Zacks Analyst Interview Highlights: Red Robin, Applebees, Ruby Tuesday and McDonald's

Business Wire, August 31, 2007

CHICAGO -- Zacks.com releases the latest Analyst Interview. Today's interview is with senior analyst Ann Northrop, who discusses Red Robin (Nasdaq: RRGB), Applebees (Nasdaq: APPB), Ruby Tuesday (NYSE: RT) and McDonald's (NYSE: MCD).

A synopsis of today's Analyst Interview is presented below. The full article can be read at http://at.zacks.com/?id=2678.

How do you see the state of the restaurant industry at the present time, in general?

The restaurant industry is currently facing significant challenges to top-line growth and cost containment. Rising gas prices and mortgage payments are squeezing consumer spending, while food - primarily corn, chicken, dairy and, to a lesser extent, beef - and labor costs - minimum wage hikes - are challenging restaurants to maintain margins.

The casual dining sector has been hardest hit, as cash-strapped consumers trade down to fast casual and quick service. In particular, the bar and grill chains of the casual dining segment are losing customers. Red Robin (Nasdaq: RRGB), Applebees (Nasdaq: APPB) and Ruby Tuesday (NYSE: RT) are three examples, although Red Robin launched a national media campaign that boosted its traffic slightly in the second quarter. It appears more price-sensitive customers have sought value for a burger in the quick service chains.

So is it just that consumers are willing to accept lower-quality dining-out experiences?

No, consumer spending pressures aren't the only catalyst for the trade-down. Many of the quick-service operators have done a great job in upgrading their offerings. McDonald's (NYSE: MCD), in particular, has responded to pressure from the coffee chains by upgrading its coffee - it actually tastes good - and broadening its menu to include healthier and more current items, such as yogurt, fruit, grilled chicken wraps, a range of salads and popular sauces, such as chipotle.

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