Gas Prices Rising, Restaurants Not Yet Suffering

Staff Writer
Gas is 40 percent higher than last year but diners aren't feeling the effects yet

The national average price for a gallon of gasoline has climbed 11 cents in two weeks, and is 40 cents more compared with a year earlier, forcing consumers to brace for more pain at the pump.

But restaurant brands are not yet feeling the effects.

“The rise in [gas] prices has been gradual and almost part of expectations in today’s economy,” David Stidham, vice president of marketing for the 445-unit quick-service chain Culver’s, said. “We’re still not seeing the quick-jerk stoppage in our guest experiences. We’re still growing [transactions] and sales.”

Many restaurants suffered from the abrupt disappearance of consumers’ discretionary spending during the gas-price shocks of 2008, but this year they show positive sales trends as gas prices have increased, especially since January.

Culver’s had a 12-percent increase in same-store sales for January and is on pace to have a double-digit increase for February as well, it said.

The NRN-MillerPulse Survey reported an industry-wide 4.9-percent same-store sales increase in January, which compared with a 1.7-percent rise in January 2011. Respondents to that survey cited favorable weather and strong guest traffic for the increase.

Elsewhere, McDonald’s posted a 7.8-percent increase in domestic same-store sales in January.  And Texas Roadhouse officials said in their fourth-quarter earnings call that the brand’s same-store sales are up 6.7 percent through the first six weeks of 2012.

Consumers historically have altered their purchasing behavior for things like restaurants when gas prices climb above $3 per gallon, said David Portalatin, director of industry analysis for market research firm The NPD Group. According to the U.S. Energy Information Administration, the average national gas price was $3.59 per gallon on Monday, up from $3.48 on Feb. 6, and $3.19 a year earlier.

But, since gas prices have been above $3 since December 2010, consumers have accepted them “almost as the new normal,” Culver’s Stidham said.

He noted that a more devastating financial and psychological threshold of $4 per gallon could create pause.

NPD says gas price increases will most likely continue. Americans will in fact have fewer dollars to spend at restaurants, as it remains expensive for them to fill their gas tanks, NPD’s Portalatin said. In 2011, drivers in the United States purchased 1.7 percent fewer gallons of gasoline compared with 2010, but they paid 24 percent more at the pump, he noted.

“Consumers are trying to cut back spending at the pump by driving less, but it’s almost a futile exercise,” Portalatin said. “There’s no doubt that the consumer is losing share of wallet at the pump despite trying to reduce consumption. They can’t keep up.”

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN