Sector Snap: Restaurants

The bar-and-grill segment — which includes Chili's and T.G.I. Friday's — has been reporting declining traffic for some time as menus became more similar and chains ramped up expansion efforts.

West said the casual dining industry is now looking like the fast-food sector looked about a decade ago, when consumers began to focus on eating healthy. With traffic slowing down, McDonald's Corp., Burger King Corp. and Yum Brands Inc. — the owner of Pizza Hut, KFC and Taco Bell — shut down more than 1,000 underperforming locations each, he said.

West said closing those restaurants was one factor in improved same-store sales, or sales at stores open at least a year, by 2003 along with better-quality food and better service.

Moody's Investors Service, meanwhile, said Friday it expects to dole out more negative ratings actions than positive ones in the restaurant sector over the next 12 to 18 months due to weak consumer spending.

Moody's noted that businesses are also spending less money at restaurants as expense accounts are slashed.

The ratings agency has a negative outlook on the sector.