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Five analysts and top management from fourteen sector firms examine the Restaurant Industry sector in this special 91-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info404.htm

TWST: What about the other factors that should play a part in the investment thesis for the group?

Ms. Meyer: This is basically a return on capital-driven group. When returns rise, the shares do well, and vice versa. We see three simple variables that impact returns: same-store sales, operating profit growth, and capital efficiency. As an example, for a given level of capital spending, if a company can generate faster same-store sales growth or operating profit growth, returns and stock prices should rise. Or, if a company can sustain a given level of same-store sales or operating profit growth, but spend less capital to get there, returns and share prices should go up as well. In the current environment, if you believe the consumer is going to recover quickly, and that same-store sales are going to rebound, that would be a return-enhancing event.

TWST: Janice, what’s the view at Credit Suisse First Boston? Has there been any evidence to indicate that consumer concerns about the economy and job security are translating into cutbacks in discretionary spending and, especially, into spending on food away from home?

Ms. Meyer: The view at First Boston is similar to what everyone else has echoed, that the economy is expected to pick up toward the end of this year, and into next year. We are reasonably upbeat on consumption because of tax cuts, interest rate cuts, and lower energy prices. The fact that all of our economists agree probably isn’t a good sign, but they are all saying the same thing. In terms of evidence that concerns have translated into actions, eating place sales growth has slowed. Even a more telling look might be at same-store sales growth, in which the customer traffic growth component has slowed versus the pricing side. That indicates a consumer cutback. We have seen certain key variables soften such as real disposable income and consumer confidence, which may have led to this. Assuming that the interest rate cuts, with a lag effect, have a positive impact on the consumer, we could start to see sales improve. But just as the sales have not slowed dramatically, to Joe’s point that this group is more of a soft cyclical, the rebound is not apt to be dramatic either.

TWST: Janice, how would you compare the relative investment attractiveness, either of the segments, or of the individual companies?

Ms. Meyer: The environment is a bit tougher right now. There are sales pressures and cost pressures that will hit different companies in different ways. So you want to be somewhat selective in the names you own. We are recommending a similar strategy: to steer around names where the sales and cost pressures are most prevalent — it’s very simple — and to invest where the sales and cost pressures should be the least. So names like Brinker (NYSE:EAT), with a broad basket of commodities, should hold up well on the cost side. And finally, for small cap growth investors, we like P.F. Chang’s China Bistro (Nasdaq:PFCB). They remain the dominant chain in the Asian casual dining category. The category is big, as Asian is the third most popular ethnic cuisine, but there are not a lot of chain competitors. However, as the dominant chain in the segment, they are small with only 60 stores, so there is a lot of growth left for them. Their same-store sales have slowed as the economy has slowed, but their new stores have opened up so strongly that they have been able to offset the slower same-store sales on the bottom line and meet or beat earnings expectations. So they are holding up well in this tough environment, and as the economy picks up, and their same-store sales pick up, you will have a combination of good comps and good new store openings, and a very exciting growth stock.

This special conference issue includes:

1) Restaurant Industry - In an in-depth (13,000 words) Analyst Roundtable, Andrew Barish, Managing Director at Banc of America Securities, Joseph Buckley, Senior Managing Director at Bear, Stearns & Company, Mark Kalinowski, Vice President at Salomon Smith Barney and Janice Meyer, Managing Director at Credit Suisse First Boston, examine the outlook for the sector including, economic outlook, new restaurant concepts and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance at nineteen sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Restaurant Stocks - In an in-depth (3,500 words) Analyst Interview, Damon Brundage, Vice President of Equity Research at Raymond James & Associates examines the outlook for the sector and shares specific stock recommendations.

4) CEO and Sponsored interviews (average 2,500 words). Top management of fourteen sector firms examine the outlook for their firm and the sector.