Mr. Bernstein: I'd say what was previously viewed as a fairly immune category, and when I say immune, I mean immune to macro pressures, has clearly proven otherwise. It's been extremely challenging for many of our restaurant operators and more so in the casual dining space relative to quick service. It's really been a perfect storm of top-line pressures from a slowing consumer environment, then cost pressures from rising commodity and labor costs, all of which have squeezed many of our restaurant operators — once again, more so on the casual dining side than the quick service sector.
TWST: Why the impact on the casual dining?
Mr. Bernstein: Casual dining targets a slightly higher-end consumer. In a
tougher macro environment, when people are scaling back on spending on food away
from home, they might be inclined to perhaps spend less at a casual dining
restaurant or perhaps visit the restaurant fewer times per month. On the flip
side, they trade down oftentimes to a quick service type chain that over the
past couple of years has really improved their product offerings. They have been
able to capture some of that trade down and they also have tremendous value
programs. They're really capturing that low-end consumer regardless of the
environment. The casual diners have really been pinched. Also, they own and
operate most of their own stores. The cost pressures really hit the casual
diners whereas the quick service chains franchise most of their stores, so they
don't feel the same cost pressures.
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