The economic downturn is having an up-down, ping-pong effect on the restaurant industry in the Valley and the nation.
People are still dining out despite the declining economy, but they're eating more at lower-priced, quick-serve restaurants than casual higher-priced places.
The more expensive fine-dining restaurants, meanwhile, are financially stable, according to restaurant industry analysts.
"Many casual restaurants in Arizona and the nation are experiencing profit losses," said Steve Chucri, president of the Arizona Restaurant Association, which represents more than 11,000 food establishments statewide.
"The biggest winners are the lower-priced, quick-serve restaurants," Chucri said. "That's because people with less disposable income still want to eat out, so they go to places they can afford.
"At the upper end, the expensive, fine-dining restaurants are holding their own, mainly because they generally serve wealthier customers who aren't affected as much by the economy."
Chucri said besides lower prices, the quick-serve restaurants are also introducing food that is attractive to customers watching their budgets. Mark Roden, who owns 48 Subway restaurant franchises in Arizona, including 24 in the Valley, said the introduction last March of the footlong, $5 sandwich at his quick-serve restaurants is strengthening the chain's bottom lines despite the economy.
"We're concerned about the economy, but we've been able to find a product and a price that is reasonable and attractive to our customers," Roden said.
He said the rise of fuel and food prices has directly increased the costs of running his restaurants. "The rise in fuel prices, for example, raises just about everything from the price of electricity to the higher cost of buying plastic spoons," Roden said.
Lindsay Cohen, 26, who recently was laid off from her job as a salon director in Scottsdale, knows first-hand about the impact of the economy on dining out. "Until I lost my job, I'd go to a lot of fancy restaurants after work," Cohen said. "I didn't want to work all day and then go home and cook. But now, I don't eat out as much, and when I do, I go to quick-serve places that I can afford."
Restaurants in Arizona are expected to post $8.4 billion in sales in 2008, according to the restaurant association.
However, net income is steadily declining. In fiscal 2005-06, net income for association members reached a record $750 million. It dropped to $600 million in 2006-07 and this fiscal year it is expected to be $400 million. "The growth in our state's restaurant industry is slowly coming down," Chucri said. "We expect revenues to improve, but not until late 2009."