Dining Out Regains Favor as Simple Luxury

Americans are returning to one of life's simple pleasures—dining out.

From Brinker International Inc. to McDonald's Corp. to Starbucks Corp., restaurant chains are serving more customers. That's boosting bottom lines and increasing confidence that the worst is firmly in the rear-view mirror.

"Consumers are more confident today, dramatically more confident today then they were especially one year ago," Chipotle Mexican Grill Inc. co-Chief Executive Montgomery Moran said on a conference call Wednesday. "It looks like the consumer is out spending again."

Chipotle's first-quarter profit rose 49%, with sales up 16% from a year earlier, including new restaurants, and increased customer visits. Former parent McDonald's posted a first-quarter earnings gain of 11% on revenue that rose 10%, with U.S. sales pitching in with a 1.5% gain over a year ago. Starbucks said more customers were coming through its doors for the first time in more than two years, pushing up sales at stores open a year by 7% over last year.

Panera Bread Co. this week said it expects to report first quarter sales at company-owned stores open at least a year rose 10%. It also lifted its forecast for company-owned restaurants this year to between a 6.5% and 7.5% comparable sales gain.r to between a 6.5% and 7.5% comparable-sales gain.

Jeremy Karlin, an attorney in Galesburg, Ill., said he and his wife have been dining out less frequently, and favoring "more economical" restaurants when they do go out. "We can justify ordering what we want because we go out less," he said.

Sales at quick-serve and family-style restaurants open at least a year have been up four of the past six weeks, research firm NPD Group reported, something that hasn't happened in 11 months. Still, the firm expects the industry will remain weak for the next seven months.

Restaurants haven't been able to raise prices. Instead, they have developed new, lower-cost items or reduced costs by substituting lower-priced ingredients in their recipes.

McDonald's Chief Executive Jim Skinner said Wednesday that he doesn't expect to achieve sales gains by raising prices, given weak jobs creation. "I don't believe that the spending levels are going to get back to pre-recession," Mr. Skinner said, "until people have some confidence over the fact that they're going to have a place to go to work and put food on the table at home or away from home."

At Yum Brands Inc., owner of KFC and Pizza Hut, lower prices have become a way of life. First-quarter sales at Pizza Hut were driven by a successful promotion, said CEO David Novak. "We were simply too expensive and now we're working on ways to sustain this value," he told analysts last week.

Chipotle finance chief John Hartung said the restaurant hasn't had any menu price rises "for over a year," and while he expects food and labor costs to creep up this year, "I think we'll be patient before we rush into any price increase," he added.

Consumer food prices were up only 0.2% last month even as producer prices rose 2.4%. That means restaurants aren't passing along their higher costs.

Ben Rhodes, who runs Club 41 in St. Augustine, Ill., said his March and April business rose about 7% compared with last year after "a pretty slow winter." Diners "seem to be a little more budget aware" these days, he said. "Midpriced steaks, like sirloins and flat irons, are pulling customers off of filets and T-bones," Mr. Rhodes said.

Still, higher beef prices are a concern. "I'm nervous about raising prices right now. All that said, I'm optimistic about the year," he added.