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Falling Unlike Domino's: Restaurants Feel the Credit Crunch

Sep 7, 2008
Recent studies carried out by the Clapham House Group and Regent Inns correctly predicted a slowdown in consumer spending, causing a slump in the share prices of restaurants and bar chains across the UK. There were a variety of reasons behind this predicted slump in consumer interest, including the continuing impact of the smoking ban, England's failure to qualify for the Euro 2008 Championships and, of course, the continuing credit crunch.

One of the companies whose initial shares tumbled under the Clapham House Group and Regent Inn warnings was takeaway company Domino's Pizza. But fast-forward a few months and things are certainly looking up financially for Domino's, who in February 2008 recorded a 33% increase in full-year profits, and an 11% increase in profits for the first six weeks of the year, compared with profits from the same period of the previous year.

So why has Domino's seen such an increase in popularity? Quite simply: because other, eat-in restaurants have seen a decline. Because of the credit crunch, people are now unwilling to pay the high prices of restaurants and bars, and are eating out a lot less than they have done in the past. Instead, more and more people are staying at home and ordering take-away pizza and other fast food.

As a result in the upturn of fast-food, Domino's - whose shares have climbed 14-fold since the company's flotation in 1999 - now have over 500 stores across the UK and Ireland, and are hoping to have doubled that number by 2017: proof that Domino's, for one, are confident about making something of the UK's economic problems.

Comparing the more credit card-friendly cost of a takeaway pizza, Chinese meal or Turkish kebab with a wallet-busting sit-in restaurant meal, it's hardly surprising that the fast-food industry has experienced an upturn in trade and profits, given that the average two adults and two children 'nuclear' family can feed themselves for the equivalent cost of a three-course dinner for one in many restaurants. Add in the cost of a bottle of wine and a few beers, drinks and ice-cream for dessert from the local supermarket and the cost of eating in as a family weighs far below the likely restaurant bill - plus by eating in at home, you won't have to tip the waiter!

There are other advantages to eating in at home, too. For starters, you won't be limited by the restaurant's choice of dishes as everyone can get exactly what they want from any manner of takeaway establishments - after all, most towns and cities have any number of fish-and-chips shops, Chinese takeaways and local pizzerias as well as takeaway shops catering for other types of food. Plus, depending on what you order, there may not be any washing up afterwards; just throw the empty container in the bin and you're done!

And, you'll be hard-pressed to find a restaurant where you can watch your favourite DVD while eating your dinner, making eating in at home almost as much a social event as eating out as you can invite your friends along to your house too - and all at a fraction of the cost; so long as they bring along their own takeaway, of course!
About the Author
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
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