Frugal Consumers Could Squeeze Restaurants As Costs Rise

Restaurants could see their margins squeezed as inflationary pressures return to the commodity markets, especially as the chains find it harder to wean customers off a steady diet of meal deals.

Analysts expect higher ingredient and energy costs for restaurants in 2010, with inflation returning to normal levels after a year when costs increases moderated and, for some items, fell from year-ago levels. That could make it harder for chains to continue with the aggressive stream of coupons, buy-one- get-one-free offers and other promotions to bring customers into their doors.

"There's no sign of a pullback yet on discounting,"Barclays Capital analyst Jeffrey Bernstein said in an interview. But, "if you see a return to inflation in 2010, it'll prove more challenging to offer these deals."