That should come as no surprise. The broader economic picture shows that rising gas and food prices, along with costly health care and a slumping housing market, are making consumers feel less wealthy and less optimistic about this year and next.

A sure sign of that was May's consumer confidence index, which plunged to 57.2, down from 62.8 in April, its lowest point since 1992 (54.6), according to the Conference Board. It also reported consumers who anticipated business conditions to worsen in the next six months grew to 33.6 percent from 27.4 percent. To add insult to injury, the NPD Group reported that 58 percent of consumers it surveyed believe the country is in a recession, up from 55 percent in April.

May's jobless rate spike, to 5.5 percent from 5.0 percent, was the largest increase in 22 years and likely to fuel even more consumer pessimism.

Although several big-box retailers—Wal-Mart and Costco, in particular—reported stronger-than-expected same-store sales in May, the outlook for restaurant sales remained uncertain. In a June 5 report, UBS analyst David Palmer wasn't betting on positive gains until full-service chains essentially stopped opening units.

“We believe casual-dining supply growth may drop to 1 percent from over 3 percent in 2007 and over 4 percent in 2006. With a shallow recovery in demand, traffic growth in 2009 may finally match supply growth,” he wrote.

Rising prices of gas, food and health care have consumers fretting about their futures, which means more empty tables in restaurants.

For example, in its recent “Attitudes Toward Dining Out” study, which included 2,000 online users 18 and older, Chicago-based Mintel discovered over half of respondents are trimming the amount they spend at restaurants because of the economy. The largest group by age doing so is between 45 and 54 (cutting spending by 60 percent), presumably, the study adds, because they are paying “college tuition for their kids or mortgages on second homes.”

One obvious sign of the cutback is tumbling guest counts throughout all segments of the industry. Even fast food, which has traditionally benefited from “trade down” in slow times, feels the pain. “If you peel back the onion in fast-food traffic, you really see the softness at lunch and dinner, the core [dayparts] of the industry,” says Tom Wagner, vice president of consumer insights for Irvine, Calif.-based Taco Bell.

Any sales growth, he adds, “is driven by increases in check average” and by what he calls “fringe dayparts”: breakfast, late night and snacks.

Palmer expects the largest players—McDonald's, Subway, Yum Brands and Burger King—to grow comparable sales 2 or 3 percent in the second quarter. According to Wagner, such growth is merely the result of increasing prices. 

Things could be worse, offers food and beverage expert Harry Balzer, an NPD Group vice president who tracks consumer eating patterns. He recalls the period of 2002-2003 when the dot-com collapse and post-9/11 trauma significantly crimped consumer spending at restaurants.

With gas at $4 a gallon, almost two-thirds of consumers say they are eating out less or choosing a less expensive restaurant.

Data from Mintel's report support the claim. “There is little variation when looking at frequency of dining out by household income,” its authors write. That's because there is such a wide variety of price points. As a result, household income nearly always “determines the type of restaurant visited more so than how often restaurant meals are eaten.”

For instance, Mintel found that although more respondents (88 percent) with household incomes of $100,000-plus say they have had one or more meals out in the last week than any other income bracket, the overall mean number for all income categories was 2.3 restaurant visits per week.

 

The same percentage (40) declared they would trim visits to a full-service restaurant they favored if the check average climbed by $2 (again, lowest in the range). Both increases amount to about 10 percent of the current check averages in full-service and limited-service restaurants, says Technomic Principal Tom Miner, who's conducting the survey.

Miner began the survey seven months ago and says he has seen the percentage of people “adamantly against a price hike” steadily increase, from 25 percent to the current 40 percent.

Mintel's study, conducted in March, discovered similar attitudes toward restaurant meals when it asked respondents who had eaten out in the last week if economic conditions have caused them to pull back on spending. “Over half of respondents are cutting back on how much they spend at restaurants based on the economy, with only 15 percent reporting that they are spending more,” the authors write.

Interestingly, the group with the largest percentage (24 percent) saying they are spending more is comprised of 18- to 24-year-olds, perhaps because a younger lifestyle involving dating, social activities and job requirements often leads to more frequent restaurant visits. The study advises operators to target this group.

That figure is supported by Restaurants & Institutions' 2008 “New American Diner Study,” in which so-called Gen Y consumers, followed by Gen X, have the highest weekly propensity to purchase an away-from-home meal (5.13 times and 4.06 times, respectively).

Sales of freshly prepared deli meals are growing across all age groups, according to the "New American Diner" study. Reasons for the growth are not clear, though supermarket chains are making strides to compete with restaurants.

UBS' Palmer credits the three-tiered menu for driving same-store sales an estimated 6 percent as of June 6. Items on the new menu, which includes such favorites as the beef Crunchy Taco and a new, hefty burrito, are priced at 79 cents, 89 cents and 99 cents.

Taco Bell's Wagner says the menu is aimed directly at consumers whose annual household incomes are less than $75,000—a group, he adds, that accounts for the decrease in fast-food traffic. “There are only two types of customers out there,” he says, “those who are price sensitive because they have to be and those with household incomes over $75,000.”

“The price-value proposition is shifting more to the value side,” says Balzer. “Chains that are more aggressive in their deals will fare better than those which are not.”

The NPD Group's “Fast Check Study: Consumers Speak Out on the U.S. Economy” shows the number of people who said they would take advantage of money-saving offers rose to 68 percent in May from 58 percent in April.

Fast-feeders are not the only chains to take advantage of the desire for deals that result in getting more for your money—or at least the perception thereof. Case in point: a recent limited-time offer at Ruth's Chris Steak House, a fine-dining outfit based in Orlando, Fla. In May the chain launched a promotion that featured a three-course dinner for two people for $89, which is significantly below what the items would cost were they ordered a la carte.

Offering customers a deal drives business, but it may pressure margins. Taco Bell's food cost on it's new value menu is 50 percent, says UBS analyst David Palmer.

During a recent conference call with Wall Street analysts, Ruth's Chris Chief Operating Officer Geoffrey Stiles explained that consumer research showed that the chain's customers preferred bundling menu items to ordering them a la carte, which he called “a challenge” for some customers.

“In the testing we have done in a variety of different regions, we have found the program to be very, very effective and to attract guests that really spent virtually the same amount on additional items whether it be alcohol or after-dinner drinks or coffee,” Stiles told analysts.

Clearly, offering a deal drives business, though it may pressure margins. Taco Bell's food cost on its value menu is a whopping 50 percent, according to Palmer. Yet what might it take to get customers to come to your restaurant and—are you sitting down?—actually pay more?

Technomic's Miner wondered the same thing and asked survey respondents to list the top attributes that would always prompt them to pay more at a restaurant, both in limited- and full-service environments. One attribute outscored 15 others by a wide margin.

“That one attribute is riding so high you have to go back to that old adage,” he says. “It's the food, stupid.”

Web Exclusive: Taco Bell Vice President of Consumer Insights Tom Wagner discusses the chain's sales-building strategies in a down economy.