“Part of the bounce we have seen in last few weeks is the reality beginning to hit that stocks like Brinker are not in economic trouble.” —Bryan Elliott

What's the outlook for sales and earnings for the companies you follow?

Based on Knapp-Track, which is the best available data, total aggregate spending by consumers in casual dining was down 2 to 3 percent in October and November. That follows three months of flat [spending]. That's the first time we've not had growth in spending in the history of the category. That has never happened.

What are the implications?

Like many industries that sell to consumers, too much capacity exists for lower-level businesses to survive. Weak restaurants must close.

What's your forecast, then, for '09?

That's a question of the depth and duration of the recession, and it is too early to do much more than guess. My working assumption is for shrinking aggregate demand in the first half and a flattening out in second half. I believe there is a baseline level of demand for casual dining.

What's the baseline look like?

We have already washed out all the economically sensitive consumers for whom it's a bit of a stretch to go to casual-dining restaurants. We're now left with heavy users, who are affluent and often dual-income families with school-age children with very busy schedules.

Where won't these people be able to dine?

The victims are mom-and-pops, sole proprietorships and very small chains in suburbia, which are closing their doors as we speak. That type of restaurant is still about a third of casual dining, and they have the lowest margins and least staying power.

Where does that leave struggling public chains?

They will be the survivors despite stock market investors, who lately have been valuing them at levels that have a measurable risk of bankruptcy.

Among casual-dining companies that you follow, which has the greatest potential for bankruptcy?

There are a couple that have borrowed too much money, but I would prefer not to say who they are.

Will there be a capacity reduction for even the best-performing chains?

There will be a slight trimming, but I do not expect wholesale closings, say of even 5 percent of the system, among the better-performing national chains.

Which chains can be described as “better-performing”?

Most of my list, actually. Certainly Darden, Brinker, Red Robin, Texas Roadhouse, California Pizza Kitchen, P.F. Chang's, Cheesecake Factory, Buffalo Wild Wings, Cracker Barrel. None of them, even beaten up Ruth's Chris, is going to have a meaningful percentage of their units that are cash-flow negative—even at the depth of the recession.

Who will be the winners and losers in 2009?

I have “buys” on most of the stocks I cover. The basic theme is, these stocks have fallen to prices that overdiscount the risk of serious financial problems for the companies.