Posted by Matt Register

Interesting take on the restaurant industry and how it has been effected by the downturn. You can see the original article at Business Insider HERE.

Texas holds some of the richest shale plays in the US, and it has been one of the places most affected by the downturn in crude-oil prices.

The Dallas Federal Reserve’s monthly manufacturing report consistently includes commentary from business owners whose operations are linked to the oil industry.

And on Thursday we got another anecdote from the management of Del Frisco’s Restaurant Group, a Texas-based operator of steakhouses across America.

The company noted during its earnings call that sales at individual restaurants with exposure to the energy sector declined.

After an analyst asked about oil-affected markets, here was the response from Thomas Pennison Jr., chief financial officer (transcript via Bloomberg, emphasis ours):

“To start with the magnitude, when you look at three locations on a 40-comp base having 140 basis points impact, as you can imagine, they are definitely double-digit negatives of the three locations in Houston and that’s the three that we’re referencing, one in each concept [i.e., restaurant brand]. It’s pretty much the lowest performer in each of the concepts.

“… I don’t know that today it as much ties to a specific stock price as well as it’s the sentiment of what people feel about their jobs there, and there’s still some companies that are doing layoffs there.”

Del Frisco’s is obviously not an oil company. But if workers continue losing their jobs and consumer sentiment remains sour, it could continue to hurt its restaurants.

But oil prices, which have rallied more than 20% this year, may now be turning the tide.

Del Frisco’s CEO Mark Mednansky said: “We’re starting to hear from our general managers who talk to their guests in the industry that they’re starting to feel better, and once they have cleared a hurdle, and that hurdle always is that they see daylight, that’s when they start spending more in entertainment.”

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About the Author
Matt Register

Matt Register

In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.

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