News You Can Chew On

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There always seems to be restaurant news on the menu. Let's take a look at some of this week's more appetizing stories.

1. Bad luck Chuck
Oh no, O'Charley's (Nasdaq: CHUX). Standard & Poor's is downgrading the debt of the casual-dining operator, fearing that the past three quarters of fiscal weakness will continue in the near term.

This certainly isn't the company's finest hour. Last month's quarterly report saw a dip on the top line with lower same-store sales at all three of its concepts -- O'Charley's, Ninety Nine Restaurants, and Stoney River Legendary Steaks. Margins were smacked so hard that it posted a larger-than-expected loss.

2. She sells thee Shells
There are things far worse than credit downgrades. Shells Seafood Restaurant filed for Chapter 11 bankruptcy protection this week, closing nearly half of its 18 company-owned seafood eateries.

This isn't as dire as the Chapter 7 liquidation of the parent company of Bennigan's and Steak & Ale earlier this summer, but it's just one more concept on shaky ground with the inability to appease its creditors.

The upside is that the shakeout will benefit the survivors once casual dining marches back into patron fancy, but it's troubling to see the sector turn into the culinary version of Survivor.

3. Rock my Chalupa
Taco Bell is rocking out again. The value-minded fast-Mex chain is kicking off its Feed the Beat contest, where it will provide a month's supply of late-night snacks to 100 indie bands. It's essentially $500 in Taco Bell spending money, but even a little money goes a long way at Taco Bell these days.

It's an interesting promotion for the Yum! Brands (NYSE: YUM) standout, but if this concept is about giving up-and-coming bands on tour a little financial boost as they drive around the country, maybe it's another type of gas that they will be running low on.

4. Summer sweetness
Making its already massive menu even bigger, Cheesecake Factory (Nasdaq: CAKE) is introducing a dozen new menu items to its summer menu. Yes, I know we're already in September, but it's never too late to come up with new ways to entice repeat traffic.

Cheesecake Factory is also expanding its Weight Management category, featuring diet-friendly items that clock in at 590 calories or less. Yes, it's hard to position yourself as a dieting choice when you have dozens of signature cheesecakes gleaming through glass enclosures, and are known for gigantic portions, but there's no harm in trying to lure calorie-counters in order to avoid getting vetoed as a dining choice.

5. Checking in on the Hardee's boys
CKE Restaurants (NYSE: CKR) is selling 29 of its company-owned Hardee's locations to franchisees. It is part of the company's refranchising efforts, now having transferred 224 units to franchise owners since the strategy was announced last year.

Franchised locations may not contribute as much financially as company-owned locations on an operating basis, but that is partly offset by high-margin royalties and one-time sale proceeds.

Thankfully for CKE, burger chains like McDonald's (NYSE: MCD), Burger King (NYSE: BKC), and its own Carl's Jr. and Hardee's are holding up better than the more price-sensitive full-service dining industry. This makes it an easier sell to potential franchisees.

6. More pies, please
Papa John's (Nasdaq: PZZA) is expanding its line of specialty pizzas from eight to 14, tacking on new offerings like a ricotta-packed white pizza and a Chicken Bacon Ranch pie drizzled with garlic ranch sauce.

Papa John's is tying the rollout to this week's start of the NFL season, but given some of the eclectic ingredients, I'm guessing that some of these pies will go down about as well as the ineffective Washington Redskins offense last night.

Check out this week's dessert specials:

• 3 Restaurant Stocks Going for the Gold
• Last week's restaurant news
• 3 More Outrageously Cheap Stocks