Moody's Investors Service lowered its outlook for the domestic restaurant group to negative from stable Tuesday, citing rising costs and economic concerns.
The sector, along with many other industries, has been squeezed as consumers tighten spending due to the continued housing slowdown, soaring food and gas costs, diminishing credit and recession worries.
Bill Fahy, a Moody's vice president/senior analyst, said in a statement that restaurant companies are also contending with increasing commodity and energy prices as well as rising labor costs.
Fahy does not see conditions improving near term, which will make it harder for most restaurant operators to "raise menu prices to help mitigate margin pressures without negatively impacting consumer traffic, profit margins and cash flow."
The analyst predicts the sector will be combating such conditions for the next 12 months.
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