It's been a great run for the casual diners. So, it's no surprise to see Applebee's (NASDAQ:APPB) put up record results. Earnings jumped 21% in the March quarter to $0.52 per share as comps improved for the 23rd consecutive quarter.
When you see companies consistently draw patrons like Applebee's has -- or Cheesecake Factory (NASDAQ:CAKE), with its single same-store sales hiccup in the past dozen years -- you have to laugh at folks who avoid restaurant stocks because diners are finicky and concepts fade.
Yes, folks are concerned with low-carb dieting, but that was as easy as tweaking the menus for most of these chains.
The more pressing concern is inflation. Food prices have been on a tear over the past year. From cheese to meats, restaurants have some leeway in pricing because food costs generally count for just about a third of the menu price. However, with prices at the pump climbing, going out for dinner is already marginally more expensive even before the chains start raising their menu prices.
Those factors may eventually slow the recent growth of casual dining companies like Brinker (NYSE:EAT) and Outback Steakhouse (NYSE:OSI). At the very least, it will test each company's ability to maintain its margins in difficult times.
So enjoy the present but don't lose sight of the way comps and margins are trending in the quarters to come. As they say, there is no such thing as a free lunch.
When was the last time you went to Applebee's? What is your favorite way to battle your waistline when eating out? Which chain has had the most success hopping on the Atkins bandwagon? All this and more -- in the Low Carb Way of Life discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz needs to drive 7.2 miles to get to his nearest Applebee's -- but he'll do it gladly if he's hungry enough. He does not own shares in any of the companies mentioned in this story.
