Industry News | May 14, 2008

Rebate Checks Could Help Bottomline

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If consumers respond to the tax rebates as they did in 2001, the last time tax rebates were issued, restaurants will benefit, according to a report from The NPD Group, a leading market research company.

Studies of what happened after households started receiving their rebate checks between July and September 2001 found that initially much of the money went into savings or to pay debt. Then, spending went to clothing stores and restaurants. In general, there was a lag time between when consumers received their checks and when they started spending at restaurants.

“It’s likely that consumers will behave in the same way they did after receiving their 2001 tax rebate, and the restaurant industry should at the very least enjoy a short-term boost,” says Bonnie Riggs, NPD restaurant industry analyst. “The 2008 tax rebate is considerably larger and is getting into consumers’ hands much earlier than the 2001 rebate, which also bodes well for the restaurant industry.”

According to NPD, during the period of time consumers began receiving and spending their checks in 2001, visits to restaurants rose 2 percent driven by quick service restaurants and casual dining. While midscale traffic was still off a bit, losses were nowhere near as severe as those noted in the first half of the year. All restaurant segments were able to benefit from consumers increasing their spending at restaurants.

There are some economists who argue that 2008 is vastly different from 2001 and that consumers may act differently this time, pointing out credit card debt, gasoline prices, and food costs are at an all time high this time around.

“NPD has tracked consumer behavior since 1976 and, historically, their behavior does not dramatically shift,” Riggs says. “It’s been a tough year so far for consumers, and my educated guess is that they will want to reward themselves with a nice meal out.”

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