Profits Fall For Restaurants with Deep Discounts

According to the Associated Press, “The deep discounts that restaurant chains have been offering to lure cash-strapped customers out of their kitchens are coming back to bite them.”

“Restaurant chains ranging from Denny’s to Applebee’s this year have been giving away food or offering deals to boost traffic slowed by the recession. But as several chains prepare to report second quarter earnings in coming weeks, Wall Street is bracing for news that price cuts not only ate into profits but failed to bring in as many customers as hoped.”

“Yum Brands Inc., whose Taco Bell and Pizza Hut brands have been emphasizing low-priced fare, reported Tuesday that earnings in its fiscal second-quarter ended June 13 rose 10%, excluding an acquisition-related gain. But same-store sales in the U.S. declined 1% due to an 8% decline at Pizza Hut, which has been offering discounts for online pizza orders and other deals.”