Family Restaurants Feeling Recession's Bite

No one leaves home with the intention of eating at a Denny's restaurant, Jay Leno wisecracked on a recent "Tonight Show." "You just kind of end up there."

The audience's laughter seemed to underscore a question haunting the entire family-restaurant industry: Why eat at a coffee shop, when fast food is half the price and a meal with a little more ambience is just a few bucks more?

The family-restaurant sector - mid-priced, no frills, sit-down eateries - is being squeezed like never before. Industry analysts estimate that 1991 sales dropped an average of 5 percent.

"Almost every restaurant in America has been beat up by the recession," said Dennis Forst, analyst at the Los Angeles investment firm Sutro & Co. "But it is particularly competitive among family restaurants."

While family restaurants scramble for market share, the fast-food industry is "constantly nibbling at the heels," said Janet Lowder, president of Restaurant Management Services, a Rancho Palos Verdes, Calif., restaurant-consulting firm.

Two of the most familiar names are frantically trying to keep from being gobbled up. Los Angeles-based Sizzler recently named a new president and hired a new advertising agency to upgrade its image. The chain has been especially hard-hit, because nearly a third of its 792 restaurants are in the tough California market.

Meanwhile, Denny's - the Spartanburg, S.C.-based coffee-shop chain - has junked several years of marketing plans aimed at getting rid of its image as a cheap place to eat.

In the past two years, Denny's made scarce use of the popular $1.99 Grand Slam breakfast promotions. But in January, fast-food price cutting forced it into discount meals at breakfast, lunch and dinner.

"We've had to take a page out of the fast-food book," said Bill Campion, director of marketing. While Denny's sales have held up, he said, "everyone's looking for a deal."

Sizzler's biggest headache may be of its own doing. The chain - which added 60 restaurants last year - successfully converted its image from steak house to salad-and-buffet restaurant. But in the process, it lost some of its most loyal - and best-spending - customers.

An industry consultant who asked not to be named was more blunt. Sizzler has not only been losing its best customers, it has been attracting consumers who simply want to eat a lot of food cheaply, the consultant said. "This doesn't sound very nice, but some people go there and eat like pigs at the trough."

As a result, steak dinners account for less than 40 percent of sales.