Things Are Looking Up for the Restaurant Industry

John S. Glass, an analyst with Morgan Stanley, told The New York Times that this changing tide in the restaurant business parallels the surprise jump in retail sales and rising consumer confidence. The decision to go out to eat, he said, is a treat to oneself that celebrates "...the end of a long winter and the end of a long recession."

Improved sales are leading to an improving employment picture as well; in the first quarter of 2010, more than 42,000 jobs were created by the food-service industry. Recovery will be a long road, though, as the industry still employs 251,000 fewer people than it did in December 2007.

This positive news doesn't necessarily mean that everyone has forgotten their budgets and is off to try the newest upscale eatery. Consumers are still being cautious with their discretionary income, so look for fast-food chains and casual dining spots - such as P.F. Chang's (PFCB), Cheesecake Factory (CAKE) and Brinker International ( EAT) - to benefit. Yum! Brands (YUM) is already reaping the rewards of a frugal but hungry populace - first-quarter earnings were better than expected, and the stock has jumped to a new all-time high today.

About 18 months ago, I read an article in a local magazine entitled "Save This Restaurant!" It featured interviews with earnest restaurateurs, who had seen their business suffer dramatically as a result of the recession. Regular customers were cutting back on their visits and new business wasn't exactly robust. It's a cheerful sign to see that one of the beneficiaries of a newly revised consumers may be the food industry. After all ... everyone's gotta eat, might as well stimulate the economy while doing so.

Beth works for The Options News Network (www.ONN.tv), which provides daily stock and options commentary. The above comments are not intended as trading advice.