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Restaurant industry stocks appear to be lackluster for most investors in the late 1990s with unpredictable commodity costs, upward labor cost pressures, and competition in every industry segment. Investors need to evaluate these stocks on an individual basis regardless of what the industry looks like as a whole. In addition, demographic and econometric models, such as two-income families, will have impacts on the industry in the future, as well.

The prospects for the restaurant industry in 1998 and later is not good when conventional measures are used on a macro-level industry-wide. However, when individual equities within the industry are evaluated the timeliness of many of these stocks appears to be better. Many individual companies, along with food processors, have been taking advantage of economic and social trends in the US, and investors may find some timely stocks on this basis.

Home meal replacement is the latest version of take out that restaurants are offering. It is too new a concept to discern whether it will be successful. There seems to be too high a supply of restaurants in relation to the demand. The abundance of single person households, the lack of time and the different schedules and food habits of families have caused restaurants to offer consumers an alternative to cooking their own meals. Each restaurant must be reviewed to discern whether it is a good investment.

The restaurant industry has become oversupplied with locations during the 1990s in almost every segment, even though demand has increased and is likely to do so in the future. There are also many individual restaurant concepts which can become successful with operational efficiency and good marketing management. There are several stocks in this industry that have potential, and investors need to seek those which are the most timely.

The restaurant industry may prove a wise investment decision as more people get busier and eat meals prepared by restaurants. The home-meal-replacement market is becoming a popular trend for several restaurants to follow. The concern at several restaurants, such as McDonald's and Boston Chicken, is the decrease in the quality of the meals.

Restaurant industry share prices increased in the 2nd qtr of 1996 after good 1st qtr 1996 earnings. Restaurant chains will be affected by the minimum wage increase under consideration by Congress in 1996, but will be able to pass this on through higher prices. Low ingredient costs in 1995 and 1996, which could increase in 1997, have helped restaurant finances. Many stocks are timely in 1996, and several have potential for 1999-2001.

Short-term investors in the restaurant industry will likely be disappointed in the 1st qtr 1996 but find earnings better in the spring. Longer-term prospects are better for the industry, as the trend among two-income families to eat out continues to gain momentum. Three rapidly growing specialty chains are being tracked for the first time by Value Line: Boston Chicken, Papa John's International, and Lone Star Steakhouse and Saloon.

The restaurant industry is comprised of the casual dining, family, and fast food segments. These segments have been showing divergent trends in the last three months of 1995. Fast food chains are having the best results, family restaurant earnings are more mixed, and casual dining chains are seeing slower sales. These stocks are average investments for 1996, but several, such as McDonald's and Applebee's, are timely.

Restaurant industry stocks have a mixed performance record for the Jun qtr of 1995. Same-store sales, a common measure for restaurant results, appears to have softened since Jun 1995, and this could cause problems for some of the weaker companies in this competitive industry. Several stocks, however, will outperform the market in 1995 and 1996 and investors should select those with good balance sheets and successful operations.

Restaurant companies have been expanding in 1995, due to lower interest rates and other factors. Fast food chains have been actively expanding internationally, and casual diners have planned theme chains. The industry has become volatile, due to US economic slowing and fears of possible recession. These stocks are now rated average, but several are of interest to investors not looking for immediate income.

The improved economy has helped restaurant earnings in 1995, but higher interest rates, supply costs, and labor shortages may hurt the industry for the rest of the 1990's. The possibility of a higher mandated minimum wage and national healthcare kept restaurant stocks low for 1994 and 1995. Several stocks should outperform the market for 1995 and 1996 and may be attractive for those not seeking immediate income.