March 2008 Casual Dining Executive Summary – Talking Points –

III-A. Current Operating Environment

3 Why is Casual Dining Struggling? Several elements within the current operating environment are contributing to the lackluster results currently experienced by many concepts: Economic pressures Various economic factors can create positive or negative drags on consumer perceptions and spending patterns/habits. Many of the current trends are creating a negative effect on sales demand. Historically aggressive Casual Dining unit growth In recent years, Casual Dining unit growth rates have exceeded the overall restaurant industry. This has created a scenario where restaurant supply arguably is greater than consumer demand.

4 Why is Casual Dining Struggling? Lack of differentiation among Casual Dining brands As concepts look to attract more customers, many are losing their unique identity. Consumers often see very little difference among the menu offerings and experience perceptions of various brands (especially in the Bar and Grill segment). Changing consumer dining habits Recent trends show consumers eating more meals at home, while total meals sourced outside the house have flattened and even decreased slightly.

5 Economic Pressures Potential Drivers of Restaurant Industry Sales Demand Source: UBS Factor Projected Effect on Restaurant Spending Rising gasoline pricesNegative Rising wage and salariesPositive Higher unemployment rateNegative Lower restaurant unit growthPositive Rising consumer prices (energy)Negative Positive wealth effectPositive Falling consumer sentimentNegative Consumers are currently experiencing all of the Negative influencers, while the Positive elements have been non-existent, or exhibited minimal influence.

6 Casual Dining Unit Growth Has Outpaced Demand An analysis of 146 Leading Casual Dining Chains included in the Technomic Top 500 shows that their rate of unit expansion has averaged nearly 5% during the period as shown on the following chart.

7 Historical Casual Dining Unit Growth Source: UBS Casual Dining unit growth has outpaced the general restaurant industry three of the past four years.

8 Consumers have almost unlimited choices. Little perceived differentiation. Many concepts have spent too much time focusing on trying to be all things to all people. The result is everyone looks the same. Undifferentiated Concept Landscape

9 When participants were asked to identify differences among Classic Casual concepts they struggled to find differences, reporting that they are very similar. Other focus group comments included: They all look alike. You walk in and the waiting area is like a box. The booths are so close together. Its like everyone is on top of each other. …they all have similar atmospheres as far as casual dining goes.

10 Casual-Dinings Dinner Traffic Is Down Dinner Traffic at Casual-Dining Source: The NPD Group/Foodservice/NPD Crest and UBS Similar trends are noted in fast food as well, but not to this degree.

11 Meals Purchased at a Restaurant Flattening Consumption Has Decreased Slightly Over the Past Several Years – Annual Per Person – Source: The NPD Group/Foodservice/NPD Crest and UBS

12 Meals Prepared and Consumed at Home Increasing Consumption Trending Upward – Annual Per Person – Source: The NPD Group/Foodservice/NPD Crest and UBS

13 Consumers Report Cutting Back at FSRs (Full-Service Restaurants) In a recent survey, approximately a quarter of consumers reported they had cutback back their usage at FSRs in the past 90 days for lunch and dinner. % of Consumers Who Have Increased or Decreased Their FSR Visits in the Past 90 Days Source: American Express Market Brief, March 2008; n=1200

14 Consumers Report Having Less Discretionary Income Available for Dining at FSRs Top Reasons Given for Dining at FSRs Less Often Source: American Express Market Brief, March 2008; n=1200

15 Consumers are Most Likely to Blame Gas Prices and Utility Bills Factors Impacting Consumers Decisions to Spend Less Money at Restaurants Source: American Express Market Brief, March 2008; n=1200

16 Most of these Meals Have Been Replaced By Meals Prepared at Home Meal Types That Replaced What Were FSR Occasions Source: American Express Market Brief, March 2008; n=1200