Moody's pessimistic on restaurant sector

by Josh Sosland
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NEW YORK — Economic weakness together with rising costs facing consumers and business spell difficult times for the restaurant industry in the United States and internationally, Moody’s Investors Service said last week. "These trends are unlikely to ease over the intermediate term, despite a recent drop in commodity and energy prices," said William Fahy, Moody’s vice-president and senior analyst. An increasingly competitive environment will add pressure to the restaurant business as will food safety concerns. Against this backdrop, restaurant companies will face liquidity and refinancing risks because of increasingly stringent lending standards. "All these factors have been key drivers behind most of the recent negative rating actions in the restaurant sector," Mr. Fahy said. The analysis was published in a Moody’s report, "U.S. Restaurant Industry Outlook 2008."

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