How's the middle class doing? Look at Denny's

While some may view Denny's (DENN) and Cracker Barrel (CBRL) as sit-down restaurants offering reasonably priced meals, these family-focused eateries are also a barometer for the health of the middle class.

And after the family-dining segment has struggled for years, sales are slated to pick up in the second half of the year, pointing to better times for middle-class families, Bloomberg reports, citing consultant Malcolm Knapp. Households earning between $40,000 to $75,000 per year are benefiting from a strengthening economy, which could lead to higher sales later in the year, he noted.

Denny's last month said that same-store sales rose 1.8 percent, with chief executive John Miller saying in a statement that it was the strongest performance in more than seven years. While the middle-class was hard-hit by the recession and has suffered from stagnant wages, there are also some positive signs making consumers feel more secure: rising home prices, for one, and more hiring by employers.

That's not to say that full-service restaurants aren't facing issues. For one, American workers still aren't seeing significant wage growth, with average hourly earnings standing at $24.31 per hour in April, or an increase of less than 2 percent from a year earlier, according to the Bureau of Labor Statistics.

And Denny's and its competitors are facing a rash of upstarts that are wooing Americans away from booth-service. Chipotle (CMG) and Panera Bread (PNRA) are among the counter-service restaurants offering slightly more upscale surroundings than fast-food outlets. Darden Restaurants (DRI), meanwhile, is selling Red Lobster, the victim of the changing tastes of American consumers.

Americans appear to have an increased desire to eat out, Larry Miller, founder of MillerPulse.com, told Bloomberg. The restaurant industry saw sales rise about 2 percent this spring, regaining the growth rate it had enjoyed before the tough winter caused some customers to stay home.

  • Aimee Picchi

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