Why wait 'til March for madness?

My friends are a little worried because I like to kick off restaurant chains' earnings season with a tailgate party. And why not? We’re talking quarterly updates from the biggies, people. And then come the conference calls, where you can ease back with a hot dog and a beer while investors do some serious grilling of public-company execs. Who needs Six Flags or Vegas? Especially during a financial-reporting stretch like the current one, when the action’s been wilder at times than a Sweeps Week on Fox. Consider, for instance, the mysterious disappearances that have recently come to light.

Where, for example, was Chipotle’s copy of the memo that every other public restaurant company must’ve gotten? It’s the one about cutting expenses because of spiking food costs.

It was certainly right there in Chuck E. Cheese’s “In” box. The pizza and games chain countered high cheese and dough expenses by trimming the size of its large and medium pizzas by a half-inch.

P.F. Chang’s, another apparent recipient, is focusing its efficiency efforts in part on labor. The company told investors that it’s revising the responsibilities and recruitment processes for the unit-level managers at its Pei Wei Asian Diner concept in part to eliminate one supervisory position. It’s also simplifying and shrinking the fast-casual chain’s menu to cut prep space and kitchen labor, while also deleting some high-cost selections that don’t sell well.

Somehow, the mandate to take similar action never reached Chipotle. “It would be plausible to try to squeeze costs out of the food line or labor line or to aggressively raise prices,” said president Monty Moran. “We’re not going to do that.”

Instead, executives said, the chain is directing more units to use additive-free chicken, which costs 20 to 50 percent more than the standard version, and is buying more locally grown produce. So much for economizing on kitchen supplies.

Chipotle might also see some pressure on labor expenses because of the ongoing salmonella outbreak. Since the federal government now believes fresh jalapeno peppers could be the source of the contamination, the Mexican chain is grilling all of the peppers that it formerly served raw.

The same vanishing act must’ve been pulled with Chipotle’s copy of the Official Restaurant-Chain Handbook, or at least the page that deals with international expansion. Charging beyond the boundaries of the United States is as important to the success of many restaurant brands these days as selling soft drinks. But not, it seems, for the 778-unit burrito specialist. Founder and CEO Steve Ells revealed that the chain’s international strategy consists of opening a lone unit in Toronto. “I want to remind you that international expansion is not a key driver of our current growth strategy,” he observed after noting that Chipotle has never needed a passport before. Hopefully he spoke loud enough to override the gasps of investors who’ve grown accustomed to hearing chains project hundreds of overseas openings.

The disappearances involving Chipotle were parlor-room stunts compared with the Houdini feat that The Cheesecake Factory pulled off. One day, as he had for the prior eight years, Michael Dixon was serving as an executive of the casual-dining company. The next, he was gone. His resignation and departure as CFO came the same day.

Cheesecake founder and CEO David Overton said it was just a coincidence that Dixon vamoosed hours before the company disclosed that its profits dropped 19 percent during the second quarter. He also declined to put forward any other explanation.

Maybe he should’ve just uttered, “Abracadabra,” and been done with it.

Okay, time to throw another hot dog on the grill and see who else is reporting today.

Are things bad all over?

If the restaurant industry has slogged through a worse reporting period than the last few weeks, a guy named Hoover was probably president—if not somebody named Voldemort. In a 19-day stretch, Domino’s posted a 55-percent freefall in net income, Ruby Tuesday posted a 48-percent plummet, Brinker notched a 21-percent decline, Wendy’s disclosed a 56-percent dive, P.F. Chang’s earnings sank 20 percent and IHOP finished $11.6 million in the red. For all but a few industry standouts (notably McDonald’s and Tim Hortons), the recent past has been the stuff of blues songs.

The industry has certainly shrieked through its share of rollercoaster drops before. As Ruth’s Chris CEO Craig Miller noted during MUFSO, the current ills of sky-high fuel prices and surging food costs are minor compared to what he saw in the 1970s, when President Nixon froze prices to check inflation and consumers couldn’t buy gas at any price because of an OPEC embargo. This is nothing compared to then, he suggested.

But what makes Quagmire 2007 unique, at least out of all the restaurant downturns I’ve witnessed, is its lack of discrimination. In past sales chills, business usually shifted, with the big brands wresting traffic away from the scrawnier players in a display that would have had Darwin smugly nodding. But this time, the dynamic seems to be more of a lowering tide. Many of the companies that reported their earnings with a decided wince were the very ones that filed their SEC documents with a swagger just a short while ago. This is truly a macro-effect, not a bad story with plenty of footnotes. The list of the unaffected is shorter than a mash note to George Steinbrenner.

Which, of course, underscores the question, What’s the industry to do? Miller offered his recollections of worse times to illustrate that better conditions will return eventually. But how can a chain hurry it along?

BJ’s Restaurants, one of the companies to clearly prosper during a period that most competitors characterize as a kick in the groin, has a very definite idea. “In this difficult operating environment, where consumer spending for casual dining occasions and the prime costs of doing business will likely continue to be under significant pressure on an absolute basis for the foreseeable future, we believe the more successful casual dining concepts will be those that protect their overall consumer 'approachability' for all dining occasions and that offer even greater quality, differentiation and overall value to the consumer," CEO Jerry Deitchle was quoted as saying in the company’s announcement of a 31 percent rise in net income on a 30 percent rise in revenues for the third quarter.

I’m not crystal-clear on what he means by “overall consumer ‘approachability,’” but I assume he’s trying to say that the objective is boosting customer frequency, a laudable goal. Certainly that’s more ambitious than the usual approach of trying to buy customers by giving them a deal, a reflex that can haunt a chain for years to come.

Avoiding that knee jerk to focus on “approachability” and differentiation—an objective that should trump the others, in my estimation—would be as much of a departure from the norm as this downturn itself seems to be.