updated 11/30/2008 4:00:48 PM ET 2008-11-30T21:00:48

Shopping up an appetite? Restaurants, which have been hit hard by the economic downturn, certainly hope so.

To entice shoppers, chains are increasing their advertising during the Thanksgiving holiday weekend, offering freebies to customers who take a break from the stores and giving discounts to anyone who buys a gift card from the restaurant.

Denny's Corp., for example, is offering a $5 gift card to the restaurant if you purchase $25 worth of cards. The company also advertised its current value promotions during the Macy's Thanksgiving Day Parade, the National Football League games the same day and several college football rivalry games over the weekend to bring in more customers.

"We really are trying to hit the family and the gatherings to remind people that Denny's is an incredible value," said Chief Executive Nelson Marchioli, adding that the chains — like all restaurant chains these days — will be "under a lot of pressure" to boost sales during the holiday season.

"Every restaurant company is going to be pressed this year for providing value and dealing with what very well could be less customers," he said.

Restaurants have been hurting for months as consumers have cut back on eating out to save money. Fast-food restaurants have been somewhat insulated from the slower spending because they offer food at far lower prices. But at casual dining chains, where menu prices are higher, consumers' new spend-wary habits have led to falling sales and profits.

In October, same-store sales, or sales at stores open at least a year, dropped 6 percent with traffic falling about 8 percent, according to Knapp-Track, which collects monthly sales data from more than 10,000 sit-down restaurants. Some restaurants — including Ruth's Chris Steakhouse owner Ruth's Hospitality Inc. — reported steep double-digit drops for the month, as turmoil in the financial markets kept consumers eating at home.

November's sales numbers have yet to be released, but analysts and industry-watchers are largely forecasting more of the same.

The month between Thanksgiving and Christmas offers a possible reprieve for restaurant chains, particularly those located in or around a mall.

"If ever there is a time to actually step up and communicate not only the brand but also the value offerings associated with it, it is now," said Hudson Riehle, senior vice president of research at the National Restaurant Association.

Riehle said some independent restaurant chains make up to 25 percent of their annual sales during the month in between the holidays. The period is typically less important for the major chains, but it still makes up a good chunk of overall revenue, he said.

Besides Denny's, other chains offering special deals fozr the holiday season include IHOP, which is offering $5 off a customer's next visit with the purchase of a $25 gift card, and Benihana, which is giving away coupons for free food for each $50 or $100 gift card. At Papa John's, customers get a certificate for a free medium one-topping pizza if they buy a $25 gift card.

And TGI Friday's is giving a free dessert with the purchase of an entree to members of its guest recognition program during the Black Friday weekend.

With mall traffic projected to be down for the year, though, some analysts have been pessimistic that the deals will help sales.

Darren Tristano, executive vice president of restaurant consulting firm Technomic Inc., said most restaurants are bracing themselves for a tough fourth quarter — the quarter that includes the holiday season.

"Everyone is tightening their belts and, as a result, spending is going to be down," he said.

Restaurants may get some relief in January when consumers who received gift cards to chains redeem them, and the company recognizes the revenue on its books.

But it could be longer before sales start to truly improve given consumers' anxiety about the prospect of a prolonged recession.

"Consumers are going to have to feel good again," Marchioli said. "There are still a lot of unknowns."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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