SAN FRANCISCO - Sept. 24, 1997 / Buoyed by the strong economy, today's restaurant-goers are more concerned about having a high-quality dining experience, complete with an exciting atmosphere and entertainment, and are less concerned about menu prices, according to two restaurant industry analysts for Montgomery Securities.

As a result, restaurants such as Morton's of Chicago and Planet Hollywood, offering the opportunity for "indulgence and riskless pleasure," are growing rapidly and should continue to grow, said Montgomery analysts John Weiss and Michael G. Mueller. "Food is a manageable source of pleasure," said Weiss. "There is a revolt against the pleasure police," he continued. "Many people are rebelling against the idea that they have to be politically and nutritionally correct every second of their lives. They want to indulge in a riskless manner."

Weiss and Mueller made their comments at the Montgomery Securities 27th Annual Investment Conference, the largest annual investment conference devoted exclusively to growth stocks, which is running now through September 26. More than 1,000 institutional investors are attending the conference, which features 235 growth companies and 25 analyst-led workshops. Among the restaurant companies making presentations at the conference are Planet Hollywood, Rainforest Cafe, Landry's Seafood Restaurants, Lone Star Steakhouse Saloon and Papa John's International.

Weiss said that these days, consumers are tending toward spicy food over bland and toward restaurants with "personality" rather than those perceived as offering a commodity. This is evident at the quick-service level, where companies such as Sonic Corporation, a drive-in chain, and Jack-in-the-Box have experienced comparable store sales growth of more than 6 percent over the past 18 months, while restaurants such as McDonald's and Burger King have been posting flat comparable store sales.

Weiss also reported on the trend of "de-cocooning," as people seek opportunities to "socialize outside the home in non-intimidating environments."

Weiss said that while restaurant stocks do not trade as a group, many stocks in the group are currently experiencing "low valuations that are based on perceptions that we believe are not consistent with reality." The growth and popularity of high-volume event dining restaurant chains, such as Planet Hollywood, can be traced to the fact that "compared to traditional restaurants, they offer a superior overall dining experience at the same price," Mueller said.

Mueller highlighted chains such as Rainforest Cafe and Planet Hollywood, which are expected to achieve earnings per share growth ranging from 35 percent to 50 percent annually. Yet each is selling for a price-earnings multiple (based on 1998 earnings) significantly below their expected growth rates.

Mueller also covered the area of contract food service, an estimated $100 billion market served by more than 30,000 companies providing services to institutions such as hospitals and colleges as well as sports arenas. Mueller sees a significant consolidation opportunity, as well as new growth in the international arena, alternative venues (such as malls), and from new facilities now being developed. Two stocks Mueller is recommending in this area are Fine Host Corporation (the industry's fastest-growing operator) and Host Marriott Services Corp.

Montgomery Securities is one of the nation's premier investment banking and institutional brokerage firms. Dedicated to growth companies, Montgomery combines focus and specialization in research and investment banking with bulge-bracket capabilities in global distribution and large-block trading. Montgomery has offices in San Francisco, New York and Boston. Montgomery has agreed to be acquired by NationsBank Corporation and will be merged with NationsBanc Capital Markets, Inc. to form NationsBanc Montgomery Securities Inc.

Montgomery Securities currently maintains a market in Rainforest Cafe. Montgomery Securities was manager or co-manager of a public offering and/or performed investment banking or other services for Rainforest Cafe and Planet Hollywood in the last three years.

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