OREANDA-NEWS. December 16, 2015. Fitch Ratings projects same-store sales (SSS) will average 3%, driven by selective pricing actions and mix shift towards premium menu items, for the U.S. restaurant industry in 2016. Few catalysts exist for a meaningful increase in traffic, given near normal unemployment and a bottoming out of gas prices.

Casual dining is expected to underperform the quick-service and fast casual segments of the industry but effective promotions, good value, quality food/beverages, above average customer service and loyalty will separate winners from losers. Darden Restaurants, Inc. (Darden; 'BBB-'/Outlook Positive) and Brinker International, Inc. (Brinker; 'BBB-'/Outlook Stable) should maintain share, while Starbucks Corp. (Starbucks; 'A'/Outlook Stable) is expected to outperform and market share losses at McDonald's Corp. (McDonald's; 'BBB+'/Outlook Negative) are expected to subside.

Margins could expand within the industry due to low commodity inflation, G&A cost reductions and refranchising but credit trends are expected to be mixed as returning cash to shareholders and enhancing value through M&A or spinoffs is likely to continue. Total adjusted debt/EBITDAR for Fitch's universe is expected to decline slightly and range between 2.0 times (x) - 6.0x in 2016 with trends varying across issuers.

Leverage should decline to below 3.0x for Darden, which is using proceeds from its recent real estate monetization to pay off debt, stay near 2.0x for Starbucks, rise to about 3.5x for McDonald's, and approximate 3.5x for Brinker. McDonald's recently issued \\$6 billion of debt to fund cash being returned to shareholders but Fitch expects most other issuers to fund buybacks with cash flow.