Less than one out of five restaurant operators expect economic conditions to improve in the next six months
WASHINGTON, Sept. 30, 2011 /PRNewswire-USNewswire/ -- Dampened by softer sales and traffic levels and continued uncertainty among restaurant operators, the National Restaurant Association's Restaurant Performance Index (RPI) declined for the second consecutive month in August. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 99.4 in August, down 0.3 percent from July. In addition, August marked the second consecutive month that the RPI stood below 100, the level above which signifies expansion in the index of key industry indicators.
"The August decline in the Restaurant Performance Index resulted from softening of both current situation and expectations indicators, as well as Hurricane Irene," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "Although restaurant operators reported net positive same-store sales results in August, their six-month outlook for both sales growth and the economy continued to deteriorate."
"It is important to note that the industry's August performance is a substantial improvement over the 2008-2009 period, but overall, the near-term health of the restaurant industry will depend heavily on the economy's ability to create jobs and bolster consumer confidence," Riehle added.
The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, and index values below 100 represent a period of contraction for key industry indicators. The RPI consists of two components, the Current Situation Index and the Expectations Index.
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 99.3 in August – down 0.5 percent from July and the second consecutive monthly decline.
Although restaurant operators reported net positive same-store sales in August, the overall results were softer than recent months. Forty-five percent of restaurant operators reported a same-store sales gain between August 2010 and August 2011, while 37 percent of operators reported lower same-store sales. In July, 48 percent of operators reported higher same-store sales, while 34 percent reported a sales decline.
Meanwhile, restaurant operators reported a net decline in customer traffic for the first time in three months. Thirty-four percent of restaurant operators reported an increase in customer traffic between August 2010 and August 2011, down from 40 percent of operators who reported higher traffic in July. In comparison, 42 percent of operators reported a traffic decline in August, up from 37 percent who reported lower traffic in July.
Overall, restaurant operators reported relatively steady levels of capital spending. Forty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, roughly on par with 43 percent who reported similarly last month.
The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 99.5 in August – down 0.1 percent from July and the lowest level in nearly two years. In addition, August represented the second consecutive month that the Expectations Index stood below 100, which illustrates restaurant operators' uncertainty about business conditions in the months ahead.
Restaurant operators' outlook for sales growth in the coming months continues to deteriorate. Thirty-three percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 39 percent last month and the lowest level in 19 months. In comparison, 23 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, matching the proportion who reported similarly last month.
Meanwhile, restaurant operators remain generally pessimistic about the direction of the overall economy in the months ahead. Only 18 percent of restaurant operators said they expect economic conditions to improve in six months, compared to 17 percent who reported similarly last month. Meanwhile, 31 percent of operators said they expect economic conditions to worsen in the next six months, matching the proportion who reported similarly last month.
Restaurant operators are slightly more optimistic about capital spending in the months ahead. Forty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up slightly from 42 percent who reported similarly last month.
The RPI is based on the responses to the National Restaurant Association's Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor, and capital expenditures. The full report and a video summary are available online at http://www.restaurant.org/pressroom.
The RPI is released on the last business day of each month, and more detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based service that provides detailed analysis of restaurant industry trends.
Founded in 1919, the National Restaurant Association is the leading business association for the restaurant industry, which comprises 960,000 restaurant and foodservice outlets and a workforce of nearly 13 million employees. We represent the industry in Washington, D.C., and advocate on its behalf. We operate the industry's largest trade show (NRA Show May 5-8, 2012, in Chicago); leading food safety training and certification program (ServSafe); unique career-building high school program (the NRAEF's ProStart, including the National ProStart Invitational April 27-29, 2012, in Baltimore, Md.) and college-level management program (ManageFirst); as well as the Kids LiveWell program promoting healthful kids' menu options. For more information, visit www.restaurant.org and find us on Twitter @WeRRestaurants, Facebook and YouTube.
SOURCE National Restaurant Association