Restaurant Industry Outlook Improved Somewhat in JulySeptember 9, 2009
Washington, D.C.) The outlook for the restaurant industry improved somewhat in July, as the National Restaurant Association’s comprehensive index of restaurant activity registered its first gain in three months. The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 98.1 in July, up 0.3 percent from its June level. However, the RPI still remained below 100 for the 21st consecutive month, which signifies contraction in the index of key industry indicators.
“Although restaurant operators continue to report soft same-store sales and customer traffic levels, they are more optimistic about improving conditions in the months ahead,” said Hudson Riehle, senior vice president of Research and Information Services for the Association. “Restaurant operators reported a positive six-month economic outlook, and the proportion expecting higher sales rose to its highest level in three months.”
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 RPI consists of two components – the Current Situation Index and the Expectations Index. The full report is available online.
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, while index values below 100 represent a period of contraction for key industry indicators.
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.8 in July – up 0.2 percent from June and its first improvement in three months. However, July still represented the 23rd consecutive month below 100, which signifies contraction in the current situation indicators.
Although same-store sales remained negative in July, restaurant operators reported an improvement from June’s soft performance. Twenty-six percent of restaurant operators reported a same-store sales gain between July 2008 and July 2009, up from a record-low 22 percent of operators who reported positive sales in June. Fifty-eight percent of operators reported a same-store sales decline in July, down slightly from 61 percent who reported negative sales in June.
In addition to sales declines, restaurant operators reported negative customer traffic levels for the 23rd consecutive month in July. Twenty-three percent of restaurant operators reported an increase in customer traffic between July 2008 and July 2009, up slightly from 19 percent who reported similarly in June. Fifty-nine percent of operators reported a traffic decline in July, compared to 60 percent reported lower traffic in June.
Capital spending activity among restaurant operators continued at a relatively steady level in recent months. Forty percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, roughly on par with the reporting of the previous three monthly surveys.
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 99.4 in July – up 0.5 percent from June and its first gain in three months.
The July uptick in the Expectations Index was the result of an improvement in restaurant operators’ outlook for both sales growth and the overall economy in the months ahead. Thirty-one percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from just 24 percent who reported similarly last month. In comparison, 33 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 in the previous two months.
Restaurant operators are also more optimistic about the direction of the economy. Thirty-two percent of restaurant operators said they expect economic conditions to improve in six months, up from 24 percent who reported similarly last month. In comparison, 24 percent of operators expect economic conditions to worsen in six months, down from 26 percent who reported similarly last month.
Restaurant operators’ plans for capital expenditures held relatively constant this month. Forty-two percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, compared to 44 percent who reported similarly last month.
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. Follow Restaurant TrendMapper on Twitter @trendmapper.
National Restaurant Association's Restaurant Performance Index
Values Greater than 100 = Expansion; Values Less than 100 = Contraction
Source: National Restaurant Association