Restaurant Performance Index Rose to Three-Year High In OctoberNovember 30, 2010
(Washington, D.C.) Fueled by improving same-store sales and customer traffic levels, the National Restaurant Association’s Restaurant Performance Index (RPI) rose to its highest level in more than three years. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.7 in October, up 0.4 percent from September and strongest level since September 2007. In addition, the RPI stood above 100 for the second consecutive month, which signifies expansion in the index of key industry indicators.
“October’s RPI gain was driven by continued improvements in the same-store sales and customer traffic indicators,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Most notably, a majority of restaurant operators reported higher same-store sales in October, the first such occurrence since August 2007. As a result, the RPI’s Current Situation Index reached the 100 plateau for the first time in more than three years.”
“In addition to improving current situation indicators, restaurant operators are increasingly optimistic about sales growth in the coming months, and also reported a positive outlook for staffing levels for the first time in six months,” Riehle added.
Watch a video of Riehle providing an industry update, including the October RPI and outlook for the holiday season.
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 100.0 in October – up 0.6 percent from September and its second consecutive solid gain. In addition, the Current Situation Index reached the 100 level for the first time since August 2007, which meant 37 consecutive months below 100 in the contraction range.
Restaurant operators reported a net increase in same-store sales for the second consecutive month in October. Fifty-one percent of restaurant operators reported a same-store sales gain between October 2009 and October 2010, up from 44 percent of operators in September and the first time since August 2007 that a majority of operators reported higher same-store sales. Meanwhile, only 33 percent of operators reported a same-store sales decline in October, down from 38 percent of operators who reported negative sales in September.
Restaurant operators also reported an increase in customer traffic levels in October. Forty-four percent of restaurant operators reported an increase in customer traffic between October 2009 and October 2010, up from 38 percent of operators who reported higher traffic in September. In comparison, 34 percent of operators reported a traffic decline in October, down from 37 percent in September.
While sales and traffic levels improved, capital spending activity remained relatively steady. Forty-two percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the past three months, matching the proportion of operators 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 101.4 in October – up 0.3 percent from September and its strongest level in six months.
Restaurant operators remain solidly optimistic about sales growth in the months ahead. Forty-three percent of restaurant operators expect to have higher sales in six months (compared with the same period in the previous year), matching the proportion who reported similarly last month. Meanwhile, just 12 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, down slightly from 14 percent who reported similarly last month.
Restaurant operators also remain relatively optimistic about the direction of the overall economy. Thirty-five percent of restaurant operators said they expect economic conditions to improve in six months, down slightly from 38 percent last month. In comparison, only 12 percent of operators said they expect economic conditions to worsen in the next six months, down from 16 percent who reported similarly last month.
Along with a positive outlook for sales and the economy, restaurant operators’ plans for capital expenditures also remained solid. Forty-eight percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up slightly from 47 percent who reported similarly last month and the strongest level in six months.
For the first time in six months, restaurant operators reported a positive outlook for staffing gains in the months ahead. Sixteen percent of operators expect to increase staffing levels in six months (compared with the same period in the previous year), and just 11 percent plan to reduce staffing levels in six 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 full report is available online.
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.
National Restaurant Association's Restaurant Performance Index
Values greater than 100 = expansion; Values less than 100 = contraction