Operators Remain Confident though Economic Growth is SluggishAugust 8, 2011 By: Alissa Ponchione
The National Restaurant Association (NRA) released the June Restaurant Performance Index (RPI), a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry.
Because of strong same-store sales and higher traffic levels, the outlook for many operators is cautiously optimistic, as the RPI, once again, rose above 100 in June to 100.6, up 0.8% from May’s 99.9 level; this is the sixth time in the last seven months the RPI has been above 100.
Key industry indicators such as same-store sales and customer traffic performance are part of June’s increase, establishing confidence for restaurants operators.
According to the Current Situation Index, which measures current trends in same-stores sales, traffic, labor and capital expenditures, June was up 1.4% to 100.5 from May’s level of 99.2.
Standing at 100.7 in June, the Expectations Index, which measures restaurant operators’ six-month outlook in same-store sales, employees, capital expenditures and business conditions, showed a slight improvement from May’s standing at 100.6. This is the 11th month in a row that the Expectations Index stood about 100.
Fifty-one percent of restaurant operators reported improved year-on-year same-store sales between June 2010 and June 2011. In May, 39% of operators reported higher same-store sales. In June, 31% of operators reported a decline in same-store sales; down from 40% of operators who reported the same in May.
Customer traffic levels also increased in June with 44% of restaurant operators reporting an increase in traffic while 33% of operators reported higher traffic in May. Operators also reported a 33% decline in traffic, down from the 41% in May.
Forty-eight percent of operators reported they made capital expenditure for equipment, expansion or remodeling in the last three months, up slightly from 44% of operators in May.
In May, 41% of restaurant operators expected higher sales in the next six months, compared to 40% in June. Only 16% of operators expect sales volume to be lower than it was during the same period in June 2010.
Though there are positive indicators, restaurant operators remain cautious about economic growth with only 26% saying they expect conditions to improve in six months, up from 24% in May. However, 20% of operators expect economic conditions to worsen in six months compared to 21% of operators who felt the same way in May.
Though there is trepidation about where the economy is headed, operators continue to plan to spend in the months ahead; 51% of operators plan to make a capital expenditure on equipment, expansion or remodeling.
There has been marginal growth over the past few months in the various segments of the restaurant industry, yet things still remain sluggish. However, even with this slow growth, operators are having burgeoning feelings of confidence and will continue to spend time and money on strengthening the restaurnt industry.