The National Restaurant 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 100.2 in January, down 0.8 percent from its December level. Despite the decline, January marked the fourth time in the last five months that the RPI stood above 100, which signifies expansion in the index of key industry indicators.
“The RPI’s January decline was due in large to part to dampened sales and traffic levels as a result of extreme weather in some parts of the country,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association. “Although restaurant operators reported softer same-store sales and customer traffic results in January, their outlook for sales growth and the economy remained optimistic.”
“Overall, the economic fundamentals of the restaurant industry remain positive, which will likely lead to stronger sales and traffic levels in the months ahead,” 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 98.6 in January – down 1.1 percent from its December level. The Current Situation Index remained below 100 for the third consecutive month, which signifies contraction in the current situation indicators.
Due in large part to extreme weather conditions in some parts of the country, sales levels were dampened in January. Thirty-nine percent of restaurant operators reported a same-store sales gain between January 2010 and January 2011, down from 48 percent of operators who reported higher same-store sales in December. In comparison, 44 percent of operators reported a same-store sales decline in January, up from 35 percent of operators who reported lower sales in December.
Restaurant operators also reported a net decline in customer traffic levels in January. Thirty-five percent of restaurant operators reported an increase in customer traffic between January 2010 and January 2011, down from 43 percent of operators who reported higher traffic in December. In comparison, 44 percent of operators reported a traffic decline in January, up from 34 percent in December.
Despite the softer sales and traffic levels, restaurant operators continued to report relatively steady levels of capital spending. Thirty-nine percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, roughly on par with the levels reported in the last two 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 101.8 in January – down 0.5 percent from December’s 45-month high of 102.4. Despite the decline, the Expectations Index stood above the 100 level for the sixth consecutive month, which signifies expansion in the forward-looking indicators.
Restaurant operators remain optimistic that their sales levels will improve in the months ahead. Forty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 55 percent who reported similarly last month. In comparison, 14 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, up from eight percent who reported similarly last month.
Restaurant operators are also relatively optimistic about the direction of the overall economy. Forty-two percent of restaurant operators said they expect economic conditions to improve in six months, compared to 46 percent who reported similarly last month. In comparison, 10 percent of operators said they expect economic conditions to worsen in the next six months, up slightly from eight percent who reported similarly last month.
Buoyed by a positive outlook for sales and the economy, restaurant operators’ plans for capital expenditures remained relatively steady. Forty-eight percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, compared to 50 percent who reported similarly last month.
For the fourth consecutive month, restaurant operators reported a positive outlook for staffing gains in the months ahead. Twenty-four percent of restaurant operators plan to increase staffing levels in six months (compared to the same period in the previous year), while just 11 percent said they expect 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.
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. Together with the National Restaurant Association Educational Foundation, the Association works to lead America’s restaurant industry into a new era of prosperity, prominence, and participation, enhancing the quality of life for all we serve. For more information, visit our Web site at www.restaurant.org.