Although challenging weather conditions in many parts of the country continued to impact customer traffic in February, the National Restaurant Association's Restaurant Performance Index(RPI) remained above 100 for the 12^th consecutive month. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.5 in February, down 0.2 percent from January's level of 100.7. Despite the modest decline, the fact that the overall RPI remains above 100 continues to signify expansion in the index of key industry indicators.

"Restaurant operators continued to report net positive same-store sales results in February, despite customer traffic levels that were challenged by the weather," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "Looking forward, operators are generally optimistic about sales gains in the months ahead, although they aren't as bullish about the overall economy."

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 Index 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 February – down 0.2 percent from January's level of 99.5 and the third consecutive month below 100. Although restaurant operators reported net positive same-store sales in February, continued softness in the customer traffic and labor indicators outweighed the performance, which resulted in an overall Current Situation Index reading below 100.

Although results were mixed in February, restaurant operators reported net positive same-store sales for the 12^th consecutive month. Forty-four percent of restaurant operators reported a same-store sales gain between February 2013 and February 2014, while 37 percent of operators reported a sales decline. February marked the third consecutive month in which fewer than half of restaurant operators reported higher same-store sales.

In contrast, restaurant operators reported a net decline in customer traffic for the third consecutive month. Thirty-five percent of restaurant operators reported customer traffic growth between February 2013 and February 2014, while 43 percent of operators reported a traffic decline. In January, 33 percent of operators reported higher customer traffic levels, while 50 percent reported a decline.

After three consecutive months of dampened customer traffic levels, restaurant operators reported a dip in capital spending activity. Forty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the first time in 10 months that less than a majority of operators reported making an expenditure.

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 101.7 in February – down slightly from January's level of 101.8. Despite the modest downtick, February represented the 16^th consecutive month in which the Expectations Index stood above 100, which indicates that restaurant operators remain optimistic about business conditions in the coming months.

Restaurant operators remain cautiously optimistic about sales growth in the months ahead. Forty percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), essentially unchanged from 41 percent who reported similarly last month. Meanwhile, 11 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, while 49 percent expect their sales to remain about the same.

Meanwhile, restaurant operators are somewhat less bullish about the direction of the economy. Twenty-nine percent of restaurant operators said they expect economic conditions to improve in six months, while 16 percent expect the economy to worsen. The remaining 55 percent expect economic conditions to remain generally unchanged in the next six months.

Along with a generally optimistic sales outlook, a majority of restaurant operators are planning for capital expenditures in the coming months. Fifty-eight percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 64 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 is available online at Restaurant.org/RPI.

The RPI is released on the last business day of each month, and a more detailed data and analysis can be found on Restaurant TrendMapper, the Association's subscription-based web site 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 980,000 restaurant and foodservice outlets and a workforce of more than 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 in Chicago); leading food safety training and certification program (ServSafe); unique career-building high school program (the NRAEF's ProStart); as well as the Kids LiveWell program promoting healthful kids' menu options. For more information, visit Restaurant.org and find us on Twitter @WeRRestaurants, Facebook and YouTube.

Source: National Restaurant Association