Driven by stronger same-store sales and customer traffic and a more optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) rose to a 10-month high in March.  The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.4 in March, up 0.9 percent from February’s level of 100.5.  In addition, the RPI remained above 100 for the 13^th consecutive month, which signifies expansion in the index of key industry indicators.

“The solid March increase in the RPI was fueled by stronger sales and traffic levels, which bounced back from the weather-challenged results in recent months,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.  “Looking forward, restaurant operators are increasingly optimistic about sales gains, and a majority plan to make capital expenditure in the next six months.”

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 100.8 in March – up 1.5 percent from February’s level of 99.3.  In addition, March represented the first time in four months that the Current Situation Index stood above 100, which signifies expansion in the current situation indicators.

For the first time in four months, a majority of restaurant operators reported higher same-store sales.  Fifty-five percent of restaurant operators reported a same-store sales gain between March 2013 and March 2014, up from 44 percent who reported higher sales in February.  In comparison, 32 percent of operators reported a decline in same-store sales in March, down from 37 percent in February.    

Restaurant operators also reported stronger customer traffic levels in March.  Forty-six percent of restaurant operators reported higher customer traffic levels between March 2013 and March 2014, up from 35 percent who reported a traffic gain in February.  Meanwhile, 33 percent of operators reported a decline in customer traffic in March, down from 43 percent in February.

Along with stronger sales and customer traffic results, restaurant operators reported an uptick in capital spending activity.  Forty-nine percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up from 44 percent 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 102.0 in March – up 0.3 percent from February and the strongest level in nine months.  In addition, March represented the 17th consecutive month in which the Expectations Index stood above 100, which indicates that restaurant operators remain optimistic about business conditions in the months ahead.  

Restaurant operators are increasingly optimistic about sales gains in the coming months.  Forty-nine percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 40 percent last month and the highest level in nearly two years.  In contrast, only 6 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 from 11 percent last month.

Meanwhile, restaurant operators’ outlook for the economy remains somewhat tempered.  Twenty-eight percent of restaurant operators said they expect economic conditions to improve in six months, while 14 percent expect the economy to worsen.  The remaining 58 percent expect economic conditions to remain generally unchanged in the next six months.  

For the seventh consecutive month, a majority of restaurant operators are planning for capital expenditures in the near future.  Fifty-eight percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, matching the proportion 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 and video summary are available online at Restaurant.org/RPI. 

Source: National Restaurant Association