Driven by stronger same-store sales and customer traffic levels and a more optimistic outlook among restaurant operators, the National Restaurant Association's Restaurant Performance Index (RPI) posted a solid gain in August.  The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.9 in August, up 1.0 percent from July and its first gain in three months.  In addition, the RPI stood above 100 for the 18^th consecutive month, which signifies expansion in the index of key industry indicators.

"The August gain in the RPI was fueled by stronger same-store sales and customer traffic results, aided by continued improving economic conditions," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.  "Looking forward, restaurant operators remain generally optimistic about continued sales growth, while a majority plans to make a capital expenditure in the next six months. However, operators still report food costs and government among top challenges that continue to negatively affect the operating environment."

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 101.8 in August – up 1.1 percent from July and the strongest level in three months.  In addition, the Current Situation Index stood above 100 for the sixth consecutive month, which signifies expansion in the current situation indicators.

Restaurant operators reported stronger same-store sales results in August, with a majority indicating higher sales for the sixth consecutive month.  Sixty-two percent of restaurant operators reported a same-store sales gain between August 2013 and August 2014, up from 54 percent who reported higher sales in July.  In contrast, only 21 percent of operators reported a same-store sales decline in August, down from 30 percent in July.   

Restaurant operators also reported positive customer traffic results in August.  Forty-five percent of restaurant operators reported an increase in customer traffic between August 2013 and August 2014, up from 41 percent in July.  In comparison, 31 percent of operators reported a decline in customer traffic in August, down slightly from 34 percent in July.

Along with positive same-store sales and customer traffic results, restaurant operators continued to report solid capital spending activity.  Fifty-nine percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up from 50 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 102.1 in August – up 0.9 percent from July and the highest level in three months.  August also represented the 22^nd consecutive month in which the Expectations Index stood above 100, which indicates restaurant operators are generally optimistic about business conditions in the coming months. 

Restaurant operators remain positive about sales growth in the months ahead.  Forty-five percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 47 percent who reported similarly last month.  In contrast, only 5 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 13 percent last month.

While restaurant operators are generally optimistic about sales growth, their outlook for the economy remains mixed.  Twenty-seven percent of restaurant operators said they expect economic conditions to improve in six months, while 13 percent expect the economy to worsen.  The remaining 60 percent expect economic conditions in six months to be about the same as they are now. 

For the 12^th consecutive month, a majority of restaurant operators said they are planning for capital expenditures in the months ahead.  Fifty-nine percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 54 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 and video summary are available online at Restaurant.org/RPI.

Source: National Restaurant Association