Buoyed by stronger same-store sales and customer traffic levels, the National Restaurant Association's Restaurant Performance Index (RPI) topped the 100 mark in September for the first time in three months. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.1 in September, up 0.7 percent from August and its highest level since June. In addition, September represented the first time in three months that the RPI stood above 100, the level above which signifies expansion in the index of key industry indicators.
"The September increase in the Restaurant Performance Index was fueled by improvements in the same-store sales and customer traffic indicators," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "Among the forward-looking indicators, restaurant operators are more optimistic about sales growth in the months ahead, while their outlook for the overall economy remains cloudy."
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 100.1 in September – up 0.8 percent from August and the first gain in three months. In addition, the Current Situation Index rose above 100 for the first time since June, which signifies expansion in the current situation indicators.
Restaurant operators reported stronger same-store sales in September. Fifty percent of restaurant operators reported a same-store sales gain between September 2010 and September 2011, up from 45 percent who reported a sales gain in August. In comparison, 34 percent of operators reported lower same-store sales in September, down slightly from 37 percent in August.
Restaurant operators also bounced back from a sluggish August performance to report net positive customer traffic levels in September. Forty-three percent of restaurant operators reported higher customer traffic levels between September 2010 and September 2011, while 33 percent of operators reported a traffic decline. In August, only 34 percent of operators reported higher customer traffic, while 42 percent reported a traffic decline.
Restaurant operators continued to report relatively steady levels of capital spending. Forty-three percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, essentially unchanged 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 100.2 in September – up 0.7 percent from August and the strongest gain in nine months. In addition, September represented the first time in three months that the Expectations Index stood above 100, which signifies a more optimistic outlook among restaurant operators for business conditions in the months ahead.
Restaurant operators' outlook for sales growth improved from recent months. Thirty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 33 percent last month which represented the lowest level in 19 months. In comparison, 19 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 23 percent who reported similarly last month.
Meanwhile, restaurant operators' outlook for the overall economy remains mixed, albeit somewhat more optimistic than last month. Twenty-two percent of restaurant operators said they expect economic conditions to improve in six months, up slightly from 18 percent who reported similarly last month. Twenty-three percent of operators said they expect economic conditions to worsen in the next six months, down from 31 percent who reported similarly last month.
Restaurant operators' outlook for capital spending ticked up in recent months. Forty-seven percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up 44 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 a video summary are available online at http://www.restaurant.org/research/economy/rpi.
Source: National Restaurant Association