Jan. 28, 2010
Driven by improvements in both business performance and expectations for future business conditions, the National Restaurant Association's comprehensive index of restaurant activity rose to its highest level in 22 months in December. The 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 98.7 in December, up 0.9 percent from November and its strongest level in nearly two years. "The RPI's strong gain in December was the result of broad-based improvements among several index components," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the NRA. "Although restaurant operators continued to report a net decline in same-store sales and customer traffic, both registered their strongest performances since the summer of 2008." The Index is based on the responses to the NRA's Restaurant Industry Tracking Survey, fielded monthly among restaurant operators nationwide on a variety of indicators such as sales, traffic, labor and capital expenditures. The RPI consists of two components – the Current Situation Index and the Expectations Index. A video of Riehle providing an update on the RPI and the 2010 Restaurant Industry Forecast also is available on the NRA's YouTube channel.
The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index Despite the solid improvement in December, the RPI remained below 100 for the 26th consecutive month. Current Situation Index The Current Situation Index, which measures trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 97.3 in December – up a strong 1.4 percent from November and its highest level since August 2008. However, December still represented the 28th consecutive month below 100, which signifies contraction in the current situation indicators. Although restaurant operators reported negative same-store sales for the 19th consecutive month, the overall results improved dramatically in December, including:
- Thirty-five percent of restaurant operators reported a same-store sales gain between December 2008 and December 2009, well above the 24 percent of operators who reported higher sales in November.
- Forty-nine percent of operators reported a same-store sales decline in December, down sharply from 65 percent who reported negative sales in November.
- Restaurant operators also reported an improving customer traffic performance in December. Results include:
- Thirty percent of restaurant operators reported an increase in customer traffic between December 2008 and December 2009, up from just 21 percent who reported higher customer traffic in November.
- Forty-seven percent of operators reported a traffic decline in December, down from 62 percent who reported lower traffic in November.
Although restaurant operators reported stronger sales and traffic results in December, capital spending activity continued to drop off. Thirty-one percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, down from 33 percent last month and the lowest level on record.
Expectations Index 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 100.0 in December – up from a level of 99.6 registered in the previous two months. December represented the first time in eight months that the Expectations Index reached the 100 level. Restaurant operators are increasingly optimistic about sales growth in the months ahead. Reported results include:
- Thirty-five percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 31 percent who reported similarly last month.
- In comparison, 21 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 24 percent who reported similarly last month.
Restaurant operators are also more optimistic about the direction of the economy in the months ahead. Results include:
- Thirty-four percent of restaurant operators said they expect economic conditions to improve in six months, while 18 percent expect economic conditions to worsen during the next six months.
- Last month, 27 percent of operators said they expected the economy to improve in six months, while 19 percent expected economic conditions to deteriorate.
Despite the positive outlook for sales and the economy, restaurant operators' plans for capital expenditures dipped. Thirty-nine percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 41 percent who reported similarly last month. The RPI is released on the last business day of each month, and more detailed data and analysis can be found on Restaurant TrendMapper, the association's subscription-based service that provides detailed analysis of restaurant industry trends.