NRA: Restaurant capital spending outlook at a 40-month high

 
March 30, 2011

The National Restaurant Association's Restaurant Performance Index (RPI) indicated continued improvement in February, with higher sales and traffic levels, as well as the capital spending outlook at a 40-month high.

Additionally, operators' outlook for staffing growth rose to the highest level in nearly four years.

Index scores stood above 100 for the fifth time in sixth months for February, at 100.7, up 0.4 percent from January. This elevated outlook signifiies expansion in key industry indicators as gauged by the RPI.

"February's RPI gain was driven by solid 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. "Restaurant operators reported positive same-store sales and customer traffic results in February, after January's results were dampened by extreme weather conditions in many parts of the country."

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. 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 99.4 in February – up 0.9 percent from its January level.

However, the Current Situation Index remained below 100 for the fourth consecutive month, as the softness in the labor and capital expenditure indicators outweighed gains in same-store sales and customer traffic.

Operators report solid improvements

Restaurant operators reported a solid improvement in same-store sales in February. Forty-nine percent of restaurant operators reported a same-store sales gain between February 2010 and February 2011, up from 39 percent of operators who reported higher same-store sales in January. In comparison, 37 percent of operators reported a same-store sales decline in February, down from 44 percent of operators who reported lower sales in January.

Operators also reported a net increase in customer traffic levels in February. Forty-one percent of restaurant operators experienced an increase in customer traffic between February 2010 and February 2011, up from 35 percent of operators who reported higher traffic in January.

Capital spending activity among restaurant operators remained steady in recent months. Forty percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, compared with 39 percent who reported similarly last month.

Six-month outlook

The Expectations Index, which measures restaurant operators' six-month outlook for four indicators (same-store sales, employees, capital expenditures and business conditions), stood at 101.9 in February – up slightly from January's level of 101.8. In addition, the Expectations Index stood above the 100 level for the seventh consecutive month, which signifies expansion in the forward-looking indicators.

Restaurant operators remain optimistic that their sales levels will improve in the months ahead. Forty-eight percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up slightly from 47 percent who reported similarly last month.

Because of this optimism, plans for capital spending rose to its highest level in 40 months. Fifty-two percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 48 percent who reported similarly last month.

For the fifth consecutive month, restaurant operators reported a positive outlook for staffing gains in the months ahead. Twenty-six percent of restaurant operators plan to increase staffing levels in six months (compared with the same period in the previous year), while just 10 percent said they expect to reduce staffing levels in six months.

 


Topics: Business Strategy and Profitability , National Restaurant Association , Operations Management , Restaurant Design / Layout , Trends / Statistics


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