Restaurant operators expect economic conditions to improve

 
Jan. 30, 2011

According to the National Restaurant Association's Restaurant Performance Index (RPI), restaurant operators have become a bit bullish about the direction of the overall economy. Forty-six percent of restaurant operators said they expect economic conditions to improve in six months, up from 37 percent who reported as such in November. In comparison, only 8 percent of operators said they expect economic conditions to worsen in the next six months, down from 15 percent who reported similarly last month.

The news shines a bright light on the industry's potential for recovery in 2011 as the outlook for the restaurant industry improved in December as the NRA's Restaurant Performance Index (RPI) stood at 101.0 for the month, up a strong 1.1 percent from its November level.

The increase is driven by expanding same-store sales and customer traffic levels, and marks the third time in the last four months that the RPI stood above 100.

"The RPI's solid gain in December was driven by improvements in each of the eight current situation and forward-looking 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 December, and their outlook for sales growth and the economy continued to improve.

"Driven by operators' optimistic outlook for sales and economic conditions in the months ahead, the RPI's Expectations Index rose to its highest level in nearly four years."

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 99.7 in December, up 1.0 percent from November. However, index remained slightly below 100 in December, as the softness in the labor and capital expenditure indicators outweighed the same-store sales and customer traffic performances.

For the third time in the last four months, restaurant operators reported a net increase in same-store sales. Forty-eight percent of restaurant operators reported a same-store sales gain between December 2009 and December 2010, up from 40 percent of operators who reported higher same-store sales in November. In comparison, 35 percent of operators reported a same-store sales decline in December, down from 44 percent of operators who reported negative sales in November.

Restaurant operators also reported a net increase in customer traffic levels in December.

Forty-three percent of restaurant operators reported an increase in customer traffic between December 2009 and December 2010, up from 36 percent of operators who reported higher traffic in November. In comparison, 34 percent of operators reported a traffic decline in December, down from 45 percent in November.

Restaurant operators reported relatively steady levels of capital spending activity in recent months. Forty-one percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, roughly on par with the levels reported in the previous three monthly surveys.

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 102.4 in December, up 1.2 percent from November and its highest level since March 2007.

Restaurant operators are increasingly optimistic about sales growth in the months ahead. Fifty-five percent of restaurant operators expect to have higher sales in six months, up from 42 percent last month and the strongest level in more than four years. Meanwhile, only 8 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 14 percent who reported similarly last month.

Bolstered by an improving outlook for sales and the economy, restaurant operators' plans for capital spending rose to its highest level in nearly three years. Fifty percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 47 percent who reported similarly last month.

For the third consecutive month, restaurant operators reported a positive outlook for staffing gains in the months ahead. Twenty-three percent of operators expect to increase staffing levels in six months (compared to the same period in the previous year), while just 11 percent plan to reduce staffing levels in six months.


Topics: Associations , Business Strategy and Profitability , Food & Beverage , National Restaurant Association , Trends / Statistics


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