Due in part to a dampened outlook among restaurant operators, the National Restaurant Association's Restaurant Performance Index (RPI) registered a modest decline in July.
The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.0 in July, down from a level of 101.3 in June and the second consecutive monthly decline. Despite the recent downticks, the RPI remained above 100 for the 17th consecutive month, which signifies expansion in the index of key industry indicators.
"Although restaurant operators reported positive same-store sales and customer traffic results in July, the RPI edged down as a result of a mixed outlook for the months ahead," said Hudson Riehle, senior vice president of the Research and Knowledge Group, in an association press release. "Restaurant operators were less bullish about the direction of the overall economy, and rising wholesale food costs are once again starting to pose a significant challenge."
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 100.7 in July – down 0.1 percent from June and the second consecutive monthly decline. Despite the drop, the Current Situation Index stood above 100 for the fifth consecutive month, which signifies expansion in the current situation indicators.
For the fifth consecutive month, a majority of restaurant operators reported higher same-store sales. Fifty-four percent of restaurant operators reported a same-store sales gain between July 2013 and July 2014, while 30 percent reported a sales decline. In June, 55 percent of operators reported higher same-store sales, while 27 percent reported lower sales.
Restaurant operators also reported positive customer traffic results in July. Forty-one percent of restaurant operators reported an increase in customer traffic levels between July 2013 and July 2014, while 34 percent reported lower traffic levels. In June, 39 percent of operators said their customer traffic levels rose, while 41 percent reported a decline.
Along with positive same-store sales and customer traffic results, restaurant operators continued to report solid capital spending activity. Fifty percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, down slightly from 53 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 101.2 in July – down from 101.7 in June and the second consecutive monthly decline. Despite the recent drops, July represented the 21st consecutive month in which the Expectations Index stood above 100, which represents an optimistic outlook among restaurant operators for the coming months.
Restaurant operators remain generally optimistic about sales growth in the months ahead. Forty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 44 percent who reported similarly last month. In comparison, 13 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, up slightly from 10 percent last month.
In contrast to the generally upbeat sales outlook, restaurant operators are mixed about the overall economy. Twenty-five percent of restaurant operators said they expect economic conditions to improve in six months, while 19 percent expect the economy to worsen. The remaining 56 percent expect economic conditions in six months to be about the same as they are now.
For the 11th consecutive month, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Fifty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 59 percent who reported similarly last month.
Topics: Trends / Statistics