News

Weather leads to restaurant performance decline

February 27, 2011

The National Restaurant Association’s Restaurant Performance Index stood at 100.2 in January, down 0.8 percent from its December level. Despite the decline, January marked the fourth time in the last five months that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“The RPI’s January decline was due in large to part to dampened sales and traffic levels as a result of extreme weather in some parts of the country,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association.  “Although restaurant operators reported softer same-store sales and customer traffic results in January, their outlook for sales growth and the economy remained optimistic.”

The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. It consists of two components, the Current Situation Index and the Expectations Index.

The Current Situation Index, which measures current trends in same-store sales, traffic, labor and capital expenditures, stood at 98.6 in January – down 1.1 percent from its December level. The Current Situation Index remained below 100 for the third consecutive month, which signifies contraction in the current situation indicators.

• Thirty-nine percent of restaurant operators reported a same-store sales gain between January 2010 and January 2011, down from 48 percent of operators who reported higher same-store sales in December. 
• In comparison, 44 percent of operators reported a same-store sales decline in January, up from 35 percent of operators who reported lower sales in December.

Restaurant operators also reported a net decline in customer traffic levels in January. 

• Thirty-five percent of restaurant operators reported an increase in customer traffic between January 2010 and January 2011, down from 43 percent of operators who reported higher traffic in December. 
• In comparison, 44 percent of operators reported a traffic decline in January, up from 34 percent in December.

Despite the softer sales and traffic levels, restaurant operators continued to report relatively steady levels of capital spending.

• Thirty-nine 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 last two monthly surveys.

The Expectations Index, which measures restaurant operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions, stood at 101.8 in January – down 0.5 percent from December’s 45-month high of 102.4. Despite the decline, the Expectations Index stood above the 100 level for the sixth 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-seven percent of restaurant operators expect to have higher sales in six months, down from 55 percent who reported similarly last month. 
• In comparison, 14 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 from eight percent who reported similarly last month.

Restaurant operators are also relatively optimistic about the direction of the overall economy.

• Forty-two percent of restaurant operators said they expect economic conditions to improve in six months, compared to 46 percent who reported similarly last month. 
• In comparison, 10 percent of operators said they expect economic conditions to worsen in the next six months, up slightly from eight percent who reported similarly last month.

Buoyed by a positive outlook for sales and the economy, restaurant operators’ plans for capital expenditures remained relatively steady.

• Forty-eight percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, compared to 50 percent who reported similarly last month.

For the fourth consecutive month, restaurant operators reported a positive outlook for staffing gains in the months ahead. 

• Twenty-four percent of restaurant operators plan to increase staffing levels in six months, while just 11 percent said they expect to reduce staffing levels in six months.