Restaurant industry performance softened in August, as the National Restaurant Association's comprehensive index of restaurant activity posted a modest decline after a slight gain in the prior month. 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 97.9 in August, down 0.2 percent from July and its third decline in the last four months. Still, the survey did reveal operators expect performance to improve.
"Although the RPI remained below 100 for the 22nd consecutive month, which signals contraction, there are clear signs of improvement," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the association. "Restaurant operators reported a positive six-month outlook for both same-store sales and the overall economy, which drove the expectations component of the RPI to its highest level in four months."
The RPI is based on the responses to the NRA's Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. The RPI consists of two components – the Current Situation Index and the Expectations Index. Click here for the full report.
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 Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.0 in August – down 0.9 percent from July and its sharpest decline in nearly a year. In addition, August represented the 24th consecutive month below 100, which signifies contraction in the current situation indicators.
The sharp decline in Current Situation Index was the result of deteriorating sales and traffic levels in August. The results include:
- Only 17 percent of restaurant operators reported a same-store sales gain between August 2008 and August 2009, down from 26 percent who reported a sales gain in July and the lowest reading in the seven-year history of the RPI.
- Sixty-eight percent of operators reported a same-store sales decline in August, up from 58 who reported negative sales in July.
Customer traffic levels also dropped off in August. Results include:
- Only 15 percent of restaurant operators reported an increase in customer traffic between August 2008 and August 2009, down from 23 percent who reported higher traffic in July.
- Sixty-five percent of operators reported a traffic decline in August, compared to 59 percent who reported lower traffic in July.
Despite the softer sales and traffic levels, capital spending activity held relatively steady in recent months. Forty-two percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up slightly from 40 percent who reported similarly last month.
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 99.9 in August – up 0.5 percent from July and its highest level in four months.
The August gain in the Expectations Index was the result of an improvement in restaurant operators' outlook for both sales growth and the overall economy in the months ahead. Results include:
- Thirty-two percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up slightly from 31 percent who reported similarly last month.
- In comparison, 30 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 33 percent who reported similarly in the previous three months.
Restaurant operators also are more optimistic about the direction of the economy. Results include:
- Thirty-four percent of restaurant operators said they expect economic conditions to improve in six months, up from 32 percent who reported similarly last month.
- In comparison, 19 percent of operators expect economic conditions to worsen in six months, down from 24 percent who reported similarly last month.
Along with an improving outlook for sales and the economy, restaurant operators reported an uptick in plans for capital spending in the months ahead. Forty-five percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 42 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.
