Restaurant Performance Index Edged Up in January Despite Sluggish Current Conditions

ByUSDR


Driven by restaurant operators’ more optimistic outlook for future business conditions, the National Restaurant Association’s Restaurant Performance Index (RPI) posted a modest gain in January.  The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.7 in January, up 0.2 percent from December’s level of 100.5.  In addition, the RPI remained above 100 for the 11th consecutive month, which signifies expansion in the index of key industryindicators.

“Restaurant operators are more optimistic about business conditions in the months ahead, which is also reflected in ramped up plans for capital spending,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.  “However, current situation indicators such as customer traffic were dampened in January, due in large part to adverse weatherconditions.”

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 ExpectationsIndex.

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 99.5 in January – unchanged from December and the second consecutive month below 100.  Although restaurant operators reported net positive same-store sales in January, softness in the customer traffic and labor indicators outweighed the performance, which resulted in an overall Current Situation Index reading below100.

Restaurant operators reported net positive same-store sales for the 11th consecutive month in January, but results remained relatively dampened overall.  Forty-five percent of restaurant operators reported a same-store sales gain between January 2013and January 2014, while 40 percent of operators reported a sales decline.  In December, 44 percent of operators reported higher same-store sales, while 41 percent reported adecline.

Restaurant operators reported a net decline in customer traffic for the second consecutive month.  Thirty-three percent of restaurant operators reported customer traffic growth between January 2013 and January 2014, while 50 percent of operators reported a traffic decline.  In December, 30 percent of operators reported higher customer traffic levels, while 46 percent reported adecline.

Despite the softer sales and traffic levels, restaurant operators continued to report positive capital spending levels.  Fifty-seven percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the ninth consecutive month in which a majority of operators reported makingexpenditures.

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 101.8 in January – up 0.3 percent from December and the highest level in seven months.  In addition, January represented the 15th consecutive month in which the Expectations Index stood above 100, which indicates that restaurant operators remain optimistic about business conditions in the comingmonths.

Restaurant operators are somewhat more optimistic about sales growth in the months ahead.  Forty-one percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 38 percent who reported similarly last month.  Meanwhile, 11 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, while 48 percent expect their sales to remain about thesame.

In comparison, restaurant operators are somewhat less optimistic about the direction of the economy.  Twenty-nine percent of restaurant operators said they expect economic conditions to improve in six months, while 20 percent expect the economy to worsen.  The remaining 51 percent expect economic conditions to remain generally unchanged in the next sixmonths.

Along with a positive sales outlook, a majority of restaurant operators are planning for capital expenditures in the months ahead.  Sixty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 61 percent who reported similarly lastmonth.

The RPI is based on the responses to the National Restaurant Association’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 full report and video summary are available online at Restaurant.org/RPI.

The RPI is released on the last business day of each month, and a more detailed data and analysis can be found on Restaurant TrendMapper, the Association’s subscription-based web site that provides detailed analysis of restaurant industrytrends.

Founded in 1919, the National Restaurant Association is the leading business association for the restaurant industry, which comprises 980,000 restaurant and foodservice outlets and a workforce of more than 13 million employees. We represent the industry in Washington, D.C., and advocate on its behalf. We operate the industry’s largest trade show (NRA Show  in Chicago); leading food safety training and certification program (ServSafe); unique career-building high school program (the NRAEF’s ProStart); as well as the Kids LiveWell program promoting healthful kids’ menu options. For more information, visit Restaurant.org and find us on Twitter @WeRRestaurantsFacebook and YouTube.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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