The National Restaurant 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 100.0 in October, essentially unchanged from September’s level of 100.1. October’s steady RPI level was the result of softer sales and customer traffic being offset by a more optimistic outlook among restaurant operators.
“Although sales results were somewhat softer in October, restaurant operators reported net positive same-store sales for the fifth consecutive month,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, each of the four forward-looking indicators improved in October, which pushed the Expectations Index to its highest level in four months.”
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, and index values below 100 represent a period of contraction for key industry indicators. 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 99.5 in October – down 0.6 percent from September’s level of 100.1. October marked the third time in the last four months that the Current Situation Index stood below 100, which signifies contraction in the current situation indicators.
Restaurant operators reported positive same-store sales for the fifth consecutive month in October, although results were somewhat softer than September’s performance. Forty-five percent of restaurant operators reported a same-store sales gain between October 2010 and October 2011, down from 50 percent who reported a sales gain in September. In comparison, 35 percent of operators reported lower same-store sales in October, compared to 34 percent who reported similarly in September.
Restaurant operators also reported softer customer traffic levels in October. Thirty-seven percent of restaurant operators reported higher customer traffic levels between October 2010 and October 2011, while 39 percent of operators reported a traffic decline. In September, 43 percent of operators reported higher customer traffic, while 33 percent reported a traffic decline.
Restaurant operators continued to maintain steady levels of capital spending. Forty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, essentially unchanged from their reporting in the previous three months.
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 100.5 in October – up 0.4 percent from September and the highest level in four months. October also marked the second consecutive month that the Expectations Index stood above 100, which represents a positive outlook among restaurant operators for business conditions in the months ahead.
Restaurant operators remain relatively optimistic about sales growth in the months ahead. Thirty-five percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 37 percent who reported similarly last month. In comparison, 15 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 19 percent last month.
For the first time in four months, restaurant operators reported a net positive outlook for the economy. Twenty-six percent of restaurant operators said they expect economic conditions to improve in six months, up from 22 percent who reported similarly last month. Meanwhile, 22 percent of operators said they expect economic conditions to worsen in the next six months, down slightly from 23 percent who reported similarly last month.
Restaurant operators’ outlook for capital spending rose for the third consecutive month. Forty-nine percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, the highest level in four months.
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 is available online.
The RPI is released on the last business day of each month, and more detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association’s subscription-based service that provides detailed analysis of restaurant industry trends.