Driven by stronger same-store sales and a more optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index posted a moderate gain in October. The RPI—a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—stood at 102.1 in October, up 0.7 percent from a level of 101.4 in September. In addition, October represented the 32nd consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.
“The October gain in the RPI was buoyed by broad-based improvements in the current situation indicators,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, restaurant operators are somewhat more optimistic about both sales growth and the economy in the months ahead.”
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 102.5 in October—up 1.2 percent from September and the highest level in three months. In addition, the Current Situation Index remained above 100 for the 20th consecutive month, which signifies expansion in the current situation indicators.
A majority of restaurant operators reported higher same-store sales for the 20th consecutive month, with October’s results representing the strongest performance since July. Sixty-one percent of restaurant operators reported a same-store sales gain between October 2014 and October 2015, up from 51 percent who reported higher sales in September. In comparison, 22 percent of operators reported a same-store sales decline in October, down from 27 percent in September.
While sales levels improved in October, the customer traffic results were similar to the August and September readings. Forty-one percent of restaurant operators reported an increase in customer traffic between October 2014 and October 2015, down slightly from 42 percent in September. Thirty-six percent of operators said their traffic declined in October, compared to 38 percent in September.
Restaurant operators also continued to report healthy capital spending activity in October. Seventy-six percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the 13th consecutive month in which a majority of operators reported making an expenditure.
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 101.6 in October—up slightly from a level of 101.4 in September. October represented the 36th consecutive month in which the Expectations Index stood above 100, which indicates restaurant operators remain generally optimistic about business conditions in the coming months.
Restaurant operators reversed a downward trending sales outlook with somewhat more optimistic expectations. Forty percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 35 percent who reported similarly last month. Meanwhile, only 6 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 12 percent last month.
Similarly, restaurant operators are somewhat more optimistic about the direction of the overall economy. Nineteen percent of restaurant operators said they expect economic conditions to improve in six months, while only 9 percent expect conditions to worsen. This represented the strongest net positive reading in five months.
Looking forward, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Fifty-nine percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 62 percent who reported similarly last month.
(via FSR Magazine)