Restaurant industry outlook softens as restaurant performance index declined in november
WASHINGTON, Dec 28 /PRNewswire-USNewswire/ — The outlook for the restaurant industry continued to weaken in November, as the National Restaurant Association’s comprehensive index of
restaurant activity fell to its lowest level in more than four years.
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 99.0 in November, down 1.0
percent from October and its lowest level since February 2003.
«November’s decline in the Restaurant Performance Index was the result of a broad-based decline in both the current situation and expectations indicators,» said Hudson Riehle,
senior vice president of Research and Information Services for the Association. «Each of the eight indicators declined in November, signifying both a slowdown in current industry
performance as well as a weakening in the outlook for the industry in the months ahead.«
The Restaurant Performance Index 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 RPI consists of two components — the Current Situation Index and the Expectations Index.
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 under 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 98.7 in November — down 1.2 percent
from its October level. In addition, November marked the third consecutive month below 100, which signifies contraction in the current situation indicators.
Each of the four current situation indicators registered declines in November, with restaurant operators reporting negative same-store sales for the first time in nine months. Forty percent of
restaurant operators reported a same-store sales gain between November 2006 and November 2007, down from 44 percent who reported a sales gain in October. Forty-four percent of operators
reported a same-store sales decline in November, up from 36 percent who reported similarly in October.
Restaurant operators also reported softer customer traffic levels in November. Twenty-six percent of restaurant operators reported an increase in customer traffic between November 2006 and
November 2007, down from 32 percent who reported similarly in October. Forty-nine percent of operators reported a traffic decline in November, up from 40 percent who reported similarly in
Restaurant operators also pulled back on capital spending in November. Forty-nine percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the
last three months, down from 54 percent who reported similarly last month.
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
99.2 in November — down 0.8 percent from October. In addition, November marked the first Expectations Index reading below 100 in the history of the Restaurant Performance Index.
The driving force behind the decline in the Expectations Index continues to be a weakening in restaurant operators’ outlook for the economy. Only 16 percent of operators expect economic
conditions to improve in six months, down from 19 percent who reported similarly last month and the lowest level on record. Forty-one percent of operators said they expect economic conditions
to worsen in six months, up slightly from 40 percent who reported similarly last month.
Restaurant operators were also less optimistic about sales growth in their establishments. Twenty-nine percent of restaurant operators expect to have higher sales in six months (compared to the
same period in the previous year), down from 39 percent who reported similarly last month and the lowest level on record. Twenty-eight 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 25 percent who reported similarly last month.
Restaurant operators are also scaling back on plans for capital spending. Fifty-one percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in
the next six months, down from 55 percent who reported similarly last month.