News

NRA: Expansion likely for restaurant industry

The restaurant industry outlook is positive and business owners are optimistic about improving sales in the next several months.

July 1, 2015

The restaurant industry outlook is positive and business owners are optimistic about improving sales in the next several months, according to the latest National Restaurant Association's Restaurant Performance Index.

The Restaurant Performance Index, which tracks outlook and health of the U.S. restaurant industry, was 102.3 in May, down a tiny bit, 0.4 percent, from a level of 102.7 in April. May is the 27th consecutive month the RPI hit about 100, which reflects expansion ahead.

"The outlook for the restaurant industry remains positive, as the RPI stood above the 102 level for the eighth consecutive month," said Hudson Riehle, senior VP of the research and knowledge group for the association in a statement. "A majority of restaurant operators reported higher same-store sales in May, and operators are generally optimistic about an improving business environment 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.

Current Situation Index

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 102.6 in May, down 0.2 percent from April. However, the Current Situation Index stood above 100 for the 15th consecutive month, which signifies expansion in the current situation indicators.

Same-store sales: For the 15th consecutive month, a majority of restaurant operators reported higher same-store sales, though May's results were somewhat softer than April. Sixty-seven percent of restaurant operators reported a same-store sales gain between May 2014 and May 2015, down from 71 percent who reported higher sales in April. In comparison, 19 percent of operators reported a same-store sales decline in May, up from 13 percent in April.    
Customer traffic: Restaurant operators also reported softer customer traffic results in May. Fifty-two percent of restaurant operators reported an increase in customer traffic between May 2014 and May 2015, down from 55 percent who reported higher traffic in April. Thirty-one percent of operators said their traffic declined in May, up from 25 percent in April.
Capital spending: In addition to positive same-store sales and customer traffic levels in recent months, capital spending also remained at elevated levels. Sixty percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the eighth consecutive month in which a majority of operators reported making an expenditure.

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 102.0 in May – down 0.5 percent from a level of 102.5 in April. Despite the decline, May represented the 31st consecutive month in which the Expectations Index stood above 100, which indicates a positive outlook for business conditions in the months ahead. 

Sales outlook: Restaurant operators remain generally optimistic that their sales will improve in the coming months.  Forty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 52 percent from last month. Meanwhile, 9 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 slightly from 6 percent last month.
Overall economy: Restaurant operators' outlook for the overall economy is somewhat less bullish than their sales expectations. Thirty percent of restaurant operators said they expect economic conditions to improve in six months, up slightly from 28 percent last month. Eleven percent expect economic conditions to worsen in six months, while the remaining 59 percent expect economic conditions in six months to be about the same as they are now.  
Capital expenditure planning: For the 21st consecutive month, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Fifty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 59 percent who reported similarly last month.