News

NRA restaurant outlook reports slight gain, more uncertainty

March 30, 2009

WASHINGTON, D.C. — Restaurant industry performance remained soft in February, as the National Restaurant Association's comprehensive index of restaurant activity stood below 100 for the 16th consecutive month. 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 97.5 in February, up 0.1 percent from its January level. 

"Although the index registered its second consecutive monthly gain, each of the RPI's eight indicators stood below 100 in February, which signifies continued contraction," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "A majority of restaurant operators reported negative same-store sales and customer traffic levels in February, and their outlook for sales growth in the months ahead remains uncertain." 

TheRestaurant Performance Indexis based on the responses to the NRA'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 below 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 96.6 in February – up 0.1 percent from January and the second consecutive monthly improvement. Despite the recent gains, February marked the 18th consecutive month below 100, which signifies contraction in the current situation indicators. 

• Twenty-nine percent of restaurant operators reported a same-store sales gain between February 2008 and February 2009, down from 31 percent who reported a sales gain in January.
• Fifty-six percent of operators reported a same-store sales decline in February, up slightly from 55 who reported negative sales in January.

• Twenty-two percent of restaurant operators reported an increase in customer traffic between February 2008 and February 2009, matching the proportion who reported similarly in January.
• Fifty-nine percent of operators reported a traffic decline in February, also unchanged from January.

Capital spending activity in the restaurant industry also slowed along with sales and traffic in recent months. Thirty-five percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, compared to the 34 percent levels reported by operators in the previous two 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 98.5 in February – up 0.2 percent from January and its third consecutive monthly gain. However, February still represented the 16th consecutive month in which the Expectations Index stood below 100. 

• Twenty-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 26 percent who reported similarly last month.
• Forty-one 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, compared to 42 percent who reported similarly last month.

• Twenty-two percent of operators expect economic conditions to improve in six months, up from 18 percent who reported similarly last month and the highest level in six months.
• Thirty-six percent of operators said they expect economic conditions to worsen in six months, up from 34 percent who reported similarly last month.

Restaurant operators are still somewhat reticent to make plans for additional capital spending. Forty-one percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, matching the proportion who reported similarly last month. 

While the RPI is released on the last business day of each month, more detailed data and analysis can be found onRestaurant TrendMapper, the association's subscription-based Web site that provides detailed analysis of restaurant industry trends.