Restaurant Industry outlook improved in October

(Washington, DC)  The outlook for the restaurant industry improved sharply in October, as the National Restaurant Association's comprehensive index of restaurant activity registered a solid gain.  The Association's Restaurant Performance Index - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 101.5 in October, up a strong 1.2 percent from a level of 100.2 in September.  In addition, October represented the 30th consecutive month above 100 - a level which represents expansion in the Association's composite index of eight key industry indicators. "The robust October increase in the Restaurant Performance Index was the result of broad-based gains in both the current situation and expectations components," said Hudson Riehle, senior vice president of Research and Information Services for the Association.  "Each of the eight indicators posted solid improvements in October, propelling the Index to its strongest gain in two years." 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 Index consists of two components - the Current Situation Index and the Expectations Index.   (Click on the following link to view this month's Index report: http://www.restaurant.org/pdfs/research/index/200510.pdf). The October increase in the Restaurant Performance Index was driven by strong gains in both the current situation and expectations components of the index.  The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.4 in October - up 0.9 percent from September's 24-month low of 99.5. Growth in the current situation component was fueled by a solid improvement in the sales indicator, with restaurant operators reporting positive same-store sales for the 27th consecutive month.  Forty-nine percent of restaurant operators reported a same-store sales gain between October 2004 and October 2005 - up from 44 percent of operators who registered a sales gain in September.  Thirty-two percent of operators reported a same-store sales decline between October 2004 and October 2005, while 19 percent of operators reported no change in sales. Customer traffic also registered an improvement in October. Thirty-nine percent of restaurant operators reported an increase in customer traffic between October 2004 and October 2005 - up from 36 percent who reported traffic gains in September.  Thirty-eight percent of operators reported traffic declines in October, while 23 percent reported no change in customer traffic. 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 102.5 in October - up a strong 1.6 percent from September and its second consecutive monthly gain. Driving the growth in the Expectations Index was a solid improvement in operators' outlook for sales growth in the coming months.  Fifty-three percent of restaurant operators expect their sales volume in six months to be higher than it was during the same period in the previous year - up from 42 percent of operators who reported similarly last month.  In contrast, just 11 percent of restaurant operators expect their sales in six months to be lower than it was during the same period in the previous year. In addition to an improving sales outlook, restaurant operators are also more optimistic about the direction of the overall economy.  Thirty-eight percent of operators expect economic conditions to improve in six months - up from just 26 percent who reported similarly last month. Meanwhile, just 16 percent of operators said they expect economic conditions to worsen in six months, down sharply from 30 percent who reported similarly last month. Another positive development this month was the bolstered outlook for capital expenditure activity in the restaurant industry.  Sixty-one percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, the strongest level in six months. More detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based web site that  provides detailed analysis of restaurant industry trends. A chart of the September 2005 Restaurant Performance Index is available by clicking on the link below. For a printable version of this release, our news release archive or more information about the restaurant industry, please click on the link below: http://www.restaurant.org/pressroom/pressrelease.cfm?ID=1172