Restaurant Industry Outlook Remains Positive

(Washington, DC) Despite the recent sharp rise in gas and energy prices, the outlook for the restaurant industry remains positive. 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 101.7 in July, down 0.4 percent from a record-level of 102.0 in June. However, July represented the 27th consecutive month above 100 - which represents expansion in the Association's composite index of eight key industry indicators.

"Although the Restaurant Performance Index registered a modest decline in July, the underlying indicators remained in a positive position," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "Operators reported positive same-store sales and customer traffic levels in July, and they are optimistic for continued growth 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 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/200507.pdf).

The industry is not without challenges, Riehle added. "Nearly three out of ten restaurant operators (29 percent) identified recruiting and retaining employees as the number-one challenge facing their business - the strongest level in the three-year history of the Association's monthly tracking survey," he said. "In addition, fully 10 percent of operators said gas and energy prices are the top challenge facing their business - up from just four percent who reported similarly last month."

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 101.0 in July - down slightly from a June performance that represented a six-month high.

For the 24th consecutive month, restaurant operators reported an increase in same-store sales. Fifty-four percent of restaurant operators reported a same-store sales gain between July 2004 and July 2005 - down slightly from 58 percent of operators who registered a sales gain in June. Thirty percent of operators reported a same-store sales decline between July 2004 and July 2005, while 16 percent of operators reported no change in sales.

Customer traffic remained positive despite a slight decline in July. Forty percent of restaurant operators reported an increase in customer traffic between July 2004 and July 2005 - down from 44 percent of operators who registered an increase in June. Thirty-eight percent of operators reported a decline in customer traffic between July 2004 and July 2005, while 22 percent of operators 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), slipped 0.4 percent in July to a level of 102.2 - its fourth decline in the last five months.

Although the overall Expectations Index was down somewhat in recent months, a majority of restaurant operators are still expecting 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, while only 14 percent of operators expect to have lower sales in six months. Thirty-three percent of operators expect their sales to remain about the same.

In addition to a positive sales outlook, a solid majority of restaurant operators are making plans for new capital expenditures. 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 61 percent who reported similarly last month.

Restaurant operators are also planning to increase staffing levels during the next several months. Twenty-four percent of operators expect to have higher staffing levels in six months (compared to the same period in the previous year), while only 13 percent of operators expect to employ fewer workers in six months (compared to the same period in the previous year).

While the Restaurant Performance Index is consistently released on the last business day of each month, more detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based Web site that provides real-time analysis of restaurant industry trends.

Note: The August 2005 Restaurant Performance Index will be released on October 7, instead of the normally scheduled release on the last business day of the month. A chart of the July 2005 Restaurant Performance Index is available by clicking on the link below.

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http://www.restaurant.org/pressroom/pressrelease.cfm?ID=1138

If you have questions, please contact the National Restaurant Association's Media Relations Department at media@dineout.org, or call (202) 973-3677, and remember to visit our Web site www.restaurant.org frequently to learn why restaurants are the cornerstone of the economy, career and employment opportunities, and community involvement.