News
Restaurant Performance Index dropped in July
August 30, 2007
WASHINGTON, D.C. — The outlook for the restaurant industry softened somewhat in July, as the National Restaurant Association's comprehensive index of restaurant activity registered a moderate decline.
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 100.9 in July, down 0.5 percent from June.
Despite the decline, the RPI remained above 100 for the 51st consecutive month, which represents expansion in the association's composite index of eight key industry indicators.
The Restaurant Performance Index is based on responses to the National Restaurant Association's Restaurant Industry Tracking Survey, fielded monthly among restaurant operators nationwide. The index consists of two components — the Current Situation Index and the Expectations Index.
Current Situation Index
The July decline in the Restaurant Performance Index was the result of drops in both the current situation and expectations components of the index. The Current Situation Index, which measures trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.5 in July — down 0.5 percent from June and its first decline in three months.
Although the overall Current Situation Index declined in July, restaurant operators continued to report positive same-store sales. Forty-eight percent of restaurant operators reported a same-store sales gain between July 2006 and July 2007, down from 56 percent who reported a sales gain in June.
Thirty-six percent of operators reported a same-store sales decline in July, up from 29 percent who reported similarly in June.
Restaurant operators also reported softer customer traffic levels in July.
Thirty-eight percent of restaurant operators reported an increase in customer traffic between July 2006 and July 2007, down from 43 percent who reported similarly in June. Forty percent of operators reported a traffic decline in July, while 22 percent said their customer traffic levels were about the same as they were in July 2006.
In contrast to the softer sales and traffic results, capital expenditure activity was stronger in July. Fifty-seven percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the strongest level in nearly three years.
The 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 101.2 in July — down 0.5 percent from June and its lowest level in 11 months.
Restaurant operators remained relatively optimistic about sales growth in the coming months. Forty-nine percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), roughly on par with 50 percent who reported similarly last month. Sixteen 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.
Although their outlook for sales growth remains positive, restaurant operators are less optimistic about the direction of the overall economy. Twenty-six percent of operators expect economic conditions to improve in six months, down from 31 percent who reported similarly last month. Twenty-two percent of operators said they expect economic conditions to worsen in six months, while 52 percent expect economic conditions to remain about the same.
In addition to lower expectations for the economy, restaurant operators backed off on plans for capital spending. Fifty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 59 percent last month and the lowest level in 11 months.
Click hereto view the full report.
Related Media
Subscribe
Get the latest news and resources from Fast Casual.
