Operators Report Positive Sales and Traffic Levels
Buoyed by positive sales and traffic and an optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) remained in positive territory in November.
The RPI, a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry , stood at 102.1 in November, down slightly from its October level of 102.8. November marked the 21st consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.
“The RPI registered a modest decline in November, as sales and customer traffic results were somewhat softer than their solid October levels,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “However, a majority of restaurant operators still reported higher same-store sales in November, and they are increasingly optimistic that business conditions will continue to improve in the months ahead.
“Overall, the RPI topped the 102 level for the second consecutive month in November, the first such occurrence in nearly nine years,” Riehle adds.
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.
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor, and capital expenditures), stood at 101.4 in November, down 1.6 percent from October’s strong level of 103.1. Despite the decline, the Current Situation Index stood above 100 for the ninth consecutive month, which signifies expansion in the current situation indicators.
A majority of restaurant operators reported higher same-store sales in November, though results were somewhat softer than October’s strong performance. Fifty-seven percent of restaurant operators reported a same-store sales gain between November 2013 and November 2014, down from 71 percent who reported higher sales in October. In comparison, 21 percent of operators reported a same-store sales decline in November, up from 11 percent in October.
Restaurant operators also reported a net increase in customer traffic in November. Forty-five percent of restaurant operators reported an increase in customer traffic between November 2013 and November 2014, down from 55 percent who reported higher traffic in October. Meanwhile, 30 percent of operators said their traffic declined in November, up from 16 percent who reported similarly in October.
Along with positive sales and traffic results in recent months, a majority of restaurant operators made capital expenditures. Fifty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, down slightly from 57 percent who reported similarly last month.
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 102.8 in November, up 0.3 percent from October’s level of 102.5. In addition, November represented the 25th consecutive month in which the Expectations Index stood above 100, which indicates restaurant operators are optimistic that business conditions will continue to improve in the months ahead.
A majority of restaurant operators expect their sales to rise in the coming months. Fifty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 52 percent who reported similarly last month. Meanwhile, only 7 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 6 percent last month.
Restaurant operators are also becoming more optimistic about the overall economy. Forty-one percent of restaurant operators said they expect economic conditions to improve in six months, up from 35 percent last month and the highest level in nearly four years. Only 8 percent expect economic conditions to worse in six months, while the remaining 51 percent expect economic conditions in six months to be about the same as they are now.
For the 15th consecutive month, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Fifty-seven 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.
The RPI 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.