Restaurant operators' optimism wanes

NRA's Restaurant Performance Index slips in June

Restaurant operators appear to be less optimistic about their future prospects, which contributed to a decline in the National Restaurant Association’s Restaurant Performance Index for the third consecutive month.

The RPI fell to 99.5 in June, a decline of 0.3 percent from May and the lowest level since February, according to the NRA. It also marks the second consecutive month the RPI has stood below 100, which reflects contraction in the monthly index of key foodservice industry indicators.

“Although the current situation indicators registered a modest improvement in June, each of the four expectations indicators dipped for the second consecutive month,” said Hudson Riehle, the NRA’s senior vice president of the research and knowledge group. “Restaurant operators are generally optimistic that sales and business conditions will improve in the next six months, but the strength of their optimism fell to a five-month low.”

Riehle explains the June RPI results in the video below:

The Current Situation Index, which measures current trends in same-store sales, traffic, labor and capital expenditures, inched up to 98.9 in June, an increase of 0.1 percent from the May level. However, this marks the 34th consecutive month the Current Situation Index has remained below 100.

Foodservice operators reported a net decline in same-store sales for the third consecutive month in June, although that reflected improvement over May results. About 39 percent of operators said same-store sales rose between June 2009 and June 2010, an increase over the 35 percent who reported higher sales in May. Forty-three percent of restaurateurs said same-store sales decreased in June, a decline from 46 percent who reported negative sales in May.

Operators also reported a net decline in traffic levels in June. While 33 percent said customer traffic rose between June 2009 and June 2010, 43 percent reported a traffic decline for the month, which remains flat from May results.

Restaurateurs also reported a decrease in capital spending activity. Forty-three percent said they made a capital expenditure for equipment, expansion or remodeling in the past three months versus 45 percent who reported the same thing in May.

The Expectations Index, which gauges foodservice operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions, slipped to 100.2 in June, a decline of 0.6 percent from May and its lowest level in five months. The good news, however, is that the index remained above 100 for the sixth consecutive month, which reflects expansion in the forward-looking indicators.

In general, restaurant operators are not particularly optimistic about the economy. Twenty-eight percent expect economic conditions to improve in six months compared with 33 percent who reported similarly in May. Meanwhile, 21 percent anticipate that the economy will worsen in the next six months, up from just 10 percent two months ago.

The RPI, which is based on responses to the NRA’s Restaurant Industry Tracking Survey, gauges the health and outlook of the foodservice industry on a monthly basis through such indicators as traffic, labor and capital expenditure.

Click here for more on the NRA's Restaurant Performance Index [3].

Contact Paul Frumkin at [email protected]