Restaurant operators' outlook improves

WASHINGTON While customer traffic remained sluggish during the month of October, restaurateurs tended to be more hopeful about their prospects for the future, according to the latest monthly operator survey from the National Restaurant Association.

The NRA's Restaurant Performance Index, or RPI, posted its first gain in three months, registering 98.0 for the month, an increase of 0.5 percent over its September level of 97.5. Based on a 100-point scale, the RPI is a monthly composite that tracks the health and outlook of the U.S. foodservice industry by monitoring sales, traffic, labor and capital expenditures.

Despite the uptick, though, the index remained below the 100 mark Ñ which reflects contraction of key industry indicators -- for the 24th consecutive month.

Nevertheless, the NRA reports that operators generally appear to have a more positive attitude about future business prospects.

"Although restaurant operators continue to report soft same-store sales and customer traffic levels, they are somewhat more optimistic about improving conditions in the months ahead," said Hudson Riehle, senior vice president of the NRA's Research and Knowledge Group.

The NRA survey's Current Situation Index -- which measures current trends in same-store sales, traffic, labor and capital expenditures -- was 96.5 in October, an increase of 0.4 percent over September levels and the index's first improvement in three months. Again, however, that under-100 figure signifies contraction.

Same-store sales remained in negative territory in October, marking the 17th consecutive month there. According to the survey, 22 percent of operators reported same-store sales gains between October 2008 and October 2009, the same as in September. Meanwhile, 61 percent reported same-store sales declines for the same period, down a notch from those restaurateurs in September who said sales were slower.

Customer traffic also continued to be soft in October -- marking the 26th consecutive month of negative traffic trends -- although some slight improvement was reported, the NRA report showed. Twenty-one percent of operators saw an increase in customer traffic between October 2008 and October 2009, up from 20 percent who reported gains in September. Sixty percent of operators reported traffic decreases in October, down from 62 percent in September.

But while overall business conditions remained difficult in October, 40 percent of restaurateurs said they had made capital expenditures for equipment, expansion or remodeling over the past three months, up from 37 percent who reported in September.

Meanwhile, the survey's Expectation Index -- which measures operators' six-month outlook for same-store sales, employees, capital expenditures and business conditions -- reached 99.6 in October, up 0.6 percent from September's level.

Operators were cautiously optimistic about the direction the economy would be taking in the next six months, the survey said. Thirty percent said they anticipate economic conditions will improve during that period, while 20 percent said they would deteriorate further. Last month 28 percent said the economy would improve while 20 percent thought they would worsen.

Riding that wave of cautious optimism, 42 percent of those operators polled said they would invest in a capital expenditure for equipment, expansion or remodeling in the next six months, an increase over the 37 percent who reported similarly last month.

Contact Paul Frumkin at [email protected] [3].