Surveys point to brighter future for restaurants

NEW YORK Both restaurant operators and consumers are providing mounting evidence that the end of the industry’s downturn could be near.

Two monthly surveys released last week – the National Restaurant Association’s Restaurant Performance Index and the RBC Capital Restaurant Spending Survey – showed increased confidence among restaurant operators and increased spending plans among consumers.

The NRA index of restaurant activity, which surveys operators on economic indicators including sales, traffic, labor and capital expenditures, registered its fourth consecutive monthly gain in April. It stood at 98.6 in April, up 0.8 percent from March, and its highest level in 11 months.

“The recent growth in the RPI was driven by the expectations component, which rose above 100 in April for the first time in 18 months, a level which indicates expansion,” said Hudson Riehle, senior vice president of research and information services for the NRA. “Although the RPI’s current situation indicators are still in a period of contraction, the solid improvement in the forward-looking indicators suggests that the end of the industry’s downturn may be in sight.”

Indeed, restaurant operators reported a positive outlook on sales volume over the next six months, as well as a positive outlook on an improved economy in the next six months, according to the NRA survey.

While more optimistic expectations drove the NRA performance index, operators’ reports on their current business status also improved but still remained at levels indicating industry contraction. The NRA current situation index stood at 97.0 in April, up 0.9 percent from March, and its highest level since August 2008. It was still the 20th consecutive month of a result below 100, which signifies contraction.

Consumers also were expressing more positive views about the economy and their plans to spend more at restaurants.

The May RBC Capital consumer spending survey, which gathers spending intentions from more than 1,000 consumers, showed its best monthly improvement since November 2006. Those who said they would spend more at restaurants over the next 90 days rose to 10 percent, up from the 6 percent who said the same thing in April. Consumer plans to spend less at restaurants also went in the right direction, according to RBC, falling to 38 percent in the May survey, compared with 44 percent in April.

“Consumers have emerged from their winter hibernation seemingly with a bigger appetite,” said Larry Miller, restaurant analyst at RBC Capital Markets Corp. “Perhaps the biggest takeaway from the May survey was an uptick in spending plans at casual dining.”

Consumers say they are planning to spend more at restaurants because they are traveling more, have more special events planned, have less time to cook and because restaurants are offering better value, the survey said.

Contact Sarah Lockyer at [email protected] [3].