As a result of softer same-store sales and customer traffic levels, the National Restaurant Association's Restaurant Performance Index declined in August. The RPI, a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, stood at 101.5 in August, down 1.2 percent from July and the lowest level in 11 months. Despite the decline, August represented the 30th consecutive month that the RPI stood above 100, which signifies expansion in the index of key industry indicators.
"The RPI's August decline was the result of broad-based declines in the current situation indicators," says Hudson Riehle, senior vice president, Research and Knowledge Group, National Restaurant Association. "Same-store sales and customer traffic softened from July's strong levels, while the labor and capital spending indicators also dipped.
"Despite the declines, each of the current situation indicators were in expansion territory above 100, which indicates the restaurant industry remains on a positive growth trajectory," 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 August—down 2.3 percent from July and the lowest level since November 2014. Despite the decline, the Current Situation Index remained above 100 for the 18th consecutive month, which signifies expansion in the current situation indicators.
Same-store sales: A majority of restaurant operators reported higher same-store sales for the 18th consecutive month in August, though results were much softer than the July readings. Fifty-six percent of restaurant operators reported a same-store sales gain between August 2014 and August 2015, down from 73 percent who reported higher sales in July. In comparison, 32 percent of operators reported a same-store sales decline in August, up from 16 percent in July.
Customer traffic: Restaurant operators also reported softer customer traffic results in August. Forty-one percent of restaurant operators reported an increase in customer traffic between August 2014 and August 2015, down from 59 percent who reported higher traffic in July. Thirty-seven percent of operators said their traffic declined in August, up from 23 percent in July.
Capital spending: Restaurant operators continued to report solid capital spending activity in August. Sixty-three percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the 11thconsecutive month in which a majority of operators reported making an expenditure.
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 101.6 in August—down slightly from a level of 101.7 in July. August represented the 34th consecutive month in which the Expectations Index stood above 100, which indicates restaurant operators remain optimistic about business conditions in the coming months.
Sales outlook: Restaurant operators have a generally positive outlook for sales in the months ahead. Forty-four percent of restaurant operators expect to have higher sales in six months [compared to the same period in the previous year], up from 40 percent who reported similarly last month. Twelve 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, while 44 percent expect their sales to remain about the same.
Overall economy: In contrast, restaurant operators are much less optimistic about the direction of the overall economy. Only 22 percent of restaurant operators said they expect economic conditions to improve in six months, while 21 percent expect conditions to worsen. This came on the heels of net negative readings in the previous two months.
Capital expenditure planning: Although the economic outlook is mixed, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Sixty percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 66 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.
News and information presented in this release has not been corroborated by FSR, Food News Media, or Journalistic, Inc.