The National Restaurant Association announced that the Restaurant Performance Index (RPI) rose in November as a result of positive same-store sales performance and customer traffic.

The monthly composite index, which tracks the performance and outlook for the U.S. restaurant industry, stood at 99.9 in November, up 0.5 percent from October. However, November marked the second consecutive month in which the RPI stood below 100, which signifies contraction in the index of key industry indicators. 

“The November gain in the RPI was driven by improving same-store sales and customer traffic levels, both of which registered their strongest performance in three months,” reports Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “However, restaurant operators remain concerned about the direction of the overall economy.” 

The RPI measures the health of the restaurant industry 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 the Current Situation Index and the Expectations Index. 

The Current Situation Index, which measures trends in same-store sales, traffic, labor, and capital expenditures, stood at 99.8 in November—an increase of 0.6 percent from a level of 99.3 in October. Although restaurant operators reported net positive sales and traffic results in November, softness in the labor and capital spending indicators outweighed the performance, which resulted in a Current Situation Index reading below 100 for the fourth time in the last five months. 

Restaurant operators reported positive same-store sales for the 18th consecutive month, with November’s results representing the strongest performance in three months. Fifty-five percent of restaurant operators reported a same-store sales gain between November 2011 and November 2012, up from 40 percent who reported positive sales in October. Meanwhile, 30 percent of operators reported lower same-store sales in November, down from 36 percent in October. 

Restaurant operators also reported a net gain in customer traffic levels in November. Forty-three percent of restaurant operators reported higher customer traffic levels between November 2011 and November 2012, up from 30 percent who reported positive traffic in October. Meanwhile, 35 percent of operators reported lower customer traffic levels in November, down from 41 percent in October. 

Although sales and traffic results improved, restaurant operators reported a dip in capital spending. Thirty-seven percent of operators said they made a capital expenditure for equipment, expansion, or remodeling during the last three months, the lowest level of capital spending in 32 months. 

On a positive note, the Expectations Index, which measures restaurant operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions, stood at 100.0 in November—up 0.4 percent from October. Although November was an improvement over October’s reading of 99.7, it still signals that restaurant operators are uncertain about the business environment in the months ahead. 

However, restaurant operators are somewhat more optimistic about sales growth in the coming months. Thirty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 31 percent last month. Meanwhile, 14 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, down from 21 percent last month. 

Along with the uncertain outlook, restaurant operators reported a pullback in plans for capital spending in the coming months. Forty-five percent of restaurant operators plan to make a capital expenditure for equipment, expansion, or remodeling in the next six months, down from 50 percent who reported similarly last month. 

Industry News, NextGen Casual