Industry News | January 8, 2004

NRA Says Restaurant Outlook Good

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After soaring to a record level in October, the National Restaurant Association's Restaurant Performance Index, a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, edged down 0.5 percent in November. Despite the downtick in November, positive same-store sales and strong operator optimism point toward continued growth during the next several months.

The Restaurant Performance Index (PDF) 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. The Index consists of two components -- the Current Situation Index and the Expectations Index.

"In spite of the modest November decline," said Hudson Riehle, senior vice president of Research and Information Services for the Association, "the Restaurant Performance Index remains in a strong position, bolstered by a fourth consecutive month of positive same-store sales. Moreover, restaurant operators are extremely optimistic about their sales prospects as well as the direction of the overall economy, which sets the stage for solid industry growth in 2004."

The November decline in the Restaurant Performance Index was the result of a moderate drop in the current situation component of the index. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), fell 1.5 percent in November. The November decline came on the heels of a strong 3 percent jump in October.

Although each of the four current situation indicators declined in November, same-store sales remained positive overall. Forty-six percent of restaurant operators reported a same-store sales increase between November 2002 and November 2003, while only 33 percent of operators reported a same-store sales decline. This marked the fourth consecutive month of positive same-store sales.

In contrast, customer traffic results were not as strong in November. Thirty-eight percent of restaurant operators reported an increase in customer traffic between November 2002 and November 2003 -- down from 46 percent who registered an increase in October. Thirty-eight percent of operators reported a decline in customer traffic between November 2002 and November 2003.

The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators, increased 0.5 percent in November. The November gain followed a solid 1.2 percent gain in October and marked the fifth consecutive monthly increase in the Expectations Index.

Restaurant operators continue to become more optimistic about short-term sales growth in their establishments. Nearly two-thirds of restaurant operators (65 percent) expect to have higher sales in six months (compared to the same period in the previous year) -- up from 62 percent who reported similarly last month and the strongest level in the history of the index. Meanwhile, only 8 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.

Restaurant operators also remain confident in the direction of the overall economy. Sixty-three percent of restaurant operators expect economic conditions in six months to be better than they are now -- up from 59 percent last month and the strongest level on record. Only 5 percent of restaurant operators expect economic conditions to worsen in six months.

Along with their positive expectations for sales growth in the near future, restaurant operators are continuing to plan for capital expenditures. Sixty-one percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months -- marking the fifth consecutive month with a level of 60 percent or greater.

The National Restaurant Association's Restaurant Performance Index is published on the last business day of each month. More detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based web site that provides real-time analysis of restaurant industry trends.

A chart of the November Restaurant Performance Index is available on the Association's Web site, www.restaurant.org.