The outlook for the restaurant industry remains
optimistic going into 2006, says the National Restaurant Association. The group’s
comprehensive index of restaurant activity held steady in November. The
Association’s Restaurant Performance Index—a monthly composite index
that tracks the health of and outlook for the U.S. restaurant industry—stood at 101.5 in November, unchanged from its October level. In addition, November represented the 31st consecutive month above 100, a level which represents expansion in the association’s composite index
of eight key industry indicators.

“The November performance of the Restaurant Performance Index is a
positive sign for the restaurant industry heading into the new year,”
says Hudson Riehle, senior vice president of Research and Information
Services for the Association. “Of particular note is restaurant
operators’ optimistic outlook for the overall economy, which rose to
its strongest level in nine months.”

The Restaurant Performance Index 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. (Click on the following link
to view this month’s Index report:
http://www.restaurant.org/pdfs/research/index/200511.pdf).

The Current Situation Index, which measures current trends in four
industry indicators (same-store sales, traffic, labor, and capital
expenditures), stood at 100.4 in November, unchanged from its October
level.

For the 28th consecutive month, restaurant operators reported an
increase in same-store sales. Fifty-one percent of restaurant operators
reported a same-store sales gain between November 2004 and November 2005, up from 49 percent of operators who registered a sales gain in
October. Thirty-one percent of operators reported a same-store sales
decline between November 2004 and November 2005, while 18 percent of
operators reported no change in sales.

Customer traffic also remained positive in November. Forty percent of
restaurant operators reported an increase in customer traffic between
November 2004 and November 2005, up slightly from 39 percent who
reported traffic gains in October. Thirty-seven percent of operators
reported traffic declines in November, while 23 percent reported no
change in customer traffic.

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 102.6
in November, up from 102.5 in October and its third consecutive monthly
gain.

A majority of restaurant operators are optimistic about sales growth in
the coming months. Fifty-two percent of restaurant operators expect
their sales volume in six months to be higher than it was during the
same period in the previous year – the second consecutive month above 50
percent. In contrast, just 13 percent of restaurant operators expect
their sales in six months to be lower than it was during the same period
in the previous year.

In addition to a positive sales outlook, restaurant operators are also
more optimistic about the direction of the overall economy. Forty-one
percent of operators expect economic conditions to improve in six months, the strongest level in nine months. Meanwhile, just 11 percent of operators said they expect economic conditions to worsen in six months, while 48 percent expect economic conditions to remain about the same.

Another positive indicator is the continued strong outlook for capital
expenditure activity in the restaurant industry. Sixty-one percent of
restaurant operators plan to make a capital expenditure for equipment,
expansion or remodeling in the next six months, the second consecutive
month at a level above 60 percent.

While the Restaurant Performance Index is consistently released 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 detailed
analysis of restaurant industry trends.