Buoyed by higher same-store sales and traffic and a positive outlook among operators, the National Restaurant Association’s Restaurant Performance Index (RPI) remained elevated in January. The RPI—a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—stood at 102.7 in January, which represented the fourth consecutive month above the level of 102. In addition, January marked the 23rd consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.
“A solid majority of restaurant operators reported higher same-store sales and customer traffic in January, which helped keep the RPI well into positive territory,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the NRA. “In addition, nearly six in 10 operators expect their business to improve in the next six months, with plans for capital expenditures also continuing at a high level.”
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 102.7 in January, down slightly from a level of 102.9 in December. Despite the modest dip, the Current Situation Index stood above 100 for the 11th consecutive month, which signifies expansion in the current situation indicators.
A majority of restaurant operators reported higher same-store sales for the 11th consecutive month in January. Seventy percent of restaurant operators reported a same-store sales gain between January 2014 and January 2015, essentially unchanged from 71 percent who reported higher sales in December. In comparison, only 17 percent of operators reported a same-store sales decline in January, down slightly from 19 percent in December.
Restaurant operators also reported positive customer traffic results in January. Sixty-six percent of restaurant operators reported an increase in customer traffic between January 2014 and January 2015, up from 61 percent who reported higher traffic in December. Twenty-one percent of operators said their traffic declined in January, down slightly from 23 percent who reported similarly in December.
Along with positive sales and customer traffic trends, restaurant operators continue to make capital expenditures. Fifty-one percent of operators said they made a capital expenditure for equipment, expansion, or remodeling during the last three months, the fourth consecutive month in which a majority of operators reported capital spending.
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 102.8 in January—essentially unchanged from the previous two months. In addition, January represented the 27th consecutive month in which the Expectations Index stood above 100, which indicates restaurant operators remain optimistic about business conditions in the months ahead.
A majority of restaurant operators expect their sales to rise in the coming months. Fifty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 52 percent who reported similarly last month. Meanwhile, only 4 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, compared to 5 percent last month.
Restaurant operators are somewhat less bullish about the direction of the overall economy. Thirty-five percent of restaurant operators said they expect economic conditions to improve in six months, down slightly from 37 percent last month. Ten percent expect economic conditions to worsen in six months, while the remaining 55 percent expect economic conditions in six months to be about the same as they are now.
For the 17th consecutive month, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Fifty-seven percent of restaurant operators plan to make a capital expenditure for equipment, expansion, or remodeling in the next six months, down slightly from 62 percent who reported similarly last month.