"The June increase in the Restaurant Performance Index was driven by broad-based gains in the current situation indicators," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "Each of the four current situation indicators posted improvements in June, led by solid same-store sales and traffic performances. In addition, operators overall remain optimistic about sales and the economy, which bodes well for continued growth in the second half of 2006."
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. Growth in the Restaurant Performance Index was fueled by a moderate gain in the Current Situation Index in June.
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 June, up 0.4 percent from May and its strongest level in three months.
Despite the challenges associated with rising energy prices, restaurant operators reported positive same-store sales for the 35th consecutive month. Fifty-three percent of restaurant operators reported a same-store sales gain between June 2005 and June 2006, up from 49 percent of operators who registered a sales gain in May. Twenty-nine percent of operators reported a same-store sales decline between June 2005 and June 2006, while 18 percent of operators reported no change in sales.
Customer traffic also remained positive in June. Forty-six percent of restaurant operators reported an increase in customer traffic between June 2005 and June 2006, up from 40 percent of operators who reported traffic gains in May. Thirty-one percent of operators reported traffic declines in June, while 23 percent reported no change in customer traffic.
Restaurant operators continued to report strong levels of capital spending. Fifty-six percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the fifth consecutive month above 50 percent.
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 102.2 in June, unchanged from its May level.
Although a majority of restaurant operators expect sales to be stronger in six months, the level of optimism slipped in recent months. Fifty-three 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 lowest level in seven months. However, 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.
Restaurant operators are cautiously optimistic about the direction of the overall economy. Thirty-one percent of operators expect economic conditions to improve in six months, up slightly from 30 percent last month. Seventeen percent of operators said they expect economic conditions to worsen in six months, while 52 percent expect economic conditions to remain about the same.
Although a solid proportion of restaurant operators are planning for new capital spending in the coming months, the levels are down from recent months. Fifty-seven percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 65 percent who reported similarly in February.
The five times weekly e-newsletter that keeps you up-to-date on the latest industry news and additions to this website.