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The outlook for the restaurant industry remained positive in April, as the National Restaurant Association’s comprehensive index of restaurant activity stood above 100 for the second consecutive month. The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – was essentially unchanged from its previous month’s level; the RPI stood at 100.4 in April, down slightly from its March level of 100.5. RPI levels above 100 indicate expansion of key industry indicators.
“Although the sales and traffic indicators softened somewhat from their March performance, restaurant operators remain optimistic that business conditions will improve in the months ahead,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, restaurant operators reported a positive outlook for staffing gains, as well as continued plans for capital expenditures in the coming months.”
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, and index values below 100 represent a period of contraction for key industry indicators. The RPI 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 99.0 in April – unchanged from its March level. The Current Situation Index remained below 100 for the 32nd consecutive month, which signifies contraction in the current situation indicators.
After reporting net positive same-store sales in March for the first time in 22 months, restaurant operators reported softer sales results in April. Thirty-nine percent of restaurant operators reported a same-store sales gain between April 2009 and April 2010, down from 43 percent of operators who reported higher sales in March. In comparison, 41 percent of operators reported a same-store sales decline in April, up from 36 percent of operators who reported negative sales in March.
Similarly, restaurant operators reported a net decline in customer traffic levels in April, after posting positive traffic results in March. Thirty-seven percent of restaurant operators reported an increase in customer traffic between April 2009 and April 2010, down from 41 percent who reported higher customer traffic in March. Thirty-nine percent of operators reported a traffic decline in April, up from 36 percent who reported lower traffic in March.
Although sales and traffic results softened in April, restaurant operators reported a moderate uptick in capital spending. Forty percent of operators said they made a capital expenditure for equipment, expansion, or remodeling during the past three months, up from 36 percent last month and the highest level in six months.
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 101.8 in April – down slightly from a level of 101.9 in March. Despite the modest decline, the Expectations Index stood above the 100 level for the fourth consecutive month, which signifies expansion in the forward-looking indicators.
Restaurant operators remain solidly optimistic about sales improvements in the months ahead. Forty-seven percent of restaurant operators expect to have higher sales in six months (compared with the same period in the previous year), down slightly from 50 percent who reported similarly last month. In comparison, only 12 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 15 percent who reported similarly last month and the lowest level in more than three years.
Restaurant operators also remain optimistic about the direction of the overall economy. Forty-one percent of restaurant operators said they expect economic conditions to improve in six months, compared with 46 percent who reported similarly last month. In comparison, only 10 percent of operators said they expect economic conditions to worsen in the next six months, down from 12 percent last month.
Along with a positive outlook for sales and the economy, restaurant operators’ plans for capital expenditures held steady in recent months. Forty-eight percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, roughly on par with the levels reported in the previous two months.
For the third consecutive month, restaurant operators reported a positive outlook for staffing gains in the months ahead. Twenty-two percent of operators expect to increase staffing levels in six months (compared with the same period in the previous year), while just 12 percent plan to reduce staffing levels in six months.
The RPI 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 full report is available online.
The RPI is released on the last business day of each month, and more detailed data and analysis can be found on Restaurant TrendMapper, the Association's subscription-based service that provides detailed analysis of restaurant industry trends.