Restaurant operators gaining confidence for future

by Bryan Salvage
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WASHINGTON — In January, restaurant operators gained confidence about future economic and business conditions, according to the National Restaurant Association's (N.R.A.’s) comprehensive index of restaurant activity. However, the Restaurant Performance Index (R.P.I.) backed off slightly from December's 22-month high as a result of softening sales and traffic results in January.

A monthly composite index tracking the health of and outlook for the U.S. restaurant industry, the R.P.I. stood at 98.3 in January, down 0.3% from December's level.

"Although the current situation indicators remained soft in January, the Expectations Index rose above 100 for the first time in nine months," said Hudson Riehle, senior vice-president of Research and Knowledge Group for the N.R.A. "Restaurant operators are relatively optimistic about improving sales growth and economic conditions in the months ahead, and their capital spending plans rose to the highest level in five months."

The R.P.I. is based on the responses to the N.R.A.’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 the Current Situation Index and the Expectations Index. January's mark of 98.3 represents the 27th consecutive month of an index below 100, which signifies contraction in the index of key industry indicators. The full report is at www.restaurant.org/pdfs/research/index/201001.pdf.

The R.P.I. 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 Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.6 in January – down 0.8 percent from December. January represented the 29th consecutive month below 100, which signifies contraction in the current situation indicators.

After posting a moderate improvement in December, restaurant operators reported a softening in sales results in January. Twenty-seven percent of restaurant operators reported a same-store sales gain between January 2009 and January 2010, down from 35% of operators who reported higher sales in December. Fifty-seven percent of operators reported a same-store sales decline in January, up from 49% who reported negative sales in December.

Restaurant operators also reported softer customer traffic results in January. Twenty-six percent of restaurant operators reported an increase in customer traffic between January 2009 and January 2010, down from 30% who reported higher customer traffic in December. Fifty-four percent of operators reported a traffic decline in January, up from 47% who reported lower traffic in December.

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 100.1 in January – up 0.2 percent from December and its third gain in the past four months.

Restaurant operators remain relatively optimistic about sales growth in the months ahead and are cautiously optimistic about the direction of the economy.
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