Stronger restaurant sales ahead: NRA

by Meat&Poultry Staff
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WASHINGTON – Economic fundamentals of the US restaurant industry remain positive, even though the National Restaurant Association’s Restaurant Performance Index fell below 100 in November. This will likely lead to stronger sales in the months ahead, said Hudson Riehle, senior vice president, research and knowledge, NRA.

A monthly composite index that tracks the health of and outlook for the US restaurant industry, the RPI stood at 99.9 in November, down 0.8% from October. November was the first time in three months the RPI stood below 100, the level above which signifies expansion in the index of key industry indicators.

“While the RPI’s November decline was largely the result of softer same-store sales and traffic performances, it doesn’t necessarily mean the industry’s recovery is in peril,” Riehle said. “Like the economy as a whole, the restaurant industry’s road to recovery will be one with occasional bumps along the way.”

NRA explains the RPI is constructed so 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), measured 98.7 in November. It was down 1.3% from October and marked the first decline since May. November’s decline came on the heels of the Current Situation Index reaching the 100 level in October, the first such occurrence since August 2007.

For the first time in three months, restaurant operators reported a net decline in same-store sales. Forty percent of restaurant operators reported same-store sales gains between November 2009 and November 2010. That was down from 51% of operators who reported higher same-store sales in October.

Restaurant operators also reported a net decline in customer traffic levels in November. Thirty-six percent of restaurant operators reported an increase in customer traffic between November 2009 and November 2010, down from 44% of operators who reported higher traffic in October.

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 101.2 in November. It was down 0.2 percent from October and was the first decline in four months.

Although the overall Expectations Index declined in November, restaurant operators remain relatively optimistic about sales growth. Restaurant operators are generally optimistic about the direction of the overall economy. Thirty-seven percent of restaurant operators said they expect economic conditions to improve in six months, up slightly from 35 percent last month. In comparison, 15 percent of operators said they expect economic conditions to worsen in the next six months, up from 12 percent who reported similarly last month.
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