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Restaurant Industry News
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Sunday June 11th, 2006 |
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Restaurant Industry Outlook Remains Positive Despite Moderate Decline in Restaurant Performance Index
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Operators reported softer sales performance in April; outlook for growth remains optimistic |
National Restaurant Association's Restaurant Performance Index
Values Greater than 100 = Expansion; Values Less than 100 = Contraction
Source: National Restaurant Association
The outlook for the restaurant industry softened somewhat in April, as the National Restaurant Association's comprehensive index of restaurant activity registered its largest decline in eight months. The Association's Restaurant Performance Index - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 101.6 in April, down 1.0 percent from its March level. Despite the decline, the Index remained above 100 for the 34th consecutive month, which represents expansion in the Association's composite index of eight key industry indicators.
"Although April's Index reading was down from stronger levels in recent months, it still signals a period of expansion for the industry's key indicators," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "A majority of restaurant operators are anticipating sales growth in the short term, with growth in staffing levels and capital expenditures expected as well."
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. Click here to view this month's Index report.
The April decline in the Restaurant Performance Index was the result of drops in both the current situation and expectations components of the Index. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.5 in April - down 1.3 percent from March and its first decline in seven months.
Although April's performance was much softer than recent months, restaurant operators reported a same-store sales gain for the 33rd consecutive month. Forty-eight percent of restaurant operators reported a same-store sales gain between April 2005 and April 2006 - down from 63 percent of operators who registered a sales gain in March. Thirty-six percent of operators reported a same-store sales decline between April 2005 and April 2006, while 16 percent of operators reported no change in sales.
Restaurant operators also reported a slowdown in customer traffic in April. Thirty-nine percent of restaurant operators reported an increase in customer traffic between April 2005 and April 2006 - down from 51 percent of operators who reported traffic gains in March. Thirty-eight percent of operators reported traffic declines in April, while 23 percent reported no change in customer traffic.
In contrast to the sales and traffic trends, restaurant operators reported a boost in capital spending in recent months. Fifty-six percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the strongest level of activity in 18 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 102.5 in April - down 0.7 percent from its March level.
Although levels are down from recent months, a majority of restaurant operators are optimistic about sales growth in the coming months. Fifty-six 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 - down from 62 percent who reported similarly last month. In contrast, just 11 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 also somewhat less optimistic about the direction of the overall economy. Thirty-seven percent of operators expect economic conditions to improve in six months - down from 43 percent last month. Fifteen percent of operators said they expect economic conditions to worsen in six months, while 48 percent expect economic conditions to remain about the same.
A positive sign for both the restaurant industry and the overall economy is the strong proportion of restaurant operators planning to make new capital spending in the coming months. Sixty-one percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months - the seventh consecutive month at a level of 60 percent or higher.
More detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based web site that provides detailed analysis of restaurant industry trends.
Additional outlook information for 2006-including economic, segment, consumer, workforce and state/regional trends-can be found in the National Restaurant Association's 2006 Restaurant Industry Forecast. For details, visit the National Restaurant Association's Web site at www.restaurant.org/forecast. To order the Forecast ($24.95 for Association members and $49.95 for non-members), call 1-800-482-9122, or visit the Association's online store.
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| National Restaurant Association |
Contact Information:
1200 17th Street, NW
Washington, DC 20036
Ph: 202-331-5900 or 800-424-5156
Fax: 202-331-2429
Click for Website |
| The National Restaurant Association, founded in 1919, is the leading business association for the restaurant industry, which is comprised of 878,000 restaurant and foodservice outlets and a work force of 12 million employees - making it the cornerstone of the economy, career opportunities and community involvement. Along with the National Restaurant Association Educational Foundation, the Association works to represent, educate and promote the rapidly growing industry. |
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