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Restaurant Operators Remain Positive, Ramp Up Capital Spending

April 06, 2015, 07:35 AM
Filed Under: Restaurant

Despite dampened sales and customer traffic levels as a result of extreme weather in parts of the country, the National Restaurant Association’s Restaurant Performance Index (RPI) held relatively steady in February.  The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.6 in February, down slightly from a level of 102.7 in January.  In addition, February marked the 24th consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators. The report was released on Mar. 31, 2015.

“With same-store sales and customer traffic levels being impacted by challenging weather conditions in parts of the country, the Current Situation component of the RPI declined in February,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.  “However, this was offset by a solid improvement in the Expectations component of the index, as restaurant operators are increasingly optimistic about business conditions in the months ahead.  As a result, the overall RPI held relatively steady in February.”

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, while index values below 100 represent a period of contraction for key industry indicators. The Index 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 102.0 in February – down from a level of 102.7 in January.  Despite the decline, the Current Situation Index stood above 100 for the 12th consecutive month, which signifies expansion in the current situation indicators.

Operators Ramp Up Capital Spending

Along with positive sales and customer traffic trends in recent months, restaurant operators ramped up capital spending.  Fifty-nine percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the fifth consecutive month in which a majority of operators reported making an expenditure.

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 103.3 in February – up 0.5 percent from January’s level of 102.8.  In addition, February represented the 28th consecutive month in which the Expectations Index stood above 100, which indicates an optimistic outlook among restaurant operators for business conditions in the coming months.

Restaurant operators are increasingly optimistic about sales growth in the months ahead.  Fifty-nine percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 57 percent who reported similarly last month.  In contrast, only 4 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, unchanged from last month.

Restaurant operators are also 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.  Eleven percent expect economic conditions to worsen in six months, while the remaining 52 percent expect economic conditions in six months to be about the same as they are now.

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