FREE SUBSCRIPTION Includes: The Advisor Daily eBlast + Exclusive Content + Professional Network Membership: JOIN NOW LOGIN
Skip Navigation LinksHome / News / Read News


Restaurant Operators Remain Uncertain About Future

November 04, 2016, 07:00 AM
Filed Under: Restaurant

Driven by an overall increase in operators' current situation, the National Restaurant Association’s Restaurant Performance Index (RPI) advanced in September. The RPI stood at 100.8, up 1.2 percent from August.

“September’s RPI uptick was aided by gains in the current situation indicators, which have been soft in recent months,” said Hudson Riehle, senior vice president of research for the National Restaurant Association. “Meanwhile, the forward-looking indicators are becoming more muted. Operators are decreasingly optimistic looking toward the months ahead. In fact, three in 10 operators say they expect economic conditions to worsen in the next six months

The RPI consists of two components – the Current Situation Index (measuring current trends) and the Expectations Index (measuring restaurant operators' six-month outlook) – and tracks the health of and outlook for the U.S. restaurant industry. 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 stood at 101.0 in September – up 2.5 percent from a level of 98.6 in August. September’s reading of the current situation indicators was the highest level since April, and lifted the index back into expansion territory above 100. Restaurant operators showed the strongest same-store sales results since April; 49 percent reported a same-store sales increase between September 2015 and September 2016. Similarly, they also reported stronger customer traffic levels, though results were still mixed overall. Forty percent of restaurant operators reported an increase in customer traffic and 39 percent reported a traffic decline.

Despite this, operators maintained relatively steady capital spending levels. Sixty-two percent of restaurant operators say they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the 24th consecutive month in which a majority of operators reported making an expenditure.

The Expectations Index stood at 100.6 in September – unchanged from August. Although the Expectations Index was still above the 100 level in expansion territory, it remained below 101 for the fourth consecutive month – the first such occurrence since 2012.

Twenty-eight percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 33 percent last month and the lowest level since January. Seventeen percent expect their sales volume in six months to be lower than it was during the same period in the previous year.

In addition, only 14 percent of operators say they expect economic conditions to improve in six months, while 29 percent say they expect conditions to worsen. This represents the 11th consecutive month in which restaurant operators had a net negative outlook for the economy.

Despite the dampened expectations for business conditions, restaurant operators are continuing to plan for capital expenditures. Sixty-four percent of restaurant operators say they plan to make a capital expenditure for equipment, expansion or remodeling in the next six months.

Comments From Our Members

You must be an Equipment Finance Advisor member to post comments. Login or Join Now.