Wednesday, 1 October, 2008 0:35 AM
Dampens Restaurant Industry Outlook as Restaurant Performance Index
Stood Below 100 for 10th Consecutive Month
continued to report lower sales and traffic levels; Capital spending
BY JASON RZUCIDLO / ©AMERICAJR.com
July, all Steak and Ale restaurants closed nationwide along with
company-owned Bennigan's restaurants. This one was located in Plymouth,
Michigan. Meanwhile, the Bennigan's next door remains open because
-- Restaurant industry performance remained soft in August,
as the National Restaurant Association's comprehensive index of
restaurant activity stood below 100 for the tenth consecutive month.
The Association's Restaurant Performance Index (RPI) - a monthly
composite index that tracks the health of and outlook for the U.S.
restaurant industry - stood at 98.3 in August, up 0.1 percent from
its July level.
recent lack of change in the Restaurant Performance Index reflects
the wait-and-see sentiment in the financial markets and overall
economy," said Hudson Riehle, senior vice president of research
and information services for the Association. "Restaurant operators
reported negative same-store sales for the eighth time in the last
10 months, and their outlook for sales growth in the months ahead
uncertain economy and rising food costs continue to pose a challenging
business environment for restaurant operators," Riehle added.
"A record 31 percent of restaurant operators said the economy
is the number-one challenge facing their business, while 22 percent
identified food costs as their top challenge."
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 RPI consists
of two components - the Current Situation Index and the Expectations
Index. (Follow this link to view this month's report: www.restaurant.org/pdfs/research/index/200808.pdf).
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 under 100 represent a period of
contraction for key industry indicators.
Situation Index, which measures current trends in four industry
indicators (same-store sales, traffic, labor and capital expenditures),
stood at 97.8 in August - up 0.2 percent from July and its first
gain in three months. Despite the modest improvement, August marked
the 12th consecutive month below 100, which signifies contraction
in the current situation component.
operators continued to report a same-store sales decline in August,
though results were an improvement over the previous two months.
Thirty-eight percent of restaurant operators reported a same-store
sales gain between August 2007 and August 2008, up from 36 percent
who reported a sales gain in July. Forty-eight percent of operators
reported a same-store sales decline in August, down from 50 percent
who reported similarly in July.
to soft sales results, restaurant operators continued to report
negative customer traffic levels in August. Twenty-five percent
of restaurant operators reported an increase in customer traffic
between August 2007 and August 2008, matching the proportion who
reported similarly in July. Fifty-five percent of operators reported
a traffic decline in August, down slightly from 57 percent who reported
negative traffic in July.
spending activity in the restaurant industry remains sluggish by
recent historical standards. Forty-one percent of operators said
they made a capital expenditure for equipment, expansion or remodeling
during the last three months, down from 42 percent who reported
similarly last month.
Index, which measures restaurant operators' six-month outlook for
four industry indicators (same-store sales, employees, capital expenditures
and business conditions), stood at 98.8 in August - down 0.1 percent
from July's level. In addition, August represented the tenth consecutive
month in which the Expectations Index stood below 100.
operators remain uncertain about sales growth in coming months.
Thirty percent of restaurant operators expect to have higher sales
in six months (compared to the same period in the previous year),
a level which has remained relatively unchanged for the last 10
months. Thirty-three 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, down slightly from 34 percent who reported
similarly last month.
operators also remain relatively pessimistic about the direction
of the economy. Twenty-four percent of operators expect economic
conditions to improve in six months, up from 21 percent who reported
similarly last month and the highest level in 11 months. However,
33 percent of operators said they expect economic conditions to
worsen in six months, up from 29 percent who reported similarly
operators' outlook for capital spending activity remains soft. Forty-three
percent of restaurant operators plan to make a capital expenditure
for equipment, expansion or remodeling in the next six months, unchanged
from last month and equal to the lowest level on record.
RPI is consistently released on the last business day of each month,
more detailed data and analysis can be found on Restaurant TrendMapper
the Association's subscription-based Web site that provides detailed
analysis of restaurant industry trends.
Restaurant Association, founded in 1919, is the leading business
association for the restaurant industry, which is comprised of 945,000
restaurant and foodservice outlets and a work force of 13.1 million
employees - making it the cornerstone of the economy, career and
employment opportunities and community involvement. Along with the
National Restaurant Association Educational Foundation, the Association
works to represent, educate and promote the rapidly growing industry.
For more information, visit our Web site at http://www.restaurant.org/
National Restaurant Association