Restaurant recovery

The national restaurant sector may be in recovery.

The National Restaurant 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 100.9 in April, essentially unchanged from a level of 101.0 in March.

Also, April represented the fifth consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“The restaurant industry continued to build momentum in April, with restaurant operators reporting positive same-store sales and customer traffic levels for the sixth time in the last eight months," Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association, said in a statement. "Barring any significant external shocks, restaurant sales and traffic levels will continue to improve in the months ahead."

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, 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), stood at 100.3 in April – up slightly from a March level of 100.2. In addition, the Current Situation Index stood above 100 for the second consecutive month, which signifies expansion in the current situation indicators.

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 101.5 in April – down slightly from a level of 101.7 in March. Despite the decline, the Expectations Index stood above the 100 level for the ninth consecutive month, which signifies expansion in the forward-looking indicators.

INDEX FINDINGS
• 50% of restaurant operators reported a same-store sales gain between April 2010 and April 2011, down slightly from 52% of operators who reported higher same-store sales in March. In comparison, 31% of operators reported a same-store sales decline in April, matching the proportion of operators who reported lower sales in March.

• 38% of restaurant operators reported an increase in customer traffic between April 2010 and April 2011, down from 45% of operators who reported higher traffic in March. In comparison, 35% of operators reported a traffic decline in April, up from 32% in March.

• 48% of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the highest level in nearly three years.

• 47% of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 50% who reported similarly last month. In comparison, just 13% of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, matching the proportion who reported similarly last month.

• 33% of restaurant operators said they expect economic conditions to improve in six months, up slightly from 32% who reported similarly last month. In comparison, 17% of operators said they expect economic conditions to worsen in the next six months, compared to 19% who reported similarly last month.

• 49% of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 53% who reported similarly last month.

• For the seventh consecutive month, restaurant operators reported a positive outlook for staffing levels in the coming months. 24% of restaurant operators plan to increase staffing levels in six months (compared to the same period in the previous year), while just 11% said they expect to reduce staffing levels in six months.