Restaurant operators’ outlooks for the months ahead are mixed, according to the monthly Restaurant Performance Index from the National Restaurant Association.
The RPI, a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, slipped to 101 in July, falling from 101.3 in June. It was the second consecutive monthly decline for the index and reflected what the NRA called “a dampened outlook among restaurant operators.”
Despite the June and July dips, the RPI remained above 100 for the 17th consecutive month. An index registering above 100 indicates expansion on the key indicators measured by the survey and below 100 represents a period of contraction.
“Although restaurant operators reported positive same-store sales and customer traffic results in July, the RPI edged down as a result of a mixed outlook for the months ahead,” said Hudson Riehle, senior vice president of the NRA’s research and knowledge group.
“Restaurant operators were less bullish about the direction of the overall economy, and rising wholesale food costs are once again starting to pose a significant challenge,” Riehle said.
VIDEO: Watch the NRA’s latest Restaurant Industry Update below.
The index consists of two components: the Current Situation Index and the Expectations Index. The Current Situation Index measures four key indicators, including same-store sales, traffic, labor and capital expenditures. In July, it stood at 100.7, falling 0.1 percentage point from June and represented the second consecutive monthly decline.
For the fifth consecutive month, a majority of restaurant operators reported higher same-store sales, with 54 percent reporting a gain between July 2013 and July 2014, while 30 percent reported a decline. In June, 55 percent of operators reported higher same-store sales, while 27 percent reported lower sales.
Traffic, spending rise slightly
Restaurant operators also reported positive customer traffic results in July. Forty-one percent of operators surveyed reported an increase in customer traffic levels between July 2013 and July 2014, while 34 percent reported lower traffic levels. In June, 39 percent of operators said their customer traffic levels rose, while 41 percent reported a decline.
Along with positive same-store sales and customer traffic results, restaurant operators continued to report capital spending activity: 50 percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, down slightly from 53 percent who reported similarly in June.
The Expectations Index measures restaurant operators’ outlook on same-store sales, employees, capital expenditures and business conditions for the months ahead. That part of the index stood at 101.2 in July, falling from 101.7 in June for a second consecutive month of decline. The Expectations Index has been above 100 for 21 consecutive months.
Optimism about sales growth in the months ahead remained: 47 percent of operators said they expected to have higher sales in six months (compared to the same period in the previous year), rising from 44 percent in June. In comparison, 13 percent of restaurant operators expected their sales volume in six months to be lower than it was during the same period in the previous year, rising slightly from 10 percent in the June survey.
Operators were mixed on the general economy: 25 percent of them said they expect economic conditions to improve in six months, while 19 percent expected the economy to worsen. The remaining 56 percent expected economic conditions in six months to be about the same as they are now.
A majority of restaurant operators said they were planning for capital expenditures in the months ahead: 54 percent planned to make a capital expenditure for equipment, expansion or remodeling in the next six months, falling slightly from 59 percent who reported that in June.
The RPI is based on the responses to the National Restaurant Association’s Restaurant Industry Tracking Survey. The full report can be found at Restaurant TrendMapper.