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Restaurant Performance Index Improved in November But Remained Below 100 For Second Consecutive Month

Same-store sales rose; Restaurant operators remain uncertain about the economy

WASHINGTON, Dec. 31, 2012 /PRNewswire-USNewswire/ -- Buoyed by positive same-store sales and customer traffic results, the National Restaurant Association's Restaurant Performance Index (RPI) rose in November. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 99.9 in November, up 0.5 percent from October. However, November marked the second consecutive month in which the RPI stood below 100, which signifies contraction in the index of key industry indicators.

"The November gain in the RPI was driven by improving same-store sales and customer traffic levels, both of which registered their strongest performance in three months," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "However, restaurant operators remain concerned about the direction of the overall economy, due in large part to the uncertainty around the fiscal cliff."

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 99.8 in November – up 0.6 percent from a level of 99.3 in October.  Although restaurant operators reported net positive sales and traffic results in November, softness in the labor and capital spending indicators outweighed the performance, which resulted in a Current Situation Index reading below 100 for the fourth time in the last five months. 

Restaurant operators reported positive same-store sales for the 18th consecutive month, with November's results representing the strongest performance in three months.  Fifty-five percent of restaurant operators reported a same-store sales gain between November 2011 and November 2012, up from 40 percent who reported positive sales in October.  Meanwhile, 30 percent of operators reported lower same-store sales in November, down from 36 percent in October.    

Restaurant operators also reported a net gain in customer traffic levels in November.  Forty-three percent of restaurant operators reported higher customer traffic levels between November 2011 and November 2012, up from 30 percent who reported positive traffic in October.  Meanwhile, 35 percent of operators reported lower customer traffic levels in November, down from 41 percent in October.

Although sales and traffic results improved, restaurant operators reported a dip in capital spending.  Thirty-seven percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the lowest level in 32 months.

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 100.0 in November – up 0.4 percent from October.  Although November was an improvement over October's reading of 99.7, it still signals that restaurant operators are uncertain about the business environment in the months ahead.       

Restaurant operators are somewhat more optimistic about sales growth in the coming months.  Thirty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 31 percent last month.  Meanwhile, 14 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 from 21 percent last month.

In contrast, restaurant operators remain generally pessimistic about the direction of the overall economy.  Only 21 percent of restaurant operators said they expect economic conditions to improve in six months, essentially unchanged from 20 percent last month.  Meanwhile, 36 percent of operators said they expect economic conditions to worsen in the next six months, while 38 percent reported similarly last month. 

Along with the uncertain outlook, restaurant operators reported a pullback in capital spending plans for the months ahead.  Forty-five percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 50 percent who reported similarly last month. 

The RPI 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 full report is available online.

The RPI is released on the last business day of each month, and a 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.

Founded in 1919, the National Restaurant Association is the leading business association for the restaurant industry, which comprises 980,000 restaurant and foodservice outlets and a workforce of more than 13 million employees. We represent the industry in Washington, D.C., and advocate on its behalf. We operate the industry's largest trade show (NRA Show May 18-21, 2013, in Chicago); leading food safety training and certification program (ServSafe); unique career-building high school program (the NRAEF's ProStart, including the National ProStart Invitational April 19-21, 2013, in Baltimore, Md.); as well as the Kids LiveWell program promoting healthful kids' menu options. For more information, visit www.restaurant.org and find us on Twitter @WeRRestaurants, Facebook and YouTube.

SOURCE National Restaurant Association

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