Driven by a more optimistic outlook for future business conditions, the Restaurant Performance Index (RPI) posted a moderate gain in February. The RPI stood at 100.7 in February, up 0.6% from a level of 100.1 in January.
The National Restaurant Assn. (NRA) said growth in the RPI was fueled by broad-based gains in the forward-looking indicators, as restaurant operators grew increasingly bullish about sales, capital spending, staffing and the overall economy. Meanwhile, the RPI’s current situation indicators remained dampened overall in February, although a contributing factor was more difficult comparisons as a result of Leap Year in February 2016.
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 RPI consists of two components: the Current Situation Index and the Expectations Index.
The Current Situation Index stood at 98.8 in February – up 0.2% from a level of 99.6 in January. Despite the gain, February represented the fifth consecutive month in which this index came in below 100, as operators continued to report dampened same-store sales and customer traffic levels.
The Expectations Index stood at 102.6, up 1.0% from January’s level of 101.6. The increase was the largest since January 2016 and propelled the Expectations Index to its highest level in nearly two years.
Operators reported dampened same-store sales, customer traffic
Restaurant operators overall continued to report soft same-store sales in February, with results that were similar to January’s levels, NRA noted. While 33% of restaurant operators reported a same-store sales increase between February 2016 and February 2017, 51% reported a sales decline. In January, 33% of restaurant operators reported higher same-store sales, while 50% said their sales declined.
Restaurant operators also reported dampened customer traffic levels in February. Only 27% of restaurant operators reported an increase in customer traffic between February 2016 and February 2017, while 57% reported a decline in customer traffic. In January, 26% of operators reported higher customer traffic levels, while 54% said their traffic declined.
Despite the mixed sales results in recent months, restaurant operators continued to invest in their business through capital spending. Fifty-nine percent of restaurant operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up from 50% who reported similarly last month.
Increasing optimism about sales growth, economy
Although restaurant operators reported mixed same-store sales and customer traffic levels in recent months, they are more optimistic that business conditions will get better in the months ahead. Thirty-eight percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 34% who reported similarly last month. Only 7% 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 10% last month and the lowest level in more than a year.
NRA said restaurant operators are also generally positive about the direction of the overall economy, with 34% saying they expect economic conditions to improve in six months and only 8% saying they expect conditions to worsen in six months. This represented the fifth consecutive month of a positive outlook for the economy, which followed 11 straight months of net negative expectations.
Restaurant operators are also ramping up plans for capital expenditures in the months ahead, according to NRA. Sixty-two percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 55% of operators who reported similarly last month.