Restaurant Operators Bullish on Industry Outlook

Restaurant operators report strong growth in same-store sales, and capital expenditures are likely to follow.

February 02, 2012

WASHINGTON - The National Restaurant Association??s (NRA) Restaurant Performance Index (RPI) increased sharply in December, up 1.6% from November and reaching its highest level in nearly six years, QSR Magazine reports.

The RPI reached 102.2 in December, an increase the NRA attributed to strong same-store sales. It was also the third time in the last four months the RPI exceeded 100, which signifies further expansion.

"Aided by favorable weather conditions in many parts of the country, a solid majority of restaurant operators reported higher same-store sales and customer traffic levels in December," Hudson Riehle, senior vice president of the Research and Knowledge Group for the NRA, told the magazine.

"In addition, restaurant operators are solidly optimistic about sales growth in the months ahead, and their outlook for the economy is at its strongest point in nearly a year."

The RPI consists of the Current Situation Index and the Expectations Index. The former measures trends in four industry indicators (same-store sales, traffic, labor, and capital expenditures) and the latter measures restaurant operators?? six-month outlook for four industry indicators (same-store sales, employees, capital expenditures, and business conditions). Both were up sharply from November.

"Coupled with the solid November results, the RPI??s impressive December performance bodes well for continued positive industry momentum in the year ahead," Riehle said. "The ripple effect will likely be felt throughout the supply chain as well, with restaurant operators?? plans for capital spending rising to its highest level in more than four years."

Sixty-nine percent of restaurant operators realized a same-store sales gain between December 2010 and December 2011, while 18% reported a same-store sales decline. This represents the strongest net positive sales performance since February 2004, when 70% of operators reported a gain and 17% reported a sales drop.

Fifty-one percent of operators expect to see higher sales in six months compared to the same period in the previous year, the first time in a year a majority of restaurant operators expected sales growth. 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.

All of this points to higher spending, with 55% of restaurant operators responding that they plan to increase capital spending, the strongest level in four years.

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