Outlook looks Promising

The outlook for the restaurant industry grew more optimistic in recent months, as the National Restaurant Association’s comprehensive index of restaurant activity registered its fourth consecutive monthly gain in April.

The Association’s Restaurant Performance Index, or RPI, is a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry. It stood at 98.6 in April, up by 0.8 percent from March, its highest level in 11 months.

The findings are in line with bullish data reported in the May 25, 2009, issue of Triangle Business Journal that indicated restaurants in Wake County generally are faring well. The data show that from July 2008 through February 2009, Wake County collected nearly $11.8 million from a 1 percent tax on prepared food and beverages. That’s almost a 7 percent increase from the $11 million collected in the same period in the previous fiscal year, according to information provided by the county.

Hudson Riehle, senior vice president of research and information services for the National Restaurant Association, says, “The recent growth in the RPI was driven by the ‘expectations’ component, which rose above 100 in April for the first time in 18 months, a level which indicates expansion.”

“Although the RPI’s ‘current situation’ indicators are still in a period of contraction, the solid improvement in the forward-looking indicators suggests that the end of the industry’s downturn may be in sight, says Riehle.

The RPI is based on responses to the 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 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 97.0 in April, up by 0.9 percent from March and its highest level since August 2008. However, April represented the 20th consecutive month below 100, which continues to signify contraction in the current situation indicators.

Restaurant operators reported negative customer traffic levels for the 20th consecutive month in April. About 23 percent of restaurant operators reported an increase in customer traffic between April 2008 and April 2009, up from 20 percent who reported similarly in March. Also, 60 percent of operators reported a traffic decline in April, down from 63 percent who reported similarly in March.

Restaurant operators also continue to grow more optimistic about the economy, with 37 percent saying they expect economic conditions to improve in six months, up from 30 percent who reported similarly last month and the highest level in three years. In comparison, only 16 percent of operators expect economic conditions to worsen in six months, down from 21 percent last month.

The Washington, D.C.-based National Restaurant Association is a business association for the restaurant industry, comprising 945,000 restaurant and foodservice outlets and a work force of 13 million employees.

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