Fueled by improving same-store sales and customer traffic and a positive outlook among restaurant operators, the National Restaurant Association's Restaurant Performance Index(RPI) rose for the second consecutive month.  The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.7 in April, up 0.3 percent from March and the strongest level since May 2013.  In addition, the RPI stood above 100 for the 14^th consecutive month, which signifies expansion in the index of key industry indicators.

"The recent rise in the RPI was fueled by improvements in same-store sales and customer traffic, which are back on a positive trajectory after the winter soft patch," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.  "In addition, restaurant operators have an optimistic outlook for business conditions in the months ahead, which is reflected by the expectations component of the RPI rising to its highest level in two years."

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 101.3 in April – up 0.5 percent from a level of 100.8 in March.  In addition, April represented the second consecutive month that the Current Situation Index stood above 100, which signifies expansion in the current situation indicators.

For the second consecutive month, a majority of restaurant operators reported higher same-store sales.  Fifty-one percent of restaurant operators reported a same-store sales gain between April 2013 and April 2014, while 26 percent reported a sales decline.  In March, 55 percent of operators reported higher same-store sales, while 32 percent said their sales declined.    

Restaurant operators reported a net gain in customer traffic levels for the second straight month, after registering declines in the previous three months.  Forty-four percent of restaurant operators reported an increase in customer traffic levels between April 2013 and April 2014, while 30 percent reported a decline.  In March, 46 percent of operators said their traffic rose from the previous year, while 33 percent reported a decline.

Along with positive trends in sales and customer traffic, restaurant operators reported continued growth in capital expenditures.  Fifty-six percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up from 49 percent who reported similarly last month.

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 102.2 in April – up 0.2 percent from March and the strongest level in two years.  In addition, April represented the 18^th consecutive month in which the Expectations Index stood above 100, which indicates that restaurant operators are optimistic about business conditions in the coming months. 

Restaurant operators remain generally optimistic about sales gains in the months ahead.  Forty-six percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 49 percent who reported similarly last month.  Meanwhile, 11 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, compared to just 6 percent last month.

In comparison, restaurant operators are somewhat less bullish about the overall economy.  Thirty percent of restaurant operators said they expect economic conditions to improve in six months, while 15 percent expect the economy to worsen.  The remaining 55 percent expect economic conditions to remain generally unchanged in the next six months.  

For the eighth consecutive month, a majority of restaurant operators are planning for capital expenditures in the coming months.  Sixty percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up slightly from 58 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 and video summary are available online at Restaurant.org/RPI.

Source: National Restaurant Association