Operators Report Softer Same-Store Sales; Performance Index Falls Below 100

The National Restaurant Association's Restaurant Performance Index (RPI) stood at 99.9 in May, down 1 percent from April. May's number was the first time in six months that the RPI dipped below 100, which signifies contraction in the index of key industry indicators.

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RPI values of more than 100 indicate a period of expansion for key industry indicators, while index values of less than 100 represent a period of contraction. The RPI consists of two components, the Current Situation Index and the Expectations Index.

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The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 99.2 in May, down 1.1 percent from April's level of 100.3. This was the first time in three months that the Current Situation Index was less than 100.

Thirty-nine percent of restaurant operators reported a same-store sales gain between May 2010 and May 2011, down from 50 percent of operators who reported higher same-store sales in April. In comparison, 40 percent of operators reported a same-store sales decline in May, up from 31 percent of operators who reported lower sales in April.

Thirty-three percent of restaurant operators reported an increase in customer traffic between May 2010 and May 2011, down from 38 percent of operators who reported higher traffic in April. In comparison, 41 percent of operators reported a traffic decline in May, up from 35 percent in April.

Restaurant operators continued to report relatively steady levels of spending activity, with 44 percent saying they made a capital expenditure for equipment, expansion or remodeling during the last three months. This marks a slight decrease, though, from the 48 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 100.6 in May — down from a level of 101.5 in April. Although May represented the tenth consecutive month in excess of 100 for the Expectations Index, it was the fourth decline in the last five months, which illustrates a recent erosion of optimism among restaurant operators.

Restaurant operators are not as optimistic about future sales growth as they were earlier in the year, with 41 expecting to have higher revenues in six months. In comparison, 20 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.

Although restaurant operators are less optimistic about sales growth and the economy in the coming months, they continue to plan for capital spending. Fifty percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up slightly from 49 percent who reported similarly last month.

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