...as Operator Optimism Fell SharplyHurricanes Katrina and Rita, Gas Prices Dampen the Optimism of Restaurant Operators
October 07, 2005 Contact: Katharine Kim 202-331-5939, Annika Stensson (202) 973-3677 (Washington, DC) Due in large part to the dampening effect of two hurricanes and strong gas prices on operator optimism, the National Restaurant Association's Restaurant Performance Index registered its second consecutive monthly decline in August. The August Restaurant Performance Index – which was based on a nationwide survey of restaurant operators conducted in September – stood at 100.4, down 1.2 percent from a level of 101.7 in July. Despite the sharp decline, the Index remained above 100 – a level which represents expansion in the Association's composite index of eight key industry indicators. "September was a confluence of events that led to a substantial – and expected – decline in the short-term optimism of both businesses and consumers," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "The aftermath of Hurricane Katrina, in addition to record gas prices, resulted in the sharpest expectations decline in the three-year history of the Restaurant Performance Index. "The near-record gas prices are of particular concern for restaurant operators. Twenty-two percent of restaurant operators said gas and energy prices are the number-one challenge facing their business – up from just four percent of operators who reported similarly two months ago. Gas and energy prices finished only slightly behind recruiting and retaining employees, which was identified as the top challenge by 24 percent of restaurant operators." The Restaurant Performance Index 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 Index consists of two components – the Current Situation Index and the Expectations Index. (Click on the following link to view this month's Index report: http://www.restaurant.org/pdfs/research/index/200508.pdf). The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.4 in August – 0.6 percent lower than its July level and its second consecutive monthly decline. Although sales were somewhat softer in August, restaurant operators reported a same-store sales gain for the 25th consecutive month. Fifty-one percent of restaurant operators reported a same-store sales gain between August 2004 and August 2005 – down slightly from 54 percent of operators who registered a sales gain in July. Thirty-one percent of operators reported a same-store sales decline between August 2004 and August 2005, while 18 percent of operators reported no change in sales. Customer traffic held relatively steady in August. Thirty-nine percent of restaurant operators reported an increase in customer traffic between August 2004 and August 2005 – matching the proportion of operators who reported a traffic decline. Twenty-two percent of operators reported no change in customer traffic. The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), plunged 1.8 percent in August to a level of 100.4 – the lowest level in the history of the Restaurant Performance Index. Although the Expectations Index registered its sharpest decline on record, it still remained above 100, which indicates that operators remain somewhat optimistic about growth in the next several months. Forty-one percent of restaurant operators expect their sales volume in six months to be higher than it was during the same period in the previous year, while 23 percent of operators expect to have lower sales in six months. Thirty-six percent of operators expect their sales to remain about the same. In contrast to a relatively positive sales outlook, operators are not as optimistic about the overall economy in the months ahead. Thirty-one percent of restaurant operators expect economic conditions to worsen in six months, compared to just 25 percent of operators who expect economic conditions to be stronger in six months. Forty-four percent of operators expect economic conditions in six months to be about the same as they are now. The outlook for capital expenditure activity also slipped somewhat this month. Fifty-one percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 59 percent who reported similarly last month. While the Restaurant Performance Index is consistently released on the last business day of each month, more detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based web site that provides detailed analysis of restaurant industry trends.
National Restaurant Association's Restaurant Performance IndexValues Greater than 100 = Expansion; Values Less than 100 = ContractionSource: National Restaurant Association* Beginning with the release of the January 2005 Restaurant Performance Index, the National Restaurant Association rebased the current and historical index values 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 under 100 represent a period of contraction for key industry indicators.
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The National Restaurant Association, founded in 1919, is the leading business association for the restaurant industry, which is comprised of 900,000 restaurant and foodservice outlets and a work force of 12.2 million employees - making it the cornerstone of the economy, career opportunities and community involvement. Along with the National Restaurant Association Educational Foundation, the Association works to represent, educate and promote the rapidly growing industry. For more information, visit our Web site at www.restaurant.org.
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