Restaurant Operators Upbeat in December on Current and Future Performance

The National Restaurant Association’s Restaurant Performance Index rose quite a lot in December, up to 102.2, some 1.6 percent increase. This was the Index’ highest level in almost six years, and the third time in the last four months that it exceeded 100, which is the dividing line between expansion and shrinkage. The Index is composed of two parts: Current Situation, and Expectations.

Commenting on the new index figure, Senior VP of the Research and Knowledge Group for the RPI, Hudson Riehle, cited ‘favorable weather conditions in many parts of the country’ which supported higher same-store sales and customer traffic levels in December. Riehle also predicted ‘continued positive industry momentum in the year ahead’, with a multiplier effect throughout the supply chain.

In Current Situation, restaurant operators reported the strongest same-store sales in the past four years. Sixty-nine percent reported gains in the past year with 18 percent reporting declines. The same pattern was seen in customer traffic in December, with 57 percent of operators claiming increases and 23 percent with declines. Additionally, operators reported higher capital spending activity, with 48 percent having spent for equipment, expansion or remodeling during the past three months.

The Expectations portion of the survey was also up, to 102.3, which is the highest in a year. Fifty-one percent of operators expect their sales to increase in the next six months, up from 41 percent in the same period one year ago, with only 7 percent expecting the opposite. Operators are also more optimistic about the economy in general, with 39 percent expecting better conditions (27 percent in November) and only 11 percent expecting worse.

Finally, 55 percent of operators are planning new capital expenditures in the next six months, up from 47 percent in November and the highest level in more than four years.

The higher Index says something about discretionary spending, since it usually costs less to prepare meals at home than to eat out: Americans apparently feel bit safer giving themselves a treat, which implies better confidence in their financial outlooks. The new figures could also indicate that more people were traveling, which is usually an economic plus. Planned capital expenditures could also increase income in their proximities, when the associated multipliers take effect.

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