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Texas Restaurant Law

Restaurant Industry’s Outlook Finally Improving

Posted in Commentary, News

Restaurant Check

The National Restaurant Association (NRA) released its Restaurant Improvement Index (RPI) stats for April 2009. You can find the complete statistical report on the NRA’s website by following this link. The NRA explains, “The Restaurant Performance Index 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 RPI is broken down into two components: the Current Situation Index and the Expectations Index. The Current Situation Index measures current trends in same-store sales, traffic, labor and capital expenditures. The Expectations Index measures restaurant operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions.

After four consecutive months of improvement, the national RPI is at an 11-month high. The NRA largely credits the Expectations Index, which, at 100.2, rose above 100 for the first time in 18 months, for the recent RPI increase. Another factor in the increase is the Current Situation Index, which reached an eight-month high of 97.0.

Although the Current Situation Index remains in a period of contraction and the Expectations Index is barely registering over 100, both Indices are rising, giving hope to restaurateurs. The Triangle Business Journal quoted Hudson Riehle, the senior vice president of research and information services for the National Restaurant Association, as saying that the recent upward trend in the RPI indicates that “the end of the industry’s downturn may be in sight.”

Additionally, the percentage of restaurant operators reporting declines from the previous year in traffic and sales  decreased in April. In March, 63 percent of operators reported a traffic decline compared to 60 percent in April. Likewise, 63 percent of operators reported a same-store sales decline in March compared to 59 percent in April.

In its May 29 press release, the National Restaurant Association stated, “for the first time in 15 months, restaurant operators reported a positive six-month outlook for sales growth. Thirty-three percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 30 percent last month and the highest level in 18 months.” Coupled with increased overall economic optimism and plans for capital expenditures in the next six months, this contributes to the elevated Expectation Index.

Nation’s Restaurant News reported that restaurant chain giants such as Brinker, Benihana, California Pizza Kitchen and Ruby Tuesday are conveying sales trend improvements over the troubled winter months. “California Pizza Kitchen and Ruby Tuesday even upped their earnings outlooks for their first quarter and fiscal year, respectively,” the article stated.

Further confirming the restaurant industry’s upturn is new data released by RBC Capital Markets “showing that fewer consumers plan to cut back on restaurant spending in the next three months and a larger number of consumers than in previous months actually plan to spend more at restaurants.” The same study found that 44 percent of respondents intend to spend more at restaurants when the economy improves.

Closer to home, the Austin Business Journal reported a slightly more positive outlook for the Texas restaurant industry. The Texas Restaurant Association’s monthly tracking report survey indicated that 57 percent of Texas restaurants had equal or higher sales in April 2009 than in April 2008. Thirty-nine percent of Texas restaurateurs expect sales to improve in the next 6 months, while 54 percent expect sales to remain steady. Additionally, about half of Texas restaurants report that employment totals are equal to those of last year. Seventy-one percent of restaurants expect these totals to remain consistent over the next six months.

Overall, the restaurant industry’s outlook seems to be improving. It’s a more comfortable time to be in the business now than just a few months ago, especially in Texas. If current business trends continue, the restaurant industry could reach a full recovery without enduring further hardships.