Retailer Daily

RPI Drops Again

The RPI (Restaurant Performance Index) dropped from 98.3 in May 2009 to 97.8 in June 2009. Declines in both the Current Situation and Expectations indices contributed to the overall drop in score. The National Restaurant Association’s monthly Restaurant Industry Tracking Survey remained under 100 for the 20th consecutive month, a sign of contraction in key industry indicators including sales, traffic, labor and capital expenditures. Highlights from the Current Situation Index and Expectations Index follow.

Current Situation Index Hits 3-month Low

The Current Situation Index, which measures current trends in industry indicators including same-store sales and customer traffic, stood at 96.6 in June, as opposed to 96.9 in May. This represents its lowest level in three months. In addition, June represented the 22nd consecutive month below 100, which signifies contraction in current situation indicators. Overall same-store sales declined for the 13th straight month. Twenty-two percent of respondents reported an annual same-store sales gain in June, compared to 26% in May. This represents the lowest positive same-store sales figure in the seven-year history of the RPI. Meanwhile, 61% of respondents reported a same-store sales decline in June, up slightly from 60% in May. Customer traffic levels declined for the 22nd straight month in June, with 60% of respondents reporting less customer traffic in June, compared to 59% in May. Another 19% of respondents reported a customer traffic increase in June, compared to 22% in May.

Expectations Index Falls for 2nd Straight Month

After making gains from December 2008-April 2009, the Expectations Index fell in May 2009, and continued that trend in June 2009. The Expectations Index stood at 99 in June, compared to 99.7 in May. In April, the Expectations Index hit 100.2, the first time in 18 months it surpassed 100, signifying a positive industry outlook. The percentage of respondents expecting higher sales in the next six months as compared to the same six-month period last year stood at 24%, down from 29% in May. The percentage of respondents expecting lower sales in the next six months remained flat at 33%. Restaurant operators are also less optimistic about the economy, compared to recent months. Twenty-six percent of restaurant operators said they expect economic conditions to improve in six months, down from 34% who reported similarly last month. Meanwhile, 26% of operators expect economic conditions to worsen in six months, up from 17% who reported similarly last month.

Restaurant Franchise Growth Remains Strong

Despite the recent downturn in the RPI, franchise growth of chain restaurants appears fairly healthy in 2009. Ice cream retailer Baskin Robbins has been extremely aggressive in opening new franchise markets this summer, and sister coffee chain Dunkin Donuts has also opened a number of new franchise markets this year. In addition, Pizza retailer Papa John’s is offering special discounts to new franchisees as a marker of its 25th anniversary. Meanwhile, fast food chicken retailer Church’s Chicken recently unveiled a modular restaurant prototype designed to allow franchisees to open new restaurants with greater speed at less cost. Quick service restaurant chain IHOP is using franchise development to enter Vermont, which until recently was the only U.S. state without an IHOP location. During 2009, quick service restaurant chain Denny’s plans to add 30 new franchise units.