RPI Improves, Remains Below 100The RPI (Restaurant Performance Index) rose 0.3 percentage points in July 2009, jumping from June’s figure of 97.8 to 98.1. While even a slight increase is a welcome sign after three straight months of contraction, the Index has remained below 100, signifying contraction, for 21 straight months. The RPI 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 RPI consists of two components – the Current Situation Index and the Expectations Index. Highlights from each component and general analysis follow.
Current Situation Index Shows Sales, Traffic Still NegativeThe Current Situation Index, which measures current trends in industry indicators including same-store sales and customer traffic, slightly rebounded from a three-month low of 96.6 in June to 96.8 in July. July also marked the Current Situation Index’s 23rd straight month below 100, indicating contraction in key indicators. Although overall same-store sales remained negative in July, restaurant operators reported an improvement from June’s soft performance. Twenty-six percent of restaurant operators reported a same-store sales gain between July 2008 and July 2009, up from a record-low 22 percent of operators who reported positive sales in June. Fifty-eight percent of operators reported a same-store sales decline in July, down slightly from 61% who reported negative sales in June. In addition to sales declines, restaurant operators reported negative customer traffic levels for the 23rd consecutive month in July. Twenty-three percent of restaurant operators reported an increase in customer traffic between July 2008 and July 2009, up slightly from 19 percent who reported similarly in June. Fifty-nine percent of operators reported a traffic decline in July, compared to 60% reporting lower traffic in June. According to the U.S. Census Bureau, sales at U.S. food service and drinking establishments increased 0.4% in July 2009.
Expectations Index Shows Mild OptimismAfter making gains from December 2008-April 2009 and even breaking 100 in April, the Expectations Index fell in May 2009 and continued that trend in June 2009. The Expectations Index crept back upward in July, moving from 98.9 to 99.5. The July uptick in the Expectations Index was the result of an improvement in restaurant operators’ outlook for both sales growth and the overall economy in the months ahead. Thirty-one percent of restaurant operators expect to have higher sales in six months compared to the same period in the previous year, up from 24% who reported similarly in June. In comparison, 33% of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, matching the proportion who reported similarly in the previous two months. Restaurant operators are also more optimistic about the direction of the economy. Thirty-two percent of restaurant operators said they expect economic conditions to improve in six months, up from 24% who reported similarly last month. In comparison, 24 percent of operators expect economic conditions to worsen in six months, down slightly from 26% who reported similarly last month.
Fast Food and Quick Service Show StrengthDuring the month of July, a number of fast food and quick service restaurant chains launched or announced expansion plans, demonstrating faith in future vertical performance. These included:
- Coffee chain Starbucks, which opened the first of several planned pilot neighborhood coffee shop concept stores.
- Canadian coffee chain Tim Hortons, which added to its approximately 500 U.S. locations by entering the New York City market with 12 new locations, including 10 in Manhattan.
- Casual dining chain TGI Friday’s, which announced plans to open eight new franchise stores in California.
- Ice cream chain Baskin Robbins, which opened Denver, CO, Washington, DC, Tucson, AZ and Raleigh-Durham, NC for franchise sales.
- Coffee retailer Krispy Kreme, which is targeting Southern California for expanded franchise operations.
- Quick service restaurant chain Checkers Drive-In Restaurants, which concluded opening 23 new stores, mostly franchised, in eight states.