NRA Reports Restaurant Operator Outlook is Positive as Economy Struggles

National Restaurant AssociationThough the economy still is struggling and gas prices and unemployment numbers remain high, doom and gloom scenarios have not negatively affected the restaurant industry. In fact, recent surveys from KeyBanc Capital Markets analysts and the National Restaurant Association (NRA) show that although operators are cautious about the economy’s growth, they maintain a positive outlook for their economic future.

According to KeyBanc analysts Brad Ludington and John Dravenstott, restaurants that create high-quality food such as The Cheesecake Factory and Ruby Tuesday are benefitting financially, as patrons are more willing to go out an pay for a meal if they know they’re getting quality food, as well as a quality experience. This, along with lower employee turnover rates indicate that the restaurant industry is gaining momentum while attracting customers who expect value from a night out.

In fact, the NRA forecasts that the foodservice industry is expected to add 425,000 jobs this summer, which is a 4.6% increase over the March 2011 employment level.

These numbers come after the release of the NRA’s April Restaurant Performance Index (RPI), a monthly survey that tracks the health and outlook for the foodservice industry. Standing at 100.9, the numbers were flat for the month of April, compared with 101.0 in March, yet the overall outlook in the industry remains positive.

A number of 100 or higher signifies expansion in the restaurant industry.

National Restaurant Association

National Restaurant Association's Restaurant Performance Index; Source: National Restaurant Association

The RPI looks at the Current Situation Index, which measures current trends and same-store sales, traffic, labor and capital expenditures, and the Expectations Index, which measures restaurant operators’ six-month outlook for same-store sales, employees, capital expenditures and business conditions.

For April, the Current Situation Index rose to 100.3, a slight increase from the March level of 100.2. Down from 52% in March, 50% of operators reported increases in same-store sales between April 2010 and April 2011, while 31% reported same-store sales declines, which is flat compared with the March results.

Though 38% of operators reported a net increase in customer traffic from April 2010 to April 2011, this number was soft compared to the 45% of operators who reported higher traffic in March, with 35% of operators noting a traffic decline in April, up from 32% in March.

The Expectations Index in April was 101.5, a decline from 101.7 in March, yet with the decrease, the index reamined above the 100 level for the ninth month in a row, indicating expansion. This optimism was reflected in the 47% of operators who expect high sales in six months while only 13% believe sales volumes in six months will be below what they were in the same period a year ago.

Operators are still cautious about the economy, with only 33% of operators believing the industry will improve in six months, up from 32% in March.

However, though there is trepidation about the economy from operators, with only 49% indicating they plan to make capital expenditure for equipment, expansion or remodeling (down from the 53% in March), this is the seventh consecutive month operators have a positive outlook for staffing levels – 24% of whom plan to increase staff in the next six months.

The RPI is released at the last business day of each month and is based on responses by restaurant operators to the NRA’s Industry Tracking Survey.


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