Nat'l Restaurant Assn.'s Restaurant Performance Index Soared 1.7 Pct. In July; Improving Same-Store Sales, Optimistic Outlook Led to Record Index Level

8/29/2003

From: Katharine Kim or Tom Foulkes, 202-331-5939 or media@dineout.org, both of The National Restaurant Association

WASHINGTON, Aug. 29 -- The National Restaurant Association's Restaurant Performance Index -- a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry -- jumped 1.7 percent in July. The July gain marked the fourth increase in the last five months, and resulted in a record high level for the Restaurant Performance Index.

The Restaurant Performance Index 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 Index consists of two components -- the Current Situation Index and the Expectations Index. (Click on the following link to view the Index report: http://www.restaurant.org/pdfs/research/index/july2003.pdf)

"The broad-based growth across both components of the Restaurant Performance Index sets the stage for continued and accelerating growth in the restaurant industry," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "The growing optimism among restaurant operators, in combination with improving consumer confidence and a strengthening national economy, points toward an industry outlook that is the most positive to date this year."

Growth in the Restaurant Performance Index in July was driven by solid gains in both the current situation and expectations components of the Index. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), soared 2.0 percent in July. The robust July increase followed a 0.5 percent decline in June. Each of the four current situation indicators registered strong gains in July.

Growth in the Current Situation Index was fueled by an improving same-store sales situation. For the first time in eleven months, same-store sales did not register an overall net negative performance. Forty-one percent of restaurant operators reported a same-store sales increase between July 2002 and July 2003 -- identical to the proportion of operators who reported a same-store sales decline. This marked the largest proportion of restaurant operators reporting positive same-store sales since August 2002.

Current Situation Index growth was also driven by an increase in capital expenditure activity among restaurant operators. Fifty-five percent of restaurant operators made a capital expenditure for equipment, expansion or remodeling during the past three months - the highest level since September 2002.

Although customer traffic remained net-negative overall, it registered its fifth consecutive monthly improvement in July. Thirty-four percent of restaurant operators reported an increase in customer traffic between July 2002 and July 2003 -- up from just 19 percent in February.

The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators, increased 1.3 percent in July. July's gain followed a 1.2 percent drop in June. Like the current situation component, each of the four expectations indicators posted gains in July.

Restaurant operators continue to be optimistic about short-term sales growth in their establishments. Fifty percent of restaurant operators expect to have higher sales in six months (compared to the same period last year) - up from 40 percent who reported similarly last month. Meanwhile, only 17 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period last year.

Restaurant operators also remain confident in the direction of the overall economy. Forty-seven percent of restaurant operators expect economic conditions in six months to be better than they are now, while only 11 percent of operators expect conditions to worsen.

This continued optimism among restaurant operators is contributing to a surge in plans for capital expenditures within the restaurant industry. Sixty-one percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months -- the highest level in the history of the Restaurant Performance Index.

More detailed data and analysis can be found on Restaurant TrendMapper (http://www.restaurant.org/trendmapper), the Association's subscription-based Web site that provides real-time analysis of restaurant industry trends.

A chart of the Restaurant Performance Index is available on the association's Web site, http://www.restaurant.org.

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The National Restaurant Association, founded in 1919, is the leading business association for the restaurant industry, which is comprised of 870,000 restaurant and foodservice outlets and a work force of 11.7 million employees -- making it the cornerstone of the economy, career opportunities and community involvement. Along with the National Restaurant Association Educational Foundation, the Association works to represent, educate and promote the rapidly growing industry. For more information, visit our Web site at http://www.restaurant.org.