Despite Inflated Food Costs, Positive Environment for Restaurant Operators Expected; Rising Food Costs Dampen Restaurant Operator Optimism 6/30/2004
From: Katharine Kim, 202-331-5939, or Brad Dayspring, 202-331-5902, media@dineout.org, both of the National Restaurant Association WASHINGTON, June 30 -- Although same-store sales remained positive, the National Restaurant Association's comprehensive index of restaurant activity registered its third consecutive monthly decline in May. The Association's Restaurant Performance Index -- a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry -- fell 0.7 percent in May, which followed 0.2 percent declines in March and April. Pivotal to May's Index performance were continued sharp gains in food costs. Twenty-eight percent of restaurant operators identified rising food costs as the number-one challenge currently facing their business, up from 22 percent of operators who reported similarly last month and the strongest level on record. Meat and dairy prices rose sharply in recent months, putting additional strains on already squeezed margins among restaurant operations. (Click on the following link to view this month's Index report: http://www.restaurant.org/pdfs/research/index/200405.pdf). "Although the Index declined in May, it stood nearly four percent above its May 2003 level, demonstrating the continued strength in its underlying indicators," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "Same-store sales were positive for a majority of restaurant operators, while the outlook for capital expenditure activity remained at strong levels. With the exception of inflated food costs, the positive economic environment for the restaurant industry is expected to continue for the remainder of the year." 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. The May decline in the Restaurant Performance Index resulted from drops 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), fell 0.9 percent in May, which followed a 0.1 percent gain in April. For the fifth consecutive month, a majority of operators reported an increase in same-store sales. Fifty-four percent of restaurant operators reported a same-store sales gain between May 2003 and May 2004, while only 29 percent of operators reported a decline. In addition, May marked the tenth consecutive month of positive same-store sales. Customer traffic levels also remained positive in May, albeit somewhat weaker than the strong performances registered in recent months. Forty-four percent of operators reported an increase in customer traffic between May 2003 and May 2004, down from 53 percent of operators who reported a gain in April. Meanwhile, 31 percent of operators registered a traffic decline between May 2003 and May 2004 -- the highest level in four months. While sales and traffic results were somewhat softer in May than recent months, capital expenditure activity remained strong. Fifty-seven percent of restaurant operators made a capital expenditure for equipment, expansion or remodeling during the last three months -- one of the strongest levels on record. The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators, declined 0.4 percent in May. Although the Expectations Index registered its third consecutive monthly decline, its solid level still points toward continued industry growth during the next several months. Although operators' level of confidence is not as strong as it was in recent months, a solid majority of restaurant operators remain optimistic about sales growth in their establishments during the next six months. Sixty-one percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), while only seven percent of operators expect their sales volume in six months to be lower than it was during the same period in the previous year. In addition to their positive outlook for sales growth, restaurant operators are continuing to make plans for capital expenditures. Sixty-five percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months -- the eleventh consecutive month at a level of 60 percent or greater. While the Restaurant Performance Index is consistently released on the last business day of each month, 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 at the Association's Web site, http://www.restaurant.org/pressroom. ------ The National Restaurant Association, founded in 1919, is the leading business association for the restaurant industry, which is comprised of 878,000 restaurant and foodservice outlets and a work force of 12 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. |