Restaurant Operators Optimistic Despite Modest 0.3 Percent Decline in September Performance Index

10/31/2003

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

WASHINGTON, Oct. 31 -- In a positive sign for the restaurant industry, 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-showed continued positive same-store sales and the strongest operator optimism in the history of the Index. Despite the Index slipping a modest 0.3 percent in September, marking the first decline in three months, the restaurant industry remains in a solid position for continued growth during the next several months.

The Restaurant Performance Index is based on the responses to the National Restaurant Association's Restaurant Industry Tracking Survey, which is fielded monthly among approximately 500 restaurant operators (quickservice and fullservice, independents and chains) 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/september2003.pdf)

"The industry remains in a strong position, despite the Restaurant Performance Index easing off its record high in August," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "With a record proportion of restaurant operators expecting higher sales and an improving overall economy, the industry is poised to register continued growth in the coming months."

The September decline in the Restaurant Performance Index was the result of a moderate drop in the current situation component of the Index. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), fell 0.8 percent in September. The September decline came on the heels of two consecutive monthly gains.

Each of the four current situation indicators declined in September, yet same-store sales remained positive overall. Forty-three percent of restaurant operators reported a same-store sales increase between September 2002 and September 2003, while 40 percent of operators reported a same-store sales decline. This marked the second consecutive month of positive same-store sales.

Restaurant operators' reporting of customer traffic slipped somewhat in September. Thirty-three percent of restaurant operators reported an increase in customer traffic between September 2002 and September 2003 -- down from 37 percent who registered an increase in August. Forty-four percent of operators reported a slight decline in customer traffic between September 2002 and September 2003.

The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators, increased 0.2 percent in September. The September gain matched the increase posted in August, and marked the third consecutive monthly increase in the Expectations Index.

Restaurant operators continue to become more optimistic about short-term sales growth in their establishments. Fifty-three percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year) -- up from 51 percent who reported similarly last month. Meanwhile, only 15 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year.

Restaurant operators also remain confident in the direction of the overall economy. Fifty-two percent of restaurant operators expect economic conditions in six months to be better than they are now -- the strongest level on record. Only 10 percent of restaurant operators expect economic conditions to worsen in six months.

Along with their positive expectations for sales growth in the near future, restaurant operators are continuing to plan for capital expenditures. Sixty percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months -- marking the third consecutive month with a level of 60 percent or greater.

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

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

------

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.