Restaurant Operators Remain Optimistic About Growth Despite Challenging Energy Environment (1/2)

Restaurant Operators Remain Optimistic About Growth Despite Challenging Energy Environment Gas and energy prices cited as the top challenge by restaurant operators As the impact of hurricanes and gas prices continue to linger, the National Restaurant Association's Restaurant Performance Index edged down in September. The Association's Restaurant Performance Index – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.2 in September, down 0.2 percent from a level of 100.4 in August. Although the Index registered its fourth decline in the last five months, it remained above 100 – a level which represents expansion in the Association's composite index of eight key industry indicators. "Most importantly, restaurant operators were more confident regarding sales growth in the months ahead," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "In addition, the outlook for capital expenditure activity remains strong." 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. "However, restaurant operators are increasingly concerned about the impact that high gas and energy prices will have on both their operational expenses and customers," Riehle added. "In fact, 25 percent of restaurant operators said gas and energy prices are the number-one challenge currently facing their business – topping the list of concerns among operators this month," he said. "Gas and energy prices ranked well ahead of recruiting and retaining employees, which was identified as the top challenge by 18 percent of restaurant operators." The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), fell to 99.5 in September – its first dip below 100 in 21 months. Three of the four current situation component stood below 100 in September, which signifies a period of contraction for those indicators. The same-store sales indicator was the lone exception, as restaurant operators reported a same-store sales gain for the 26th consecutive month – albeit the softest sales performance in 24 months. Forty-four percent of restaurant operators reported a same-store sales gain between September 2004 and September 2005 – down from 51 percent of operators who registered a sales gain in August. Forty percent of operators reported a same-store sales decline between September 2004 and September 2005, while 16 percent of operators reported no change in sales. Customer traffic registered a net decline in September. Thirty-six percent of restaurant operators reported an increase in customer traffic between September 2004 and September 2005, while 44 percent of operators reported a traffic decline. Twenty percent of operators reported no change in customer traffic. The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 100.9 in September – up 0.5 percent from its record-low August level. Bolstering the Expectations Index was an improvement in operators' outlook for sales growth in the coming months. Forty-two percent of restaurant operators expect their sales volume in six months to be higher than it was during the same period in the previous year, while 20 percent of operators expect to have lower sales in six months. Thirty-eight percent of operators expect their sales to remain about the same.