Restaurants' Investment Plans Signal More Optimism

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Although actual sales and traffic dipped a bit in January, after a relatively strong December, operators are exhibiting more optimism about the prospects for their business and the overall economy in the next several months -- at least based on their business investment plans.

That was the bottom line on the January results of the National Restaurant Association's ongoing monthly indexing of the industry's health, based on a survey of operators.

The Restaurant Performance Index (RPI), a composite reflecting overall health/outlook for the industry, actually declined slightly versus December (-0.3%), to 98.3 -- marking the 27th consecutive month below 100. (An index of 100 represents a steady state; any score below that represents contraction.) However, December's RPI was at a 22-month high.

The January RPI decline in part reflected the "current situation" sub-index component, which measures same-store sales, traffic, labor and capital expenditures. This index was down 0.8% from December, to 96.6 (marking the 29th consecutive month below 100 for current situations index).



After posting moderate sales improvement in December, operators reported a softening last month: 57% reported same-stores sales down in January (compared to same-month '09), versus 49% reporting same-store sales declines in December.

About one-quarter (26%) reported an increase in customer traffic versus January 2009, down from 30% reporting traffic increases in December. Actual capital spending activity remained about the same between January and December.

However, the expectations sub-index that is factored into the RPI, which measures operators' six-month outlook, rose 0.2% in January, to 100.1 -- the first time in nine months that it has risen about 100.

The expectations index reflects several indicators. In January, it rose because more operators indicated that they are now planning for more capital expenditures in the months ahead. Forty-three percent now say they will invest in equipment, expansion or remodeling in the next six months -- up from 39% last month, and the highest level in five months.

Still, operators' outlook on their sales and the economy's status in the next six months are not leaping upward.

In fact, the 33% reporting that they expect sales to be up in six months (compared with same-period 2009) was slightly down from December's 35%, and the 22% saying they expect sales volume to be down in six months was up by one percentage point versus December.

Twenty-nine percent said they expect economic conditions to improve in six months, also down (from 34%) last month. As in December, 18% indicated that they expect economic conditions to worsen in the next six months.

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