New NRA index shows modest uptick in trends

Nation's Restaurant News,  May 12, 2003  by Susan Spielberg

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Restaurant industry trends improved somewhat in March, and operators are more optimistic about the future, according to a new monthly index developed by the National Restaurant Association.

The NRA's Restaurant Performance Index, launched April 30, is a composite of several variables that gauge the health of the industry. The statistical tool consists of a Current Situation Index, which measures trends in sales, traffic, labor and capital expenditures, and an Expectations Index, which aims to reflect operators' attitudes about future prospects.

The index's March results marked an upbeat shift from recent trends. "The last uptick we saw was in October; since October the trend line had been going down," said Hudson Riehle, senior vice president of Research and Information Services for the NRA.

"The optimism in March definitely did come back. You certainly should expect to see that continue in April [results]. You saw that with the Conference Board," Riehle said, referring to the independent panel of business experts that regularly gauges consumers' expectations and other key indicators. "They had the largest monthly gain since 1991 in their index," he added, referring to the Conference Board's Consumer Confidence Index, which was benchmarked in 1985 at 100 and jumped this April to 81.0 from 61.4 in March.

The NRA's Restaurant Performance Index, which was benchmarked at 100 in June 2002, was 98.0 for October and had declined steadily to 96.3 by February. The index rose by 1.7 percentage points in March.

The data for the Restaurant Performance Index are culled from the NRA's monthly Restaurant Industry Tracking Survey. The latest survey, which canvassed approximately 500 restaurant operators, was completed in April. The Current Situation data cover operating variables in March; attitudes about the future were gauged in April.

The Current Situation component of the index increased 1.5 percentage points in March over February, mostly owing to improved sales among survey respondents.

Although most operators reported lower same-store sales during the month compared with the year before, the percentage that reported increases rose to 29 percent in March from 23 percent in February. Fifty-six percent of respondents reported a decline in same-store sales, while 15 percent said they remained flat.

Traffic counts in March 2003, compared with March 2002, were reported to be down for the seventh month in a row. Fifty-nine percent of respondents said traffic was down, compared with 22 percent who said traffic was up.

Forty-four percent of the operators surveyed said they had made a capital expenditure for equipment, expansion or remodeling during the past three-months, up slightly from the 42 percent who said the month before that they had done so.

Although 53 percent of survey respondents reported no change in the number of employees or their average hours worked, 38 percent reported a reduction in staff between March 2002 and March 2003, while only 10 percent reported an increase.

The second component of the Restaurant Performance Index, the Expectations Index, rose 1.8 percentage points in April. Forty-seven percent of operators said they expect business conditions overall in six months to be better than they are now, compared with only 30 percent who were similarly optimistic last month.

The number of respondents in the survey who expect to have higher sales and staffing levels in six months, compared with the same period last year, rose from the previous month's survey. Forty-one percent of respondents said in April they expect to have higher sales, compared with 35 percent in March, and 23 percent expect higher staffing levels, compared with 17 percent a month earlier.

The NRA hopes to grow the sample size for its monthly surveys. "It's still in its embryonic state," Riehle said. The Conference Board surveys 5,000 U.S. households for its monthly Consumer Confidence Index.

"Initially, the [NRA's] index was developed for internal purposes because [there have been] a lot of inquiries about what's going on, on a real-time basis," Riehle said.

"With the industry and the economy much more volatile right now, there is increased demand for real-time information," he added. "Even though this is a little delayed, it's proved to be quite helpful."

The association intends to release its composite index results on the last business day of each month.

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