WASHINGTON – During September, the outlook for the restaurant industry worsened, as the National Restaurant Association’s index of restaurant activity fell to a new record low. A monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, the association’s Restaurant Performance Index was 96.7 in September, down 1.7% from August and its 11th consecutive month below 100.
"The September decline in the Restaurant Performance Index was the result of broad-based declines across the index components, with both the current situation and expectations indices falling to record lows," said Hudson Riehle, senior vice-president of research and information services for the N.R.A. "Nearly two out of three restaurant operators reported negative same-store sales and traffic levels in September, while 50% expect their sales in six months to be lower than the same period in the previous year."
Operator sentiment reflects the rapid deterioration in economic conditions, with a record 42% of restaurant operators saying the economy is currently the No. 1 challenge facing their business, Mr. Riehle said.
"Operators aren’t optimistic about the economy looking forward either, with 50% expecting economic conditions to worsen in six months," he added.
September represented the worst result same-store sales in more than five years. Twenty-six per cent of restaurant operators reported a same-store sales gain between September 2007 and September 2008, down from 38% who reported a sales gain in August. Sixty per cent of operators reported a same-store sales decline in September, up from 48% who reported similarly in August.
What’s more, September traffic levels represented the weakest performance in the six-year history of the R.P.I. Just 15% of restaurant operators reported an increase in customer traffic between September 2007 and September 2008, down from 25% who reported similarly in August. Sixty-six per cent of operators reported a traffic decline in September, up from 55% who reported negative traffic in August.
Along with weak sales and traffic levels, capital spending activity remained soft.
Restaurant operators also remain decidedly pessimistic about the direction of the economy. Fourteen per cent of operators expect economic conditions to improve in six months, down from 24% who reported similarly last month. Fifty per cent of operators said they expect economic conditions to worsen in six months, up sharply from 33% who reported similarly last month.
"As the restaurant industry is negatively impacted, this will also have a negative impact on suppliers to the industry," said a spokesman for the National Restaurant Association.