Restaurant Performance Index Rose To Highest Level In Nearly Six Years

Fueled by solid same-store sales and traffic results and a bullish outlook among restaurant operators, the National Restaurant Association's Restaurant Performance Index (RPI) rose sharply in December. The RPI - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 102.2 in December, up 1.6 percent from November and its highest level in nearly six years. In addition, December represented the third time in the last four months that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

"Aided by favorable weather conditions in many parts of the country, a solid majority of restaurant operators reported higher same-store sales and customer traffic levels in December," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "In addition, restaurant operators are solidly optimistic about sales growth in the months ahead, and their outlook for the economy is at its strongest point in nearly a year."

"Coupled with the solid November results, the RPI's impressive December performance bodes well for continued positive industry momentum in the year ahead," Riehle added. "The ripple effect will likely be felt throughout the supply chain as well, with restaurant operators' plans for capital spending rising to its highest level in more than four years."

Watch a video of Riehle summarizing the December RPI.

The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, and index values below 100 represent a period of contraction for key industry indicators. The RPI consists of two components, the Current Situation Index and the Expectations Index.

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 102.1 in December - up a solid 1.9 percent from November and its strongest level in seven years. December also represented the third time in the last four months that the Current Situation Index stood above 100, which signifies expansion in the current situation indicators.

Building on a solid November performance that saw the strongest same-store sales results in more than four years, restaurant operators reported even better numbers in December. Sixty-nine percent of restaurant operators reported a same-store sales gain between December 2010 and December 2011, while only 18 percent reported a same-store sales decline. This marked the strongest net positive sales performance since February 2004, when 70 percent of operators reported a sales gain and 17 percent reported lower sales.

Restaurant operators also reported solid customer traffic results in December. Fifty-seven percent of restaurant operators reported higher customer traffic levels between December 2010 and December 2011, while just 23 percent reported a traffic decline. In November, 41 percent of operators reported higher customer traffic, while 32 percent reported a traffic decline.

In addition to positive sales and traffic levels, capital spending activity among restaurant operators continues to trend upward. Forty-eight percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the highest level in six months.

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 102.3 in December - up 1.3 percent from November and its highest level in