Restaurant outlook continues to improve, cap spending up

Washington, D.C. Fueled by improving sales and traffic levels and growing optimism among restaurant operators, the National Restaurant Association's comprehensive index of restaurant activity rose sharply in March. The association's Restaurant Performance Index (RPI) stood at 100.5 in March, up 1.4% from February and its strongest level since September 2007. It is the first time in 29 months the RPI rose above 100 for, reflecting expansion in the index of key industry indicators.

"The RPI's solid performance in March was driven by improvements among both the current-situation and forward-looking indicators," said Hudson Riehle, senior VP the research and knowledge group for the association. "Restaurant operators reported net gains in both same-store sales and customer traffic in March, the first time in 31 months that both indicators stood in positive territory."

Along with improving sales and traffic performances, restaurant operators reported a moderate uptick in capital spending. Thirty-six percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up from 30% last month and the highest level in five months. Forty-seven percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months.

The RPI -- a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry -- 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, while 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.

For the first time in 22 months, restaurant operators reported net positive same-store sales. Forty-three percent of restaurant operators reported a same-store sales gain between March 2009 and March 2010, up from 28% of operators who reported higher sales in February.

Restaurant operators also reported a net increase in customer traffic in March, the first positive reading in 31 months. Forty-one percent of restaurant operators reported an increase in customer traffic between March 2009 and March 2010, up from 25% who reported higher customer traffic in February.