Food service may be slipping again

by Keith Nunes
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WASHINGTON – Softer sales, reduced foot traffic and fading restaurant operator optimism all combined to drive the National Restaurant Association’s Restaurant Performance Index down for the second consecutive month. The R.P.I. stood at 100.7 in July compared with the June level of 101.3.

The R.P.I. consists of two components: the current situation index and the expectations index. Both declined during the month of July.

“The R.P.I.’s July decline was the result of pullbacks in both the current situation and expectations indicators,” said Hudson Riehle, senior vice-president of the Research and Knowledge Group for the N.R.A. “Most notably, restaurant operators’ outlook for the economy fell to a five-month low, with only 23% of operators expecting business conditions to improve in the next six months.”

The current situation index measures four market indicators: same-store sales, foot traffic, labor and capital expenditures. During July it declined 0.6% to 100.1 compared to June.

Restaurant operators reported net positive same-store sales in July, the results were softer than the previous two months. Forty-four per cent of restaurant operators reported a same-store sales gain between July 2012 and July 2013, down from 52% who reported higher sales in June and 63% in May.

Restaurant operators also reported a net decline in customer traffic for the first time in three months. Thirty-five per cent of operators said they experienced higher customer traffic levels between July 2012 and July 2013, while 43% of operators said their traffic declined. In June, 43% of operators reported an increase in customer traffic, while 39% reported lower traffic levels.

The R.P.I.’s expectation index stood at 101.3 in July, down 0.6% from June and its lowest level in seven months. Operators participating in the survey said their sales outlook was down compared to previous months. Thirty-seven per cent said in July that they expect to have higher sales in six months vs. 46% in June.

Restaurant operators are also less optimistic about overall economic conditions. Twenty-three per cent of restaurant operators said they expect economic conditions to improve in six months, down from 30% who reported similarly last month. Eighteen per cent of operators said they expect economic conditions to worsen in the next six months, up slightly from 16% last month.

Survey participants are also less optimistic about overall economic conditions. Twenty-three per cent said they expect economic conditions to improve in six months, down from 30% who reported similarly in June. Eighteen per cent of operators said they expect economic conditions to worsen in the next six months, up slightly from 16% last month.

The sluggishness of the food service category was reflected in comments made by Joe Sanderson Jr. on Aug. 26. Mr. Sanderson is chairman and chief executive officer of Sanderson Farms, Inc., Laurel, Miss., a chicken processor that supplies the food service category. While Mr. Sanderson’s company had a positive financial quarter, he said the upward swing in earnings was due to a menu shift from beef to chicken rather than improved food service conditions.

“Restaurant traffic continues to be flat at best,” he said.

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