This issue's Regulatory Report

Economic Report

  Industry Report

Special Focus: Are Commercial Operator Sales Beginning To Plateau?
The slight decline in the National Restaurant Association’s monthly Restaurant Performance Index in three straight readings starting in March, combined with a slowdown in traffic growth in May as reported by NPD Foodworld’s CREST study, raises the question of whether the strong growth in operator sales and traffic over the past year is starting to moderate.

Since the RPI hit its highest level, 105.0, in February, the index trickled downward to 103.9 in May, with same-store sales and traffic taking almost two-point downward hits in the May report. The RPI is calculated from a survey of a broad base of chain, small chain and independent operators.

NPD’s total restaurant traffic counts show year-to-year growth of 2.2% as a whole for the quarter ended May, but growth slowed to 1.3% May ’04 versus May ’03 after surging 2.6% in March and 2.8% in April.

Some are speculating about a plateau effect, but don’t read too much into the pause. The gasoline-price spikes of April and May appeared to take a toll on traffic and sales, but those prices have moderated since then.

Big chains, which have led the commercial operator recovery since it began a year ago July, are beginning to run into what Wall Street calls "hard comparisons." The June sales number announced by McDonald’s this week indicated slower growth than in the year-earlier period, the first such reduction in 13 months. But sales were still up 6.6% versus 7% a year earlier. At their volumes, that’s still remarkable. Wendy’s June numbers tell a similar story. Not least, NPD SalesTrac of more than 50 leading QSR and Mid-scale chains shows positive same-store sales growth through most of June, a remarkable 52 straight weeks of gains.

Hudson Riehle, NRA’s senior v.p research and information services, is not concerned. "The year-to-year comparisons are getting harder, and that’s part of this mild flattening. But honestly, our index is still very close to an historical high, and the operators we speak with are very optimistic."

There is no question the big chains’ growth will moderate over the next few months, but the overall outlook for them remains positive.

And the real issue here is that only about half the commercial market, judging by traffic, has really recovered to begin with. One of the most hopeful signs in the CREST second quarter Executive Topline report was the return of independents to flat traffic after seven quarters of decline. Small chains were still off a percentage point. And the noncommercial and spec markets are still struggling as public funding only slowly recovers.

For those of us in the equipment and supplies market, this recovery still has a way to go.

Robin Ashton
Publisher
rashton@fermag.com