Foodservice Equipment Reports

NRA’s Performance Index Signals Operator Pessimism

The looming fiscal cliff appears to have given restaurant operators a case of vertigo. The prospect of rapidly rising prices for key proteins may be adding to the swoon. For the first time in 14 months, the National Restaurant Association’s Restaurant Performance Index fell below the 100 level the index uses to separate industry expansion from contraction. The October survey results, released Nov. 30, had the overall index falling 0.9 point to 99.5. The index had been in expansion territory since September 2011. Both the Current Situation Index and Expectations Index also stand below the tipping point, with the CSI at 99.3 and the EI at 99.7.

The only good news in the report, at least for the equipment and supplies industry, was a 1.2 point jump—to 100.1—in the component tracking operators that plan to make a capital purchase in the next six months. It was the only positive indicator in the entire eight-component index.

In the CSI, both same-store sales and traffic fell for the second month in a row. Same-store sales were off 0.8 point, but remain in expansion territory at 100.4. The traffic component fell 0.7 point and is now at 98.9. It has been in negative territory three of the past four months. The labor marker fell 0.4 point. And the indicator tracking operators that made a capital buy fell half a point to 99.2. It had risen strongly in the month-prior reading.

Operators are clearly worried about the near-term future. In the EI, the component for future same-store sales fell 2.3 points while that tracking business conditions six months out dropped 2.6 points. The business condition outlook marker is now the lowest component in the overall index at 98.2. And to put it into historical perspective, operators’ view of future business conditions is at its lowest level since December ’08. Operators’ pessimism may soften a bit once the federal budget issues are resolved. But food price hikes are a certainty, and will affect operator margins throughout next year.

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