"The Current Situation indicators remained weak, however, with a solid majority of restaurant operators reporting declines in both same-store sales and customer traffic," Riehle added. "Not surprisingly, a record 44 percent of operators said the economy is the number-one challenge currently facing their business."
The RPI is based on the responses to the National Restaurant Association's Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. The RPI consists of two components - the Current Situation Index and the Expectations Index.
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, while index values under 100 represent a period of contraction for key industry indicators.
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.6 in October - up 0.2 percent from September's record low. In addition, October marked the 14th consecutive month below 100, which signifies contraction in the current situation component.
Restaurant operators continued to report negative same-store sales in October. Twenty-nine percent of restaurant operators reported a same-store sales gain between October 2007 and October 2008, up slightly from 26 percent who reported a sales gain in September. Sixty percent of operators reported a same-store sales decline in October, matching the proportion who reported negative sales in September.
Customer traffic levels also remained extremely soft in October. Twenty percent of restaurant operators reported an increase in customer traffic between October 2007 and October 2008, up slightly from 15 percent who reported similarly in September. Sixty-five percent of operators reported a traffic decline in October, compared to 66 percent who reported negative traffic in September.
With sales and traffic levels remaining soft, restaurant operators continue to cut back on capital spending. Just 39 percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the lowest level on record.
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 97.6 in October - up 0.6 percent from September's record low level. Despite the gain, October represented the 12th consecutive month in which the Expectations Index stood below 100.
The uptick in the Expectations Index was the result of a modest improvement in operators' outlook for sales growth and the economy, though pessimistic operators still outnumbered optimistic operators by a two-to-one margin.
Twenty-one percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 15 percent who reported similarly last month. Forty-three percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, down from 50 percent who reported similarly last month.
Restaurant operators are also slightly less pessimistic about the direction of the economy. Eighteen percent of operators expect economic conditions to improve in six months, up from 14 percent who reported similarly last month. Forty percent of operators said they expect economic conditions to worsen in six months, down from 50 percent who reported similarly last month.
Restaurant operators continue to cut back on plans for capital spending. Just 37 percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 41 percent last month and the lowest level on record.
