National Restaurant Association Restaurant Performance Index - August

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					                                                National Restaurant Association
                                       Restaurant Performance Index – August 2008


NRA’s Restaurant Performance Index                                                     Restaurant Performance Index
Edged Up 0.1 Percent in August; Stood
Below 100 for the 10th Consecutive Month
                                                                     104



Restaurant industry performance remained soft in August, as          103
the National Restaurant Association’s comprehensive index
of restaurant activity stood below 100 for the tenth                 102
consecutive month. The Association’s Restaurant
Performance Index (RPI) – a monthly composite index that
tracks the health of and outlook for the U.S. restaurant             101

industry – stood at 98.3 in August, up 0.1 percent from its
July level.                                                          100


The recent lack of change in the Restaurant Performance              99
Index reflects the wait-and-see sentiment in the financial
markets and overall economy. Restaurant operators reported
                                                                     98
negative same-store sales for the eighth time in the last 10
months, and their outlook for sales growth in the months
ahead remains uncertain. A record 31 percent of restaurant           97
operators said the economy is the number-one challenge                Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08

facing their business, while 22 percent identified food costs              Source: NRA; Values Greater than 100 = Expansion; Values Less than 100 = Contraction
as their top challenge.

The Restaurant Performance Index is based on the responses                   Current Situation & Expectations Indices
to the Association’s Restaurant Industry Tracking Survey,
which is fielded monthly among restaurant operators                  105

nationwide. The index consists of two components – the
                                                                     104
Current Situation Index and the Expectations Index.
                                                                     103
The Restaurant Performance Index is constructed so that the
health of the restaurant industry is measured in relation to a       102
steady-state level of 100. Index values above 100 indicate
                                                                     101
that key industry indicators are in a period of expansion,
while index values under 100 represent a period of                   100
contraction for key industry indicators.
                                                                     99
Current Situation Index Rose 0.2 Percent in August
                                                                     98
to a Level of 97.8
The Current Situation Index, which measures current trends           97

in four industry indicators (same-store sales, traffic, labor
                                                                     96
and capital expenditures), stood at 97.8 in August – up 0.2           Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08
percent from July and its first gain in three months. Despite
                                                                                        Current Situation Index                     Expectations Index
the modest improvement, August marked the 12th
consecutive month below 100, which signifies contraction in                Source: NRA; Values Greater than 100 = Expansion; Values Less than 100 = Contraction

the current situation component.



National Restaurant Association                                  1                               Restaurant Performance Index – August 2008
Restaurant operators continued to report a same-store sales                 Restaurant Operators’ Reporting of Same-Store
decline in August, though results were an improvement over                    Sales versus Same Month in Previous Year
the previous two months. Thirty-eight percent of restaurant
                                                                      60%
operators reported a same-store sales gain between August                                                              55%
                                                                                                                                                           53%
2007 and August 2008, up from 36 percent who reported a               50%
                                                                                  49%         49%                                  50%                                 50%         48%

sales gain in July. Forty-eight percent of operators reported                                        44%                                 43%
                                                                                                                                               42%
a same-store sales decline in August, down from 50 percent            40%
                                                                                                           39%
                                                                                                                                                                             38%
                                                                                        36%                                                                      36%
who reported similarly in July.                                              33%
                                                                                                                             35%
                                                                                                                                                     32%
                                                                                                                 28%
                                                                      30%
In addition to soft sales results, restaurant operators
continued to report negative customer traffic levels in               20%
August. Twenty-five percent of restaurant operators
reported an increase in customer traffic between August               10%
2007 and August 2008, matching the proportion who
reported similarly in July. Fifty-five percent of operators            0%
                                                                            Dec-07 Jan-08 Feb-08 Mar-08                      Apr-08 May-08 Jun-08                Jul-08      Aug-08
reported a traffic decline in August, down slightly from 57
percent who reported negative traffic in July.                                      Higher Same-Store Sales                                 Lower Same-Store Sales

                                                                       Source: National Restaurant Association, Restaurant Industry Tracking Survey
Capital spending activity in the industry remains sluggish by
recent historical standards. Forty-one percent of operators              Restaurant Operators’ Outlook for Sales Volume in
said they made a capital expenditure for equipment,                       Six Months versus Same Period in Previous Year
expansion or remodeling during the last three months, down
from 42 percent who reported similarly last month.                    40%                                              38%                     37%         38%
                                                                                                           34%                     34%                                 34%         33%
                                                                                         32%
                                                                             31%               31%
Expectations Index Declined 0.1 Percent to a Level                                 30%               30%         29%         29%         29%         29%         29%         30%
                                                                      30%
of 98.8 in August
The Expectations Index, which measures restaurant
operators’ six-month outlook for four industry indicators             20%

(same-store sales, employees, capital expenditures and
business conditions), stood at 98.8 in August – down 0.1
                                                                      10%
percent from July’s level. In addition, August represented
the tenth consecutive month in which the Expectations Index
stood below 100.
                                                                       0%
                                                                            Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08                                Jul-08      Aug-08 Sep-08
Restaurant operators remain uncertain about sales growth in                         Higher Sales in Six Months                             Lower Sales in Six Months
coming months. Thirty percent of restaurant operators
                                                                       Source: National Restaurant Association, Restaurant Industry Tracking Survey
expect to have higher sales in six months (compared to the
same period in the previous year), a level which has
remained relatively unchanged for the last 10 months.                             Restaurant Operators’ Outlook for General
Thirty-three percent of restaurant operators expect their sales                      Economic Conditions in Six Months
volume in six months to be lower than it was during the
                                                                      50%
same period in the previous year, down slightly from 34                           44%
                                                                                                          46%
                                                                                                                       44%                     45%
                                                                                                                                                           43%
                                                                                                                                   42%
percent who reported similarly last month.
                                                                      40%                     37%

Restaurant operators also remain relatively pessimistic about                                                                                                          29%
                                                                                                                                                                                   33%

the direction of the economy. Twenty-four percent of                  30%
operators expect economic conditions to improve in six                                                                                                           21%
                                                                                                                                                                             24%
                                                                                        21%
months, up from 21 percent who reported similarly last                20%
                                                                            16%                                  16%
month and the highest level in 11 months. However, 33                                               14%                      14%
                                                                                                                                         12%
                                                                                                                                                     15%

percent of operators said they expect economic conditions to
                                                                      10%
worsen in six months, up from 29 percent who reported
similarly last month.
                                                                      0%
                                                                            Jan-08 Feb-08 Mar-08                 Apr-08 May-08 Jun-08                Jul-08      Aug-08 Sep-08
Forty-three percent of restaurant operators plan to make a
capital expenditure for equipment, expansion or remodeling                   Better Conditions in Six Months                             Worse Conditions in Six Months

in the next six months, unchanged from last month and equal            Source: National Restaurant Association, Restaurant Industry Tracking Survey
to the lowest level on record.

National Restaurant Association                                   2                                 Restaurant Performance Index – August 2008
             National Restaurant Association Restaurant Industry Performance Index and Its Components
                                                                                                                                                         Aug-08
                                        April                  May                   June                   July                 August                   over
                                        2008                   2008                  2008                   2008                  2008                   July-08


Restaurant Performance Index              98.4                  98.6                  98.3                   98.3                  98.3                  0.1%


Current Situation Index                   97.9                  98.9                  97.9                   97.7                  97.8                  0.2%

Current Situation Indicators:
     Same-Store Sales                     98.5                 100.1                  97.9                   98.6                  98.9                  0.3%
     Customer Traffic                     96.9                  98.8                  96.3                   96.8                  97.0                  0.3%
     Labor                                97.4                  97.8                  97.7                   96.8                  97.2                  0.5%
     Capital Expenditures                 98.6                  98.8                  99.8                   98.5                  98.2                  -0.3%


Expectations Index                        98.9                  98.3                  98.6                   98.9                  98.8                  -0.1%

Expectations Indicators:
     Same-Store Sales                     99.5                  99.2                  99.1                   99.6                  99.7                  0.2%
     Staffing                             99.4                  98.7                  98.6                   98.1                  98.1                  0.0%
     Capital Expenditures                 99.5                  98.6                  99.5                   98.7                  98.5                  -0.2%
     Business Conditions                  97.2                  96.7                  97.2                   99.3                  99.1                  -0.2%

Note: For each of the Indices and Indicators, a value above 100 signals a period of expansion while a value under 100 signals a period of contraction.




                                                                               Definitions
The National Restaurant Association’s Restaurant Performance Index is a statistical barometer that measures the overall health of
the U.S. Restaurant Industry. This monthly composite index is based on the responses to the National Restaurant Association’s
monthly Restaurant Industry Tracking Survey, which is fielded among restaurant operators nationwide on a variety of indicators
including sales, traffic, labor and capital expenditures. The Restaurant Performance Index is composed of two equally-weighted
components: the Current Situation Index and the Expectations Index. For each of the Indices and Indicators, a value above 100
signals a period of expansion while a value under 100 signals a period of contraction.

The Current Situation Index is a composite index based on four ‘recent-period’ restaurant industry indicators:
    Same-Store Sales: Compares same-store sales volume in the reference month versus the same month in the previous year
    Customer Traffic: Compares customer traffic in the reference month versus the same month in the previous year
    Labor: Compares the number of employees and the average employee hours in the reference month versus the same month
            in the previous year
    Capital Expenditures: Measures capital expenditure activity during the three most recent months

The Expectations Index is a composite index based on four ‘forward-looking’ restaurant industry indicators:
    Same-Store Sales: Restaurant operators’ outlook for same-store sales in six months, compared to the same period in the
                        previous year
    Staffing: Restaurant operators’ expectations for their number of employees in six months, compared to the same period in
              the previous year
    Capital Expenditures: Restaurant operators’ capital expenditure plans during the next six months
    Business Conditions: Restaurant operators’ outlook for general business conditions during the next six months


For a complete analysis of the National Restaurant Association’s Restaurant Industry Tracking Survey including data broken out
by industry segment, as well as a host of other economic indicators that impact the restaurant industry, log on to Restaurant
TrendMapper at www.restaurant.org/trendmapper (subscription required).



National Restaurant Association                                               3                           Restaurant Performance Index – August 2008