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Restaurant Business Continued on Strong Course in January



The NRA's Restaurant Performance Index, the monthly composite index that tracks the health of and outlook for the U.S. restaurant industry, stood at 102.3 in January, up 0.3% from December and its highest level in 13 months. January also represented the 31st consecutive month above 100 - a level which represents expansion in the Association's composite index of eight key industry indicators.

"Bolstered by record warm temperatures in many parts of the country, a majority of restaurant operators reported January gains in same-store sales and customer traffic," observed Hudson Riehle, senior vice president of research and information services. "In addition, operators reported a boost in plans for hiring and capital expenditures - positive developments for both the restaurant industry and the overall economy."

The NRA explained that January's increase in the Restaurant Performance Index was the result of gains in both the current situation and expectations components of the index. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 101.2 in January - up 0.1% from its December level.

For the 30th consecutive month, restaurant operators reported an increase in same-store sales. Fifty-eight percent of restaurant operators reported a same-store sales gain between January 2005 and January 2006, down slightly from 60% of operators who registered a sales gain in December. Twenty-five percent of operators reported a same-store sales decline between January 2005 and January 2006, while 17% of operators reported no change in sales.

Restaurant operators also reported a solid customer traffic performance in January. Fifty-one percent of restaurant operators reported an increase in customer traffic between January 2005 and January 2006, up from 48% who reported traffic gains in December. Thirty percent of operators reported traffic declines in January, while 19% reported no change in customer traffic.

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 103.3 in January, its fifth consecutive monthly gain and the strongest level in 11 months.

A majority of restaurant operators are optimistic about sales growth in the coming months. Sixty-one percent of restaurant operators expect their sales volume in six months to be higher than it was during the same period in the previous year, up from 58% who reported similarly last month. In contrast, just 13% of restaurant operators expect their sales in six months to be lower than it was during the same period in the previous year.

Restaurant operators are also more optimistic about the direction of the overall economy. Forty-three percent of operators expect economic conditions to improve in six months, up from 38% last month. Ten percent of operators said they expect economic conditions to worsen in six months, while 47% expect economic conditions to remain about the same.

Along with their positive sales outlook, operators are planning for staffing increases during the next several months. Thirty-two percent of operators expect to have higher staffing levels in six months (compared to the same period in the previous year), while only 12% of operators expect to employ fewer workers in six months.

In addition to their positive outlook for sales and staffing levels, a growing proportion of restaurant operators are making plans for new capital expenditures. Sixty-five percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, the strongest level in 13 months.

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