Restaurant Owners Get More Pessimistic

 By Rieva Lesonsky

Restaurant owners’ outlook about the economy has become less optimistic, reports the National Restaurant Association’s restaurant performance index. In May, the index dropped 1 percent to 99.9 from April’s level of 100.3. (Index values above 100 indicate a period of expansion, while values below 100 represent a period of contraction.)

What caused the slide? A drop in spending is partly to blame. Consumers spent less eating out in May, with 40 percent of restaurant operators reporting a drop in same-store sales between May 2010 and May 2011, compared with 31 percent in April.

Consumers also dined out less frequently in May. Forty-one percent of restaurants surveyed said traffic decreased between May 2010 and May 2011, compared to 35 percent in April.

“Like the economy as a whole, the restaurant industry’s recovery hit a speed bump in May,” said Hudson Riehle, senior vice president at the association, said in reporting the news. “However, the overall economic fundamentals of the restaurant industry remain positive, which will likely lead to stronger performances in the months ahead.”

Bearing that out, restaurant owners in the survey were still making capital expenditures. Forty-four had invested in equipment, expansion or remodeling in the past three months, a slight drop from 48 percent who reported doing so in the April survey. And 50 percent of restaurant owners surveyed plan to make capital expenditures in the next six months.

Even so, restaurant operators are not as optimistic about the future. The index’s Expectation Index, which assesses restaurant owners’ six-month outlook in four areas — same-store sales, employees, capital expenditures and business conditions — dropped to 100.6 in May. Although that’s still positive, it’s a decline from 101.5 in April. In addition, only 41 percent of operators expect higher sales in the next six months, down from 55 percent in January.

Restaurant owners were also fairly pessimistic about the U.S. economy in general. Just 24 percent of restaurant operators said they expect economic conditions to improve in the next six months. That was the lowest percentage to foresee improvement in over two years. Twenty-one percent say economic conditions will get worse in the next six months.

Image Courtesy: Karen Axelton

This entry was posted on Monday, July 11th, 2011 at 6:00 am and is filed under Small Business, small business. You can follow any responses to this entry through the RSS 2.0 feed.


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