Despite an improving economy and more fast-food items integrating popular snack chips, Americans are eating out less.
For the second month in a row, the National Restaurant Association's Restaurant Performance Index (RPI) fell, dropping to a 100.3 in June, down 0.3%. That's a troubling metric for the industry, but it's worth noting that scores above 100 "indicate that key industry indicators are in a period of expansion," according to the association. So while a second straight decline in the monthly number bears watching, when you break down the score, you see that the declines are slight, with actual sales and traffic dropping slightly while optimism for the future has dipped as well.
"The uneven trend that the RPI followed during the first half of 2016 was due in large part to choppy same-store sales and customer traffic results," said Hudson Riehle, senior vice president of research for the National Restaurant Association. "This uncertainly likely contributed to the Expectations Index dipping to a six-month low in June. However, it's hard to draw definitive conclusions in either direction right at this point, because the indicators continue to send mixed signals."
Basically, the restaurant industry has its concerns about the future, but current numbers have been decent enough.
McDonald's Q2 results reflect the confusion facing the restaurant industry. Image source: McDonald's.
What does the RPI mean?
The National Restaurant Association's RPI leaves room for interpretation. To get the result, the association uses two numbers -- the Current Situation Index (CSI), which measures current trends, and the Expectations Index (EI), which measures restaurant operators' six-month outlook.
The first part is an actual number based on real results. In June, that index sat at 99.9 -- basically flat but down 0.3% from 100.2 in May. June marked the first time in five months that the CSI fell below 100, which indicates contraction in key indicators, according to the association.
"For the second consecutive month, restaurant operators reported a net decline in same-store sales and customer traffic," wrote the trade association. "38% reported a same-store sales gain between June 2015 and June 2016, while 43% reported a same-store sales decline." In addition, 33% of operators reported year-over-year increases in customer traffic for the period while 49% said their traffic declined.
The Expectations Index fell slightly in June as well, dropping to 100.7, its lowest level in six months.
It's a wary time for restaurants
This comes when a number of restaurant chains have struggled to achieve same-store sales growth. One of the most telling may be McDonald's (MCD 0.89%), which had been in the midst of a major recovery, powered in part by expanding its breakfast menu throughout the day. The chain saw its same-store sales grow by 1.8% in the second quarter, less than analysts had expected.
Calling 1.8% growth a bad number, however, is certainly a glass-half-empty view of things. Conlumino CEO Neil Saunders explained to CNBC just how open to interpretation McDonald's results are. As CNBC wrote: " 'They remain in positive territory and show that the changes McDonald's has made continue to gain favor with customers,' Saunders said. 'That said, they raise a question: is McDonald's turnaround plan running out of steam or is this simply a blip in growth? Perhaps unhelpfully, the truth is that the more sluggish performance is a mix of both.' "
McDonald's numbers stand as a proxy for the entire industry. They're not bad, but also not good enough to ward off a sense of rough waters ahead.
One-third of restaurant operators told the National Restaurant Association that they expect to have higher sales in six months while 18% expect their sales volume to be lower than it was during the same period in the previous year -- the highest percentage to believe that in nearly four years, according to the organization. Of course, that still leaves just under half the industry predicting flat sales, a sign that even restaurant operators don't know if Americans will start eating out more.
