Restaurant Operators Pull Back on Capital Spending Sep 1, 2011

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The National Restaurant Association said restaurant operators were pessimistic in July - even as same-store sales and customer traffic levels remained positive – and they pulled back on capital expenditures for equipment, expansion, or remodeling.

The association's Restaurant Performance Index (RPI) fell below 100 in July, reporting softer same-store sales and traffic levels and a dampened outlook among restaurant operators. The RPI – a monthly composite index that tracks the health of the U.S. restaurant industry – was at 99.7 in July, down from 100.6 in June and the lowest level in 11 months.

43% of operators said they made a capital expenditure for equipment, expansion, or remodeling in the last three months, the lowest level in five months.

In addition, in July the operators planning capital spending in the next six months dropped 8 percentage points to 43% from 50% in June.

Hudson Riehle, senior vice president of the Research and Knowledge Group for the association, addressed restaurant operator pessimism: "This survey month was burdened with the debt ceiling crisis and the downgrade in the nation’s credit rating, which added an additional layer of uncertainty in an already fragile economic recovery," Riehle said. “However, if the economy can avoid additional negative shocks in the months ahead, the overall fundamentals continue to point toward growth in the second half of the year."

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