What Is the Restaurant Performance Index?
Restaurant Performance Index (RPI) is a monthly index that tracks the health and outlook of the U.S. restaurant industry. The National Restaurant Association, the world’s largest food-service trade group, publishes the index results on the last business day of each month.
The index launched in 2002. In addition to national results, the National Restaurant Association breaks down the data by several regions, as well as a few states, including California, Michigan, and Wisconsin.
Understanding the Restaurant Performance Index (RPI)
Restaurant Performance Index (RPI) reflects the results of a monthly survey of roughly 400 restaurateurs nationwide. The survey gauges answers in key areas such as same-store sales, traffic, labor, and capital expenditures.
The index has two equally weighted components: the Current Situation Index and the Expectations Index. The Current Situation Index measures changes in same-store sales, customer traffic, the total number of total employees and their average hours worked, as well as capital spending. Each metric is tracked versus the year-ago month.
The Expectations Index, meanwhile, reflects a six-month outlook for same-store sales relative to the same period the previous year; an outlook for the changes in the number of employees needed in the next six months; capital spending plans; and business operators’ feelings about overall business conditions.
Each component breaks down survey results into an index value that is measured in relation to a steady-state of 100. That is, readings below 100 indicate business contraction, 100 is the status-quo, and index values above 100 signal expansion.
The National Restaurant Association offers much of the index data for free on its website and makes more-detailed data breakdowns available through a subscription service called Restaurant TrendMapper.
Pros and Cons of the Restaurant Performance Index (RPI)
The Restaurant Performance Index (RPI) is one of several industry-performance metrics published by the National Restaurant Association. The index leverages statistical methods and offers useful insights into current business conditions and near-term expectations. Restaurant operators use the index to assist with predictions that inform hiring and expansion decisions.
While investment analysts watch the index fairly closely, few use it to it predict movements for restaurant stocks. For investment purposes, the index is a coincident indicator, as opposed to a predictive one.
For example, much like the S&P 500 and other broad-market indexes, the Restaurant Performance Index fell below 100 in the latter half of 2017. It started to turn higher in late-2008, slightly ahead of the equity markets, although it did not pop back into expansion mode above 100 again until early 2010. For this reason, analysts and investors tend to use other methods to predict returns for restaurant stocks.