Understanding and keeping an eye on the economic landscape of the restaurant industry can be an integral part of managing your business. As a provider of financial and marketing services to the restaurant industry, Rewards Network has unique insights into the industry through the data we receive from over 10,000 restaurants. We also monitor the key restaurant trends through common indicators and publicly-reported indexes. Restaurant owners and operators should also look at these indexes for a deeper understanding of the restaurant industry to aid in making business decisions.
Here are a few indexes to keep your eye on:
Restaurant Performance Index (RPI)
Published at the end of each month by the National Restaurant Association, this composite index tracks the health and outlook for the restaurant industry in the U.S. This is done by polling restaurant operators on several industry metrics and getting their current and future outlook. Data points include capital expenditures, restaurant traffic, same store sales, labor, staffing, and business conditions. The industry currently has a very positive outlook. This indicator would suggest the ability to fund an expansion or additional capital spending is strong, but relying on one indicator alone is not a responsible decision.
Same Store Sales Metrics
Also published by the National Restaurant Association, the National Chain report is a good indicator of the overall health of restaurants with a guideline for restaurant segment results. In addition to the Nation Chain report, another beneficial place to find same store sales metrics is quarterly and annual reports filed by publically-traded companies for businesses and restaurants in your area, which can help you understand the stability of the marketplace and the traffic available to sustain your business. Business Insider also reported that restaurants and bars saw the largest year-over-year sales jump for any kind of business in January 2014 with an 11.3 percent increase.
Rewards Network captures data from over 10,000 restaurants and utilizes the same store sales methodology to track trends in geographic regions, review segment growth, and project success factors for our clients. We use this as an internal metric to measure the health of our clients’ business. This metric can be advantageous when you are looking to expand, change, or move your business forward with capital expenditure.
Consumer Price Index (CPI)
This monthly data reported by the Bureau of Labor Statistics is another indicator worth following both as a business and as an individual. The CPI is a measure that examines the weighted average prices of a “basket” of consumer goods and services like transportation, food, and medical care. This measurement is calculated by taking price changes for each item, weighing them, according to importance, and then averaging them. Changes in the CPI are viewed as a barometer of the cost of living.
CPI is an economic indicator and is widely used to measure inflation and effectiveness of government policy to serve as a guide in making economic decisions. Consumer spending in the “services” category, in which restaurants are included, bounced back from dampened growth in the first half of 2014, as spending on services increased by 2.5 percent in the third quarter, after posting gains of 1.3 percent and 0.9 percent in the first and second quarters, respectively.
Consumer Sentiment Index
Designed to measure consumer confidence, the University of Michigan Consumer Sentiment Index is a monthly report that indicates economic growth or decline based on consumer likelihood to increase or decrease spending. The report is compiled from at least 500 telephone interviews conducted of a continental United States sample asking 50 core questions. These questions seek to find how consumers view their own financial situation, the short-term general economy, and the long-term general economy. The preliminary results for February 2015 show that consumer optimism decreased by 4.6 percent in early February due to concerns over employment and wage growth, but a 14.7 percent increase over reported consumer sentiment in February 2014.
We encourage our program restaurants to also compare the national Consumer Sentiment Index with that of their own customers by using our Customer Trend Reports and Survey Analytics as restaurant indexes. Based on the results, restauranteurs can use these tools to define a tactical plan to improve or simply take a deep breath because the indexes indicate things are going well.
Keeping an eye on these indexes will provide you a good benchmark for restaurant industry and consumer health. At Rewards Network, we utilize these numbers and compare them to the performance of the restaurants on our program. This helps us evaluate our effectiveness, guide us to areas of the country where we have the opportunity to work with more restaurants, and help us in product development to provide the right services and tools for the restaurant industry. As a result of these insights into the industry, Rewards Network developed Premier Restaurant Funding to provide the level of merchant cash advances our clients are seeking.
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