Bruce Grindy is the National Restaurant Association's senior economist Check out Bruce's past articles.

Hurricanes and gas prices helped dampen restaurant operators' economic optimism in September.

Due in large part to the effect of two hurricanes and soaring gas prices, the economic optimism of restaurant operators was dampened in September. Although restaurant industry sales remained above their 2004 levels, the Association’s Restaurant Industry Tracking Survey revealed a softening in restaurant operators’ outlook for the economy in the months ahead.

In the first eight months of 2005, restaurant operators were relatively optimistic about the direction of the economy. During the spring and summer months, roughly four out of 10 operators thought the economy would be stronger in six months, while about one out of 10 operators expected economic conditions to worsen in six months. The remaining one-half of operators thought economic conditions would remain about the same during the six-month horizon.

However, restaurant operators’ outlook changed dramatically in September, when 31 percent of restaurant operators said they expect business conditions to worsen in six months, compared to just 25 percent of operators who expect business conditions to be stronger in six months. This represented the first net-negative performance for this indicator in the three-year history of the Tracking Survey.

Restaurant Operators’ Outlook for General Business Conditions in Six Months


Source: National Restaurant Association, Monthly Restaurant Industry Tracking Survey

Fueling much of the economic uncertainty were the record-setting gas prices in September. According to the Energy Information Administration, the average price for a gallon of unleaded gasoline hit a record $3.07 on September 5 -- up a whopping $1.22 from the same period in 2004. Although prices eased off somewhat in the weeks since the record high -- down to $2.73 on October 17 -- they still remain well above the previous year’s levels.

To be sure, restaurant operators are concerned about the impact that high gas and energy prices will have on both their operational expenses and customers. This was illustrated in the Association’s September 2005 Tracking Survey, where 22 percent of restaurant operators said gas and energy prices are the number-one challenge facing their business -- up from just four percent of operators who reported similarly two months ago.

In addition, gas and energy prices ranked well above the more traditional challenges reported by restaurant operators, including ‘building and maintaining sales volume’ (16 percent), ‘food costs’ (8 percent), ‘competition’ (7 percent), and ‘insurance costs’ (6 percent). In fact, gas and energy prices finished only slightly behind ‘recruiting-and-retaining employees’, which was identified as the top challenge by 24 percent of restaurant operators in the September survey.

Percent of Restaurant Operators Who Said ‘Gas and Energy Prices’ Is the Top Challenge Currently Facing their Business


Source: National Restaurant Association, Monthly Restaurant Industry Tracking Survey

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