Businesses face struggle as expenses heighten and customers tighten purse strings, threatening the future of restaurants
In the bustling world of dining, 2025 has proven to be a year of significant change. The escalating costs of food and labour have taken a toll on the profitability of restaurants, stretching operational expenses and squeezing already thin margins. To weather this storm, eateries are implementing strategies such as menu price hikes, workforce benefits enhancements, supply chain diversification, and technology adoption.
Food costs have been a major concern, with approximately 78–82% of restaurants raising their prices in 2024 and anticipating further increases in 2025. This is due to ongoing supply chain disruptions and ingredient price volatility. Food prices for food-away-from-home are projected to rise by around 3.5%, higher than the inflation rate for food-at-home[1][2][5].
Labour expenses have also been on the rise, with many restaurateurs forecasting a 1–14% increase in 2025. This surge is driven by minimum wage hikes in multiple states and workers’ expectations for benefits, resulting in high payroll burdens and staffing challenges. Labour costs have been rising roughly 10% monthly since 2021[1][3].
These pressures on profitability have forced restaurants to adopt various measures. Raising menu prices modestly (4.1% at full-service restaurants year-over-year as of early 2025) is one such strategy, aimed at protecting margins despite the risk of deterring customers[5]. To address staffing challenges, restaurants are expanding employee benefits, providing training, and offering performance bonuses[1][3].
Technology is also playing a crucial role in the industry's adaptation. Restaurants are using scheduling software and optimising workforce management to better control labour costs and improve operational efficiency[1][3]. Additionally, they are leveraging technology for delivery and online ordering, adapting to customer demand for convenience. However, this comes with the balancing act of managing commission costs from third-party delivery services, which can cut into margins[3].
Diversifying suppliers and sourcing locally is another strategy restaurants are employing to mitigate supply chain disruptions, reduce transportation costs, and gain more stable ingredient availability[2].
Despite the slim profit margins and ongoing pressures, the industry is navigating these challenges through a mix of price management, workforce investment, supply diversification, and technological innovation to sustain operations in 2025[1][2][3][5]. Executives at McDonald’s, Jack in the Box, and Dine Brands have noticed similar trends.
The struggle for quality talent has been a top issue for small businesses since 2021, forcing restaurants to consider offering higher wages or dealing with staffing shortages. In some regions, restaurants have reported depressed volumes as consumers trade down or opt to eat at home. However, in New York City, restaurant visits have continued to pick up.
Surging beef prices have been a significant concern for many restaurateurs, with Len Wade, a managing partner at a restaurant, expressing his worries. Linda Ford, a restaurant owner in Tulsa, is concerned that middle-class families might decide eating out isn't worth the money anymore. Restaurants across the country are grappling with rising costs of key items like coffee, eggs, cocoa, and tomatoes.
The American middle class is feeling the heat of high inflation, and some consumers are becoming less willing to pay higher prices due to economic uncertainty. Sales growth in 2025 has been weaker than during the Covid-19 pandemic. Trump’s crackdown on immigration in 2024 could further affect the labour situation in the restaurant industry.
Low-income consumers continue to feel the weight of the higher cost of living, leading to them skipping meals or trading down. US restaurants and bars experienced one of the weakest six-month periods of sales growth in the past decade in the first half of 2025. The past two years have made it harder to find a job, and Americans remain on edge due to Trump’s volatile trade war. Traffic at restaurants has been down for a couple of years due to inflation-stressed lower-income consumers, and now the middle-income consumers are also under pressure.
The restaurant industry has faced challenges such as the Great Depression, the Covid-19 pandemic, and inflation. Despite these hurdles, resilient establishments like Ike’s Chili in Tulsa, Oklahoma, which has been in operation for 117 years, continue to stand strong. In July 2022, wholesale hamburger meat prices were up nearly 21% compared to the same month 10 years ago, according to federal data. Food costs overall were up about 21% compared to the same month four years earlier in June 2022, according to the Producer Price Index.
Amidst these challenges, restaurants today don't have the flexibility to set prices that they had a few years ago due to an increasingly cautious consumer. The industry continues to adapt and innovate, striving to provide a dining experience that is both affordable and enjoyable for customers.
- In an attempt to offset increasing financial burdens, eateries are deliberately raising their menu prices while offering enhanced workforce benefits to retain staff.
- The food and drink sector, particularly restaurants, have been battling with soaring costs of food, labour, and raw materials, impacting both business profitability and consumer purchasing decisions.
