6 Key Restaurant Industry Insights and What They Mean for Your Business

2025 First Quarter Report

What we are seeing in restaurants

Restaurant operators are navigating mixed signals as performance metrics show signs of optimism and caution. On one hand, key metrics such as same-store sales and traffic are growing at a faster rate. However, persistent challenges like high turnover rates, rising costs, and pressures on consumer spending continue to strain margins. Operators need to remain vigilant in monitoring KPIs to adjust in this environment.

Here are six key takeaways to keep in mind as we kick off the new year:

1. Metrics Show Mixed Progress

Performance expectations from the National Restaurant Association show growth, with the overall index increasing to 101.2. Business conditions, same-store sales, and traffic metrics are all growing at a faster pace. Yet, labor and capital expenditures are still facing headwinds.

What this means for you: The growth in key performance metrics provides a glimmer of optimism for the industry. Operators should capitalize on this momentum by focusing on enhancing customer experiences and refining operational efficiencies. At the same time, the contraction in labor and capital expenditures underscores the need to invest wisely in workforce management and technology to enhance productivity.

2. Same Store Sales Increasing on Transaction Growth

 Transaction growth has surpassed dollar volume growth, but average ticket size is declining. This trend signals that while more customers are dining out, they’re spending less per visit, underscoring the growing importance of value-driven decisions.

What this means for you: Restaurants should examine pricing strategies and menu offerings to balance traffic growth with profitability. Promotional campaigns or value-driven menu options could help sustain transaction volumes while addressing consumer sensitivity to price increases.

3. Diverging Year-Over-Year Sales Trends: Growth in Quick Service, Declines in Casual Dining

Quick service and fast casual segments are stabilizing after a period of significant post-pandemic volatility, but casual dining is experiencing ongoing year-over-year declines. These diverging trends highlight shifting consumer preferences, with quick service and fast casual maintaining steady demand, while casual dining faces greater headwinds.

What this means for you: Operators in quick service and fast casual segments should capitalize on this stability by reinforcing customer loyalty through digital ordering enhancements and tailored promotions. Casual dining operators, however, must address declining sales by focusing on creating differentiated experiences, adjusting pricing strategies, and re-engaging customers through targeted marketing initiatives. Adapting to these trends is critical to sustain growth and mitigate challenges.

4. Cost of Dining Out Continues to Outpace the Cost of Eating In

Since 2019, the cost of food away from home has risen 30%, compared to a 27.6% increase in the cost of food at home. This widening gap could influence consumer decisions and impact restaurant traffic.

What this means for you: To maintain margins, operators need to carefully manage menu pricing while emphasizing the value of dining out. Highlighting unique experiences, convenience, or premium ingredients can help justify price differences and keep customers engaged.

5. Employee Turnover Has Come Down but Remains High

Non-management turnover rates remain elevated, with limited-service restaurants experiencing a 129% annual turnover rate, while full-service restaurants are at 94%. While these figures have slightly improved from recent peaks, they continue to challenge operators.

What this means for you: Addressing high turnover rates should remain a top priority. Investment in employee engagement, management training programs, and competitive benefits can help reduce turnover and improve operational efficiency. Fostering a strong workplace culture can be key to reducing employee churn.

6. Protein Costs Remain Elevated

Protein costs continue to pressure the bottom line, with poultry, meat, and seafood seeing inflation rates of 28.7%, 28.2%, and 19.4%, respectively, compared to pre-pandemic levels. These sustained price increases make it increasingly difficult for operators to maintain profitability without adjusting pricing or operational strategies.

What this means for you: Focus on rethinking your menu strategy by introducing more cost-effective protein options, including varying portion sizes while maintaining customer satisfaction. Explore alternative suppliers or renegotiate contracts to reduce input costs and communicate any menu adjustments transparently to retain customer trust. Additionally, consider diversifying your offerings to include high-margin, plant-based, or seasonal dishes to balance rising protein costs.

Disclosures

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