The U.S. restaurant industry is facing a tough landscape in 2025 as rising costs collide with more cautious consumer spending. While plenty of Americans still enjoy dining out, the pressure on restaurateurs is mounting with food and labor expenses climbing sharply, creating a challenging outlook for the year ahead.
Consumers continue to prioritize restaurants as part of their social and dining habits, and the industry is still expected to reach $1.5 trillion in sales in 2025. Despite this substantial market, growth has slowed down compared with previous years. After a robust, but somewhat uneven start to the year, consumer spending is forecast to moderate to 3.7% growth in 2025, down from 5.7% in 2024, largely due to economic uncertainties and inflationary pressures. Lower and middle-income consumers are expected to pull back more noticeably on discretionary spending, which includes dining out, affecting foot traffic in eateries across the country.
One of the biggest challenges is the relentless rise in key operational costs. According to the National Restaurant Association, food prices are under significant pressure, with 91% of restaurant operators reporting food cost increases this year. Menu prices have responded accordingly, with full-service restaurants raising prices by approximately 4.1% year-over-year as of March 2025. Limited-service restaurants have also increased their prices by about 3.4% in the same period. These increases are an effort to offset soaring wholesale costs, which remain at levels much higher than pre-pandemic averages, with the Producer Price Index for all foods standing 36% above February 2020 levels.
Labor costs are another critical concern. Results from the Restaurant365 “Midyear State of the Restaurant Industry” survey suggest that approximately 89% of restaurateurs have experienced rising payroll expenses, reflecting mandated minimum wage hikes in several states and competitive market wages to attract and retain staff. Labor costs have reportedly risen roughly 10% per month since April 2021 in some places. Many operators are responding by improving benefits, offering performance bonuses, and investing in training, but the high cost and struggle to keep sufficient staffing levels often force restaurants to operate below full capacity or reduce operating hours.
These cost pressures come at a time when consumer behavior is shifting. While 90% of adults express enjoyment in dining out, and experience is deemed more important than price by a majority of customers, many consumers are trading down to more affordable options or cutting back on visits as they tighten their budgets. This is reflected in the 2024 data showing nearly 40% of U.S. restaurants experienced sales declines, with quick-service restaurants even seeing declines in customer visits. Operators are trying to balance raising prices with maintaining value to keep consumer loyalty, with nearly half of restaurant operators planning to add new discounts or promotional deals this year.
The industry is also evolving operationally. Some restaurants are experimenting with streamlined menus, mobile ordering, and self-service kiosks to reduce labor needs and improve efficiency. Despite the challenges, the sector is still expected to add roughly 200,000 jobs in 2025, underscoring its role as a major employer.
Looking ahead to the remainder of 2025, the restaurant industry outlook calls for cautious optimism. Success will depend heavily on how well businesses can navigate rising costs while delivering the unique experiences that keep customers coming back. Innovations in service, value, and retaining skilled workers are key factors that could make the difference at a time when consumers are increasingly selective about where and how they spend their dining dollars.
While the U.S. restaurant industry remains a vital and vibrant sector, it faces an uphill battle in 2025. Soaring food and labor costs combined with a more price-conscious consumer present a blueprint for survival where adaptability and a sharp focus on customer experience are imperative.
