The State of U.S. Restaurants 2025: Growth, Risk, and the Real Cost of Doing Business

a day ago

4 min read

The U.S. restaurant industry continues to demonstrate remarkable resilience in 2025, bouncing back with projected revenues of $1.5 trillion—driven primarily by increased menu pricing rather than guest volume. However, behind this topline growth lies a more complex and challenging financial landscape, especially for independent and mid-sized operators.

✅ High-Level Achievements

Revenue Growth: Industry sales are up 4.1% year-over-year, hitting all-time highs in total volume.
Menu Price Power: Operators successfully raised menu prices by ~31% since 2020, helping offset inflationary pressures.
Labor Market Recovery: The industry added over 200,000 jobs in 2025, reaching 15.9 million employed workers—signaling ongoing workforce stabilization.
Consumer Spend Stability: Despite fewer transactions, increased check averages have helped maintain revenue momentum.

❌ High-Level Misses

Eroding Profit Margins: Average pre-tax net profits remain razor-thin at ~5%, with many operators unable to adjust fast enough to escalating costs.
Surging COGS: Cost of goods sold now exceeds 40% of revenue—a sharp increase from historical norms, driven by protein, produce, and supply inflation.
Tariff Pressures: New 2025 import tariffs could cost the industry $15B+ annually, affecting everything from coffee to packaging.
Persistent Labor Challenges: 70% of operators still report being understaffed, and turnover remains 75–80%, threatening operational continuity.

📊 Industry Financial Overview

Sales & Revenue Trends

In 2025, U.S. restaurant and foodservice sales are projected to reach $1.5 trillion, reflecting about 4.1–4.8 % real growth over 2024
Monthly sales have recently hovered around $98–99 billion; June 2025 saw $98.7 billion, up 0.6 % from May
Much of the growth stems from higher menu check averages rather than increased foot traffic, which has actually declined slightly

Profitability & COGS

Restaurants typically operate with a slim net pre‑tax profit margin of ~5%
COGS (cost of goods sold) ratios have risen to 40%+ of revenue—a significant increase over historic norms around 30%
- With flat sales and no pricing adjustments, cost increases could swing a profit into a −24% loss scenario on the same revenue base

Menu Pricing & Inflation

Menu prices rose ~31% between Feb 2020 and Apr 2025, largely to offset inflation in food costs
Food costs (PPI for all foods) were up 36% from Feb 2020 by June 2025; year‑over‑year food inflation was ~4.7% in June, down from early‑2024 peaks near 9.7%

Protein, Produce & Tariffs

Producer prices in June 2025 vs year-ago:
- Poultry: +9.6%, Beef/veal: +9.3%, Pork: +6.0%, Fresh fruit: +11.1%, coffee +31.8%, eggs +19.5%
New tariffs effective August 1, 2025, on imports from Mexico, EU, Brazil could cost U.S. restaurants up to $15.16 billion/year, impacting imports of coffee, beef, wine, packaging, etc.
Earlier high tariffs on Chinese goods (e.g., spices, containers) have pushed prices up and threatened authentic supply chains especially for niche restaurants

Labor Costs & Hiring

Labor costs account for approximately 25–40% of sales, varying by segment:
- Quick service ~29.4%, fast casual ~28.9%, casual ~33.2%, upscale casual ~30.4%
In 2022, full‑service restaurants: median 36.5% of sales; limited‑service: 34.0%
Labor costs rose ~31% over four years, food costs ~29% over same period. Combined, they comprise about 66% of restaurant sales lra.org.
Employment is projected to hit 15.9 million jobs by end‑2025, adding 200K net new jobs in 2025, although full‑service still trails pre‑pandemic levels by ~233K positions
70% of operators struggle to fill positions; turnover remains high at 75–80% annually

📈 Charts & KPIs

Metric	Value/Trend
Total Sales (2025)	$1.5 trillion (+4.1%)
Menu Price Change	+31% (Feb 2020 → Apr 2025)
COGS % of Revenue	~40% (up from ~30%)
Profit Margin (pre-tax)	~5%
Food Cost Inflation (YoY)	~4.7% (June 2025)
Protein & Produce Inflation	Poultry +9.6%, Beef +9.3%, Pork +6%, Fruit +11.1%, Eggs +19.5%, Coffee +31.8%
Labor Cost %	25–40% (segment-dependent)
Employment Growth (2025)	+200K jobs → 15.9M jobs total
Staffing & Turnover	70% short-staffed, turnover 75–80% annually
Tariff risk	$15B+ cost/year potential from new tariffs

🚀 Vanguard F&B Thynk Tank: Your Corporate F&B Team On Demand

Vanguard F&B Thynk Tank — Your Corporate F&B Team On Demand When You Need It Without the Annual Overhead

How We Support Small & Mid‑Size Hotel & Restaurant Groups

Menu engineering & pricing strategy: Align menu prices with real‑world cost inflation and help maintain profit margins (~5%) even as food and labor costs rise.
COGS and supplier optimization: Monitor protein/produce price trends, provide guidance on purchasing to offset new tariff effects, diversify sourcing, and manage margins.
Labor productivity & workforce planning: Benchmark labor cost metrics by segment, assist with staffing models, cross-training approaches, and retention strategies to reduce turnover.
Operational analytics: Track KPIs like COGS %, labor %, RPI trends, and help clients make data-driven decisions during volatile market conditions.
Ad hoc executive-level expertise: Provide financial modelling, competitive intelligence, and forecasting without the fixed expense of a full-time corporate F&B team.

Competitive Edge Gained

Smart pricing strategy keeps your margins healthy as inflation squeezes input costs.
Tariff-sensitive sourcing gives smaller operators a buffer against sudden import cost shocks.
Labor cost efficiency, with optimized staffing and retention, helps control the largest expense line.
Analytical sophistication typically only available to large chains—but now accessible to smaller businesses—levels the playing field.

📌 Final Thoughts

From 2020 to mid‑2025, menu prices rose ~31%, keeping pace with food cost inflation which rose ~29–36% in key categories.
COGS now eats ~40% of revenue, labor another ~30–35%, leaving only ~5% margin in a tight environment.
Tariffs threaten to increase supply costs further—up to $15B industry‑wide if new import duties take effect.
Labor shortages persist, with high turnover (75–80%) further exacerbating cost and inefficiency.

Vanguard F&B Thynk Tank helps fill critical gaps—menu strategy, sourcing, labor optimization, analytics—empowering small‑ and mid‑size operators to maintain competitive margins and operational resilience without the fixed costs of a corporate team.

Let me know if you’d like a tailored sample model or case study for a hotel group or regional restaurant chain!