The restaurant and bar industry tacked on roughly 29,800 jobs in March after back-to-back soft months (decline of 28,300 in February and 27,000 in January). Those opening periods of 2025 marked the slowest stretch for restaurants in more than four years, per the National Restaurant Association. But after March’s rebound, the workforce settled about 0.4 percent higher than February 2020 levels, ahead of the COVID dip.
So from a pure numbers perspective, the pool isn’t all that different from the pandemic inflection point a few years ago. Yet much has changed within the lines. 7shifts, in its 2025 Restaurant Labor Cost & Profitability survey, collected responses from north of 500 restaurant professionals across segments. One clear difference emerged from past reports: food inflation ousted labor as the top concern. This could, in all likelihood, become only more pressing as tariff issues loom. Kura Sushi CEO Jimmy Uba said on the brand’s earnings call he was shocked by the magnitude and he imagined certain mom-and-pop sushi restaurants felt similarly, if not more so. Chipotle has skirted the impact in its calls thus far and other brands are holding fort. William Blair, in a recent note, labeled Dutch Bros as a chain with “minimal tariff exposure” since coffee represents less than 10 percent of its commodity basket. The overall point being, there is not a lot of concrete realities in the forecast, only questions—something restaurants are rather familiar with.
According to The New York Times, the National Restaurant Association has brought in supply chain experts to advise restaurateurs on handling disruptions in the flow of imported seafood and vegetables. “Restaurants are the least profitable businesses on any Main Street in America,” Sean Kennedy, the Association’s executive vice president for public affairs, told the Times. “With razor-thin profit margins, we are not equipped to deal with dramatic changes in food prices. Long-term tariffs leave us with no margin for error in holding menu prices as low as possible.”
While the industry awaits the next swing, pressure with food inflation has mounted for months, especially as the ceiling on price continues to push down. Inflation in March was 2.4 percent on an annual rate, which marked a six-month low as prices fell 0.1 percent. It was the first month-over-month decline since May 2020. But on the food side, away from home prices climbed 0.4 percent (in line with February) and are up 3.8 percent over last year. Full service hiked 0.6 percent (4.1 percent higher, year-over-year) and quick service 0.2 percent (3.4 percent above prior-year). Food at home (grocers) rose 0.5 percent and is 2.4 percent loftier than last year. Eggs alone are 60.4 percent more expensive.
In 7shifts’ survey, 52 percent of respondents ranked food inflation as their primary concern and 86 percent included it in their top three. Labor costs, which had been the top trigger in past yearly reports, was the second most-pressing note. It was ranked first by 31 percent of operators and in the top three for 83 percent.
Top challenges affecting restaurant profitability
- Food inflation: 52 percent
- Labor costs: 31 percent
- Rent/utilities: 9.6 percent
- Staff turnover: 5.2 percent
Other findings
7shifts’ research showed the varied cost of replacing restaurant staff. Front-of-house averaged $1,056 per position, while back-of-house was $1,491—a 41 percent premium.
That difference, 7shifts said, reflected the specialized training required in kitchen roles. Most concerning, it added, was the cost of replacing management, which clocked $2,611 per position—147 percent more than front of house. So every manager retained equals replacing two or three servers or hosts.
Given a typical full-serve has 15–20 front-of-house employees, eight to 10 in the back, and three to five managers, if restaurants account for 50 percent front-of-house turnover, a restaurant replaces seven to 10 servers and hosts every year. Or $7,500–$10,560 in front-of-house replacement costs—a number that doesn’t consider the service concerns of constantly training new employees to standard.
Only about a third (36 percent) of restauranters in 7shfits’ survey said they hit their labor cost targets. Forty-four percent spent more than planned.
Some patterns surfaced in that discussion: About 40 percent of operators kept their labor costs between 20–25 percent of revenue. Another 26 percent fell between 26–30 percent. This shows, 7shifts said, the industry’s normal range rests between 20–30 percent. Only 15 percent or so of restaurants manage to keep labor costs under 20 percent. The same percentage struggle with costs over 30 percent.
As restaurant consultant Jim Taylor explained: “If you only hit your target 50 percent of the time, your target’s not right. So often we see restaurants that set their targets based on one of two things. Either their labor target is a byproduct of what they want their net profit to be and they’ve just worked backwards, or they’ve looked at it historically and said, ‘well, we always did this, so we should stay the same.’ The restaurants that go through the full process required to accurately set a responsible labor cost target hit their targets 75 or 80 percent of the time.”
Restaurant labor cost distribution
- Less than 20 percent: 15 percent
- 20–25 percent: 40 percent
- 26–30 percent: 26 percent
- 31–35 percent: 11 percent
- 36–40 percent: 4 percent
Point of sale/software analytics was the primary method used for tracking labor costs (76 percent) among polled restaurants. It was often combined with historical data comparisons. As labor costs increase, the report said, restaurants are less likely to meet their margins.
Most restaurants (68 percent) said they were now training staff to handle multiple jobs instead of just firing people. Other popular approaches to managing labor cost were changing the number of staff hours they schedule (45 percent) and reducing headcount (39 percent).
“I would rather pay a person $20 an hour that knows three stations and is a good salesperson than pay someone $15 an hour that knows one station and doesn’t sell,” Taylor added.
Restaurants that spend a lot on labor were more likely to cut staff. Seven out of 10 operators with labor costs over 40 percent noted they let go employees. It dropped to 14 percent for restaurants with average labor costs. Eateries with lower labor costs, 7shifts continued, tend to use a mix of different approaches instead of relying on one strategy (like cutting employees).
Labor cost management strategies
- Cross-training staff: 68 percent
- Adjusting labor targets/hours: 45 percent
- Process improvements: 41 percent
- Reducing staff headcount: 39 percent
- Changing service model: 20 percent
- Reducing hours of operation: 20 percent
- Implementing technology: 13 percent
- Management pay cuts: 13 percent
Restaurants, high costs factored in, said they were still looking to grow sales rather than cut back. Raising menu prices was the most common move (63 percent said they were doing so). But they were also training staff to suggest more expensive items (45 percent), finding new ways to make money (37 percent), simplifying menus (34 percent) or featuring items that generate more profit (20 percent).
Taylor shared this example: “If they put a $150 seafood tower on the menu, it’s easier to charge $60 for that steak instead of 55, so they can increase the price on everything else. And then once in a while, if somebody orders the $150 seafood tower, it just helps to increase average check in general. So it’s kind of a win both ways.”
Profitability actions beyond labor management
- Raised menu prices: 63 percent
- Introduced upselling initiatives: 45 percent
- Added new revenue streams: 37 percent
- Simplified menus: 34 percent
- Launched higher-margin items: 27.3 percent
- Streamlined kitchen workflows: 26.7 percent
- Reduced portion sizes: 24.7 percent
“When it comes to controlling costs, our data has confirmed that we see that most successful restaurants are choosing to invest in their people rather than just cutbacks,” 7shifts CEO Jordan Boesch said. “They are building sustainable business models for the future. Savvy operators have realized that cross-training team members and leveraging technology reduces labor costs and enhances the overall guest experience, a win-win across the board.”
On the tech conversation, back-office options were preferred by operators. Automated payroll (52 percent), staff scheduling (49 percent), and inventory management (51 percent) led the way. Larger restaurants adopted faster—71 percent of spots with 51–100 employees said they were using scheduling software versus 53 percent of smaller venues.
Customer-facing tech was mixed. QR ordering was at 33 percent adoption alongside 29 percent of operators saying they were not interested. Self-service kiosks faced the most pushback (47 percent uninterested), with just 19 percent adoption. And while only 9 percent said they were using AI answering systems, 44 percent were planning or considering the possibility—a potential shift in the making, 7shifts said. With kiosks, though, this is naturally a divergent conversation by service type. In Qu’s recent State of Digital Report, it found 80 percent adoption in quick service.
Restaurant technology adoption landscape
(already implemented)
Back-office
- Automated payroll: 51.5 percent
- Inventory management software: 51 percent
- Staff scheduling software: 49 percent
Customer-facing tech
- QR code ordering: 32.5 percent
- Order and pay at table devices: 27 percent
- Self-service kiosks: 18.5 percent
Emerging tech
- AI-powered phone systems: 9 percent
- Kitchen automation/robotics: 9 percent
- Automated inventory ordering: 23 percent
Just under half (49 percent) of operators also expressed optimism about technology’s role in reducing labor costs. Twenty-one percent were very optimistic and 28 percent somewhat. Only 16 percent were pessimistic and 34 percent neutral. This positive outlook, 7shifts said, comes despite implementation challenge and concerns about preserving the human element of hospitality.
Restaurants resist customer-facing tech because they fear the departure of “personal touch.”
“But let’s face it,” 7shifts said in the report, “tech is here. As competition heats up and solutions get better, restaurants will keep adopting new tools, both for customers and behind the scenes.”
