The restaurant industry is no stranger to having a crisis on its plate. That’s the nature of day-to-day, in-the-trenches hospitality and navigating macro battles for the country’s second-largest employer. But 2024 had a unique tilt that felt like the apex of years of post-COVID reactions. Pent-up demand initially led to a strong run, but it was a stretch driven top line more by price than traffic. And, while customers understood the challenges and paid up for a return to experience, it was an equation that held only so long as menu prices soared amid inflation. Lingering economic uncertainty and a discerning customer led to further guest count declines and restaurants, despite costs remaining high and rising (like labor), had to question what the ceiling was, and find other ways to guard margins and still drive profit.
In plainer terms, restaurants grappled with hiking food and labor and the need to satisfy customers who had grown weary of price hikes.
That “delicate balancing act,” Restaurant365 said, needed to be struck while also staying afloat and delivering great experiences to a base of customers paying and expecting more.
The company tapped data from more than 6,200 restaurant and café locations ahead of the calendar turn. Here’s a look at some of the findings and what it says about the state of the restaurant industry going into 2025.
Starting with food and labor
Prices continue to climb, but it’s not the only pressure at hand. Although this could be a fluid topic (new administration), some states have added new rules to complicate matters. Many, for instance, now require all restaurants to use cage-free eggs and minimum wage increases in certain areas are hyper-tightening margins. Some markets require quick-service restaurants to have security during operating hours.
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Speaking of minimum wage, though, 21 states will raise the floor on New Year’s Day. Two others, and the District of Columbia, have increases slated for later in 2025. The federal minimum wage has been $7.25 an hour since July 24, 2009.
With voters in Missouri and Alaska approving ballot measures, 15 states plus D.C. have a minimum wage of $15 or higher now or are phasing in scheduled increases to $15 or higher, according to Business For a Fair Minimum Wage: Alaska, California, Connecticut, Delaware, Florida, Hawaii, Illinois, Maryland, Massachusetts, Missouri, Nebraska, New Jersey, New York, Rhode Island and Washington State. Washington has the highest state minimum wage at $16.66 as of January 1, 2025.
Here’s a look at the scheduled increases:
- Alaska increases to $11.91 on January 1, 2025, and then, in accordance with Ballot Measure 1, it increases again to $13 on July 1, 2025. It increases to $14 on July 1, 2026, $15 on July 1, 2027, followed by annual indexing resuming January 1, 2028.
- Delaware increases to $15 on January 1, 2025.
- Illinois increases to $15 on January 1, 2025.
- Michigan increases to $10.56 on January 1, 2025, and then to $12.48 on February 21, 2025 in accordance with a 2024 ruling by the Michigan Supreme Court. The minimum wage is scheduled to increase to $13.29 on February 21, 2026, $14.16 in 2027 and $14.97 in 2028, followed by annual indexing.
- Missouri, with the passage of Proposition A, increases to $13.75 on January 1, 2025, $15 in 2026, and then is indexed annually.
- Nebraska increases to $13.50 in 2025 and $15 in 2026 and then is indexed annually.
- New York increases on January 1, 2025, to $16.50 in New York City, Westchester County and Long Island and $15.50 in the rest of the state, followed by 50-cent increases in 2026 to $17 and $16 respectively. Indexing begins in 2027.
- Rhode Island increases to $15 on January 11, 2025.
States with indexing where annual increases (based on the Consumer Price Index unless indicated otherwise) take effect January 11, 2025, include:
- Alaska increases to $11.91 on January 11, 2025. See above for rate increases beginning July 2025 in accordance with Proposition A
- Arizona increases to $14.70
- California increases to $16.50
- Colorado increases to $14.81
- Connecticut increases to $16.35 (CT is indexed to the Employment Cost Index)
- Maine increases to $14.65
- Minnesota increases to $11.13
- Montana increases to $10.55
- New Jersey increases to $15.49
- Ohio increases to $10.70
- South Dakota increases to $11.50
- Vermont increases to $14.01
- Virginia increases to $12.41
- Washington state increases to $16.66
State increases later in 2025:
Oregon and the District of Columbia will have cost of living increases on July 1, 2025. As noted above, Alaska has a second 2025 increase on July 1.
Florida’s minimum wage will increase to $14 on September 30, 2025, and then to $15 in 2026; in 2027, Florida will resume annual indexing.
In Restaurant365’s survey, operators said they were doing everything they could to hold the line on price while maintaining quality during labor surges. Some were reshaping menus to highlight more profitable items; others trying to get cozier with suppliers to negotiate deals; and, of course, tech pulsed as a solution now and into the future.
Labor cost increases in 2024
- 51 percent: It increased 1–5 percent
- 41 percent: 6–14 percent increase (up 9 percent since the release of Restaurant365’s midyear report)
- 8 percent: An increase of more than 15 percent
In all, 88 percent of respondents said labor costs hiked this past year.
A similar story with food costs
- 51 percent: An increase of 1–5 percent
- 37 percent: 6–14 percent jump, a lift from 30 percent earlier in the year.
- 10 percent: More than 15 percent increase
So, 78 percent of all respondents reported a lift in food costs.
Looking ahead, 79 percent said they expect labor costs to continue climbing
- 73 percent: Project an increase of 1–5 percent
- 24 percent: Believe 6–14 percent
- 3 percent: Expect 15 percent plus rise
With food costs, 82 percent see baskets rising in 2025
- 73 percent: 1–5 percent leap
- 23 percent: 6–15 percent increase
- 4 percent: 15 percent plus.
Restaurant365 suggested operators deploy a few strategies to deal with labor hikes. Firstly, they can use data-driven forecasting and scheduling tools to adjust staffing based on sales expectations, thus further controlling costs. The company also stressed cross-training employees to promote flexibility within stores.
Using tech to automate scheduling and payroll can save time and reduce errors and let managers focus on what’s vital (whatever that might be to each operation). Additionally, Restaurant365 said offering performance-based bonuses could encourage staff and leaders to work harder and stay motivated. “Lastly, fostering a positive work culture and providing opportunities for growth helps keep employees happy and loyal, reducing turnover and the runaway costs of recruiting, hiring, and training new people,” the company said.
When asked how they were responding to rising food costs, 61 percent of operators said they increased their menu prices; 16 percent focused on more frequent inventory and waste tracking; and 16 percent implemented changes with their suppliers/vendors.
Restaurant365 expects more creativity on the supply side to flow in 2025. Given prices for eggs and dairy are on the rise, operators might want to consider how to use these ingredients to maximize value. One idea—extend breakfast hours or introduce a weekend brunch menu. “… this can help ensure food doesn’t go to waste while taking advantage of popular dishes,” the company said.
“Using ingredients across multiple menu items can also cut down on waste and keep costs in check,” Restaurant365 added. “Offering rotating specials or seasonal dishes not only helps manage food costs but also keeps the menu exciting for guests. By being a little more strategic with menu planning, restaurants can keep things fresh, minimize waste, and still deliver a great experience.”
In one of the most well-worn stories in foodservice, staffing challenges topped operators’ 2024 list of concerns. But rising food costs was right there alongside, with 27 percent of surveyed restaurants naming it as their main struggle.
To tackle both, Restaurant365 suggested focusing on offering competitive pay and creating a positive and growth-enabled work culture. “On the food cost side, adjusting the menu to focus on high-margin items and building stronger relationships with suppliers can help secure better pricing,” the company said.
Key challenges in 2024
- Recruiting and retaining staff: 31.86 percent
- Food costs: 27.44 percent
- Sales volume: 20.5 percent
- Labor costs: 16.09 percent
- Disconnected technology: 1.58 percent
- State mandates: 1.58 percent
- Supply chain: 0.95 percent
Finding and keeping skilled staff is a concern that’s risen by 4 percent since Restaurant365’s last survey. So while jobs are recalibrating in the wake of COVID, getting the right people placed, trained, and sticking around is a challenge that’s as pressing as it’s ever been.
2025 expected challenges
- Recruiting and retaining staff: 28.42 percent
- Food costs: 22.81 percent
- Sales volume: 24.56 percent
- Labor costs: 17.54 percent
- Disconnected technology: 3.51 percent
- State mandates: 1.58 percent
- Supply chain: 0.70 percent
Beyond challenges and into priorities, familiar themes emerged as well.
Operational priorities for 2025
- Increasing sales: 55 percent
- Reducing costs: 16.88 percent
- Enhancing guest experience: 16.56 percent
- Improving employee satisfaction: 5.63 percent
- Expanding locations: 3.75 percent
Restaurant365’s survey showed 46 percent of respondents said they were holding off opening new locations in 2025 to focus on these points. However, among those looking to scale, 23 percent said they hoped to open a single location; 24 percent two to five; and 8 percent are preparing to debut six or more.
Whether growth is on the docket or not, investments are turning toward a few options to boost sales and balance the setbacks
- Marketing tech, promos, loyalty: 36.36 percent
- Staff enhancements: 27.27 percent
- Tec spend: POS, BoH, analytics, etc.: 16.93 percent
- Automation (kiosks, robotics, etc.): 6.58 percent
Restaurant owners are thinking outside the channel box. Takeout and catering are surging as additional streams, with operators fine-turning menus to travel and taking on larger group orders to maximize kitchen output. Restaurant365 also saw a movement in the survey toward branded merchandise, things like T-shirts, mugs, sauces, and more to court loyal customers.
New channel investments
- Catering: 27.44 percent
- Special events or promotions: 22.08 percent
- Takeout/delivery:11.36 percent
- Branded merchandise: 6.31 percent
- Pantry/grocery sales: 2.52 percent
Tony Smith, CEO and cofounder of Restaurant365, expects “cautious growth” for restaurants in 2025 with these hurdles and efforts weighing in.
“While we’re expecting overall market sales growth of about 1.0 percent, we only expect restaurant spending on costs to go up by 0.5 percent compared to 0.8 percent last year—a sign that the industry is bracing for potential fluctuations,” Smith said via email. “However, inflation hasn’t deterred consumers from dining out as much as we all expected. Eighty-one of Americans still dine out at least once a month, and half say they plan to maintain or even increase their dining-out frequency. To offset the rising costs, they’re simply becoming more strategic by opting for takeout, value meals, and happy hour deals.”
“The 2024 election results may introduce a different approach around inflation and interest rates, and consumer behavior will likely react to a shift in these economic changes,” he added.
Building on the growth topic from earlier, expansion won’t be uniform, Smith said, as fast-casual and quick-service restaurants carry the bulk, “benefitting from their agility with digital ordering and loyalty programs that drive repeat business.”
“We’re also seeing a 155 percent surge in pop-up concepts as restaurateurs explore new, temporary ideas with limited menus to gauge diners’ interest and experiment with unique flavors or formats,” Smith said.
Meanwhile, fine dining will likely remain in recovery mode in 2025 after taking the brunt of the pandemic’s crater (dine-in closures for food not meant to travel or be priced to-go without the service element). Smith said, while fine dining has experienced renewed interest as consumers seek in-person, premium experiences, further inflation could dampen sales if operators and diners stare down tighter budgets.
The segment approaching potentially the steepest hill next year? Casual sit-down dining, Smith said. “To remain competitive, they’ll need to rethink their value propositions—there’s opportunity in offering unique dining experiences or focusing on health-conscious menus that go beyond ‘comfort food,” he said. “They may also get more creative on labor costs and how they staff.”
The other side of the spectrum will be counter service. “It’s becoming clear that digital convenience paired with quality and consistency is the winning formula, and these restaurants have spent years successfully leveraging technology and data to drive loyalty and repeat business,” Smith said.
These unbalanced dynamics will lead to more closures among chains not poised to leverage off-premises business. Brands unable to answer the call for digital integration, Smith continued, and operational efficiency will be at the highest risk, especially given the rising costs of labor, ingredients, and rent.
“But for the majority who continue to evolve their business, there’s a real opportunity to engage the large portion of the population that still values dining out. Red Lobster, which successfully restructured and exited bankruptcy under a new CEO with a fresh strategy, is a case in point,” he said. “The path forward for legacy sit-down chains requires bold, agile leadership and a willingness to modernize and reduce overhead.”
More on labor, and other things
Restaurant365 asked operators to weigh in on employee turnover rates.
- 0–10 percent: 27.94 percent
- 11–25 percent: 38.73 percent
- 26–50 percent: 18.73 percent
- 51–75 percent: 9.21 percent
- 76 percent-plus: 5.40 percent
“It’s essential to invest in staff development to reduce turnover, especially for managers,” the company said. “Offering clear paths for growth and continuous training can make a big difference. Onboarding should be more than just getting through the basics—it’s about creating a welcoming environment where new hires feel like they belong.”
How can operators build loyalty? Restaurant365 said to add perks like PTO, flexible schedules, and performance bonuses. A supportive, rewarding atmosphere also lends itself to retention.
How operators are reducing turnover
- Increased pay: 32.59 percent
- Better training programs: 29.39 percent
- Improved work-life balance: 27.48 percent
- Enhanced benefits: 10.54 percent
And here’s how they plan to improve numbers in 2025
- Better training programs: 40.32 percent
- Improved work-life balance: 24.19 percent
- Increased pay: 20.32 percent
- Enhanced benefits: 15.16 percent
And diving deeper into training, here’s how operators are responding
- Shoulder-to-shoulder training: 45.14 percent
- Digital/mobile training: 21 percent
- Employee handbook: 16.30 percent
- Certified trainers: 12.23 percent
- None: 5.33 percent
The surveyed asked respondents how frequently their teams receive training each week. Results varied. A majority (58 percent) said staff typically get one to two hours per week; 17 percent said three to four; while 15 percent offered five or more hours every week. On the flip side, 11 percent said staff don’t receive any formal training at all.
“As restaurants look for ways to build stronger, more adaptable teams, cross training has become a key strategy to both enhance operational flexibility and provide career growth opportunities for staff. By teaching employees to take on multiple roles, restaurants not only fill gaps more efficiently but also offer a clearer path to advancement,” the company said.
What percentage of staff were cross trained for different roles?
- 0–10 percent: 16.61 percent
- 11–25 percent: 24.76 percent
- 26–50 percent: 32.92 percent
- 51–75 percent: 16.61 percent
- 76 percent-plus: 9.09 percent
Sustainability was on the mind of operators in the data as well. Food waste and fine-tuning orders can save money, while initiatives like switching to eco-friendly packaging and sourcing locally taps into consumer preferences and promotes loyalty among those who seek such changes.
How they’re doing it
- Tracking food waste: 30.86 percent
- Additional training to reduce food waste: 19.92 percent
- Using eco-friendly packaging: 10.55 percent
- Sourcing locally: 9.38 percent
All these efforts will be vital to reach a consumer base cutting back and picking their moment—people are still dining out, but there are simply fewer occasions to go around.
Restaurant365 asked operators how preference and behaviors shifted in 2024
- Less frequent dine-in visits: 35.14 percent
- More takeout/delivery: 33.87 percent
- Higher demand for healthier/special menu items: 23.32 percent
- Higher demand for eco-friendly options: 3.19 percent
“Today’s diners are more aware than ever of what goes into their meals—prompting restaurants to reassess the ingredients they use, from seed oils to refined sugars, and opt for fresher, more nutritious choices,” the company said.
Here’s what restaurants anticipate will change in 2025
- More takeout/delivery: 33.76 percent
- Higher demand for healthier/special menu items: 27.65 percent
- Less frequent dine-in visits: 24.12 percent
- Higher demand for eco-friendly options: 7.07 percent
With delivery, the survey polled around how much third-party systems contribute to revenue. The results
- 0–10 percent: 48.75 percent
- 11–20 percent: 28.75 percent
- 21–30 percent: 16.25 percent
- 31–40 percent: 4.06 percent
- 40 percent-plus: 2.19 percent
Operators said they were focusing on better packaging, setting clear expectations for customers, and encourage diners to order direct in the coming year. Even with challenges, it’s clear the reach and expectation of 3PD has led operators to seek ways to make it work.
Smith sees subscription-based models gaining traction in 2025, too, namely among fast-casual chains. “It’s a great way to lock in predictable monthly revenue and attract loyal customers who value convenience and personalization,” he said. “Look at Panera Bread’s Unlimited Sip Club, which offers free beverages for a flat monthly fee—it has significantly boosted customer engagement, with over half of its members being new to the MyPanera loyalty program.”
“Virtual kitchens and delivery-only concepts are also evolving from side projects to core business strategies, especially for QSRs and fast-casual brands,” Smith added. “These models allow brands to test new offerings with lower overhead, appealing to a growing market of digital-first diners. In fact, the global cloud kitchen market, valued at $45 billion in 2023, is projected to reach $155 billion by 2031.”
