Recent state-of-the-industry webinars hosted by Restaurant 365 and the National Restaurant Association (NRA) have indicated that the restaurant industry is poised for significant developments in 2025, with critical factors influencing the sector, including cost of goods, labor, technology as well as sales and customer engagement. Our article outlines the main takeaways and insights, which can shed light on the outlook for restaurants in 2025.
Cost of Goods Sold (COGS)
Inflation continues to drive up food costs, a trend that is expected to persist through 2024 and into 2025. In response, many restaurant operators have increased menu prices to offset these rising expenses, with about one-third of surveyed restaurateurs actively tracking waste and seeking new vendor relationships to negotiate lower supply costs.
Commodity prices have also been impacted, with notable increases in December 2024 for eggs (43 percent), fresh vegetables (20 percent), pork (12 percent), butter (11 percent), and beef (11 percent). However, some staple ingredients, such as potatoes (-39 percent) and flour (-7 percent), saw decreases, providing some marginal relief to operators.
Labor Market Trends
The labor market has shifted from “The Great Resignation” to “The Great Stay,” with turnover rates continuing to decline. The Bureau of Labor Statistics indicates that the employee quit rate in the restaurant and accommodations sector has actually normalized compared to the elevated levels seen during the COVID-19 pandemic. However, labor costs continue to rise, as an overwhelming majority of restaurant operators are reporting increased wages in 2025. While recruiting employees was a significant challenge for operators in January 2023 and January 2024, economic concerns have taken precedence in January 2025, meaning recruitment takes a lower (while still crucial) priority.
Technology Investments
Restaurants are increasingly turning to technology to enhance efficiency and customer engagement, helping them gain a competitive advantage in an increasingly value-conscious market. Key investment areas include:
- Marketing and Loyalty Programs: More brands are introducing or refining customer loyalty programs. According to Restaurant 365, 36 percent of respondents plan to invest in marketing technology and loyalty programs.
- Operational Efficiency: A significant 61 percent of operators plan to implement technology to improve front-of-house productivity.
- Digital Ordering Growth: Over the past four years, digital ordering has seen a sharp increase. About 75 percent of delivery customers consider technology-driven ordering and payment options essential.
- Sales and Customer Experience – Consumer behavior is shifting in 2025, with customers dining out less frequently and opting for takeout and delivery over on-premise dining. Sustainability emerges as a top consumer concern, as many show preference for restaurants that are committed to environmental stewardship, including local sourcing, reduced waste and sustainable ingredients.
The NRA survey revealed that 95 percent of respondents believe customers are more value-conscious than before, actively seeking real-time restaurant promotions. Additionally, metro office occupancy levels remain low, with cities like New York (55 percent), Chicago (57 percent), Los Angeles (49 percent) and Philadelphia (44 percent) still experiencing reduced in-office presence, which impacts weekday lunch and dinner traffic.
Despite these challenges, operators remain optimistic, anticipating higher sales in the next six months, accompanied by increased staffing to support growth. Notably, the afternoon snack category has experienced the highest traffic growth over the past five years, with more consumers replacing traditional meals with snacks. Loyalty programs are also evolving to target key demographics, such as millennials with children, through personalized promotions and discounts.
Windham Brannon Can Help
As the economic environment in 2025 is expected to yield positive, yet moderate, growth, restaurants should seek to leverage tools and resources that help them meet consumer demands while maintaining profitability and growth. Windham Brannon’s Restaurant Practice can help you navigate the challenges and seize new opportunities in the year ahead – for more information, contact your Windham Brannon advisor today, or reach out to Maggie Wise, Restaurant Practice Leader.
