State of the Restaurant Industry 2025

For some consumers, sitting down for burgers at a casual dining restaurant now feels like a better proposition than grabbing a fast-food burger — particularly after portion size, dining experience and perceptions of quality are factored in.

“Because of inflation and labor costs, the prices at QSRs have come up to the point where casual dining is now viewed as a value, because consumers are getting more quality food than they would with a QSR menu item,” says James Short, senior relationship manager in Bank of America Global Commercial Banking’s Restaurant Group.

That dynamic has fueled a resurgence of casual dining brands like Applebee’s, Chili’s and Texas Roadhouse, even as innovative menu concepts command a premium at newer concepts like Cava and Dave’s Hot Chicken. Chili’s illustrated the growth potential of combining social media buzz, a focus on improving ambience and advertising that emphasized value.² Overall, fast-food restaurants raised prices 4% this year compared with the previous year, while casual dining restaurants increased prices 2% to 3%, leveraging their unit economics and ability to upsell to provide an improved value offering to consumers.³

The narrowing price gap is putting pressure on QSRs to drive traffic by introducing new menu items and limited time offerings. “When you lose price elasticity, it’s an absolutely necessity to roll out value offerings, whether that means highlighting a new product or a promotion,” says O’Hara. McDonald’s, Taco Bell, Wendy’s and Subway are among the QSR brands aggressively leaning into limited time offerings, limited edition items and customizable meal combinations to appeal to value-conscious customers.

The rising wages and rampant turnover of the marketplace in the past few years has eased somewhat over the first half of 2025. According to Bureau of Labor Statistics data as of Sept. 3, unfilled job openings and separations have levelled out year-over-year. Job openings remain at 2018-2019 levels, and turnover has stabilized at the lowest point in nearly a decade. However, some restaurant operators are still struggling to find and retain workers, and QSR labor costs have continued to creep up, rising 6.3% in 2024, in part due to minimum wage increases.⁴ In July, Alaska, Oregon and Washington, D.C., joined the 21 states that increased minimum wages earlier in the year, suggesting that this trend is likely to continue.

Despite the higher labor costs, QSR operators were able to get a better handle on the price of food compared with previous years. Although food prices were 4.9% higher in July compared with a year earlier, the rate of change has slowed from the 9.7% rise between July 2024 and 2023. What’s more, prices even declined in March and April, offering a brief respite from the upward trend. While beef, chicken and egg prices were higher in July compared with June, a range of products such as milk, cheese and flour were less expensive. The impact of tariffs on food prices was not taken into account because the food price index is based on prices paid to domestic producers.⁵

Uncertain consumer sentiment about the economy may also be playing an important role in the outlook for restaurants. The University of Michigan’s Consumer Sentiment Index dropped to 58.2 in August data, a nearly 6% decline compared with July following two months of rising sentiment. The Index also noted a rise in consumers’ year-ahead inflation expectations⁶ — rising inflation expectations may signal a tightening of spending habits.⁷

Bank of America credit and debit card data showed that while households made fewer visits to QSRs, they increased the number of transactions at full-service, casual dining spots in June compared with 2024. Bank of America’s July Consumer Checkpoint also reported that spending growth on restaurants surpassed that at grocery stores over the past few months.⁸ In August 2025, the National Restaurant Association’s Restaurant Industry tracking survey showed that operators had positive same-store sales in each of the previous four months.⁹

O’Hara, however, cautions that spending varies widely by cohort. “In lower-income segments of the population and in economically stressed regions, dining out frequency is falling,” she says. “We’re seeing inflation and a lot of uncertainty around what is going to happen with supply chains and tariffs and how that will affect the industry going forward.”

Culture, innovation and a focus on promotion can be powerful differentiators.The success of Chili’s and Dave’s Hot Chicken suggests that brand culture and service philosophy can win over ever-more-discerning consumers in a crowded marketplace. These strategies are proving effective for QSRs as well, with brands like Chick-fil-A and Dutch Bros building loyalty by emphasizing hospitality, and brands like Taco Bell luring traffic through menu innovations and an emphasis on digital marketing initiatives. “One thing that we’ve seen that’s been consistent and particularly true in recent years is that the strong are getting stronger,” says Christopher Holtz, senior relationship manager in Bank of America Global Commercial Banking’s Restaurant Group. “Value, quality and execution are more important than ever, and those companies that outperform are doing well because they provide excellence in all three.

An emphasis on hospitality both builds customer loyalty and creates a positive workplace culture, helping restaurants attract and retain high-performing employees, further strengthening the brand experience. “Restaurants are a people business; your assets walk out the door every day and the way you interact with people makes a tremendous difference,” says Holtz. “People like to be acknowledged, to be treated well — and that becomes a virtuous cycle. The stores attract more traffic and make more money, so they can hire and retain better quality employees, which enables them to fuel that culture and feed sales, which then makes it possible to pay more.”