The check came, the bills were due, and for a huge slice of the restaurant industry, the math just did not work. Nearly half of U.S. restaurants failed to turn a profit last year, leaving owners and managers scrambling to cover rising costs while simply keeping the lights on and the doors open.
The National Restaurant Association’s State of the Restaurant Industry report finds that 42% of operators said their restaurants were not profitable in 2025, even as the group projects only modest real sales growth of about 1.3% in 2026. Rising food and labor costs, higher insurance and energy bills, and transaction fees have chewed into already slim margins. Across price points, operators are cutting hours, tightening menus and rethinking staffing in an effort to keep cash flow positive.
According to the National Restaurant Association, total restaurant and foodservice sales are expected to reach roughly $1.55 trillion in 2026, while real, inflation-adjusted sales growth is forecast at about 1.3%. More than nine in ten operators cited higher food, labor, insurance, energy and card-processing costs as major headwinds last year. The report points to workforce development and technology investments as potential ways to rebuild efficiency and margins, though actually making those investments is another battle entirely for many operators.
“It’s been a pretty challenging year for restaurants,” Dr. Chad Moutray, the association’s chief economist, told WTOP. He said significant increases in food and labor costs have squeezed already thin margins, forcing hard calls on everything from pricing to staffing levels.
Where Diners Fit In
Customers are still going out and ordering in, just with a sharper eye on where and how often they spend. Card-transaction analysis cited by S&P Global Market Intelligence put average monthly household spending at restaurants and bars at about $371 in 2025, roughly 30% higher than in 2019. At the same time, visits have softened in some categories. That combination signals that much of the industry’s modest revenue growth is coming from higher menu prices rather than more diners in seats.
How Operators Are Responding
To cope, operators are rolling out a familiar but painful playbook: raising prices, redesigning menus, trimming operating hours and pushing harder into off-premises channels and loyalty programs. Coverage of the National Restaurant Association findings by Restaurant Dive notes that larger chains with scale are continuing to expand, while independent restaurants face tougher choices, including closing or consolidating. For many small operators, the trade-off is stark: push more cost onto guests and risk losing traffic, or absorb it and watch already thin profits disappear.
The squeeze is visible on the ground in some city markets. WTOP highlighted Washington-area owners who say federal staffing cycles and policy uncertainty have layered additional pressure on top of rising costs. Local restaurant groups warn that 2026 could be another rough year for eateries. For now, many owners told reporters they are prioritizing cash flow and flexible scheduling over any big expansion plans.
The National Restaurant Association has cautioned that persistent margin pressure could lead to more closures unless operators find ways to cut costs or boost perceived value. In a press release, the association suggested workforce development and automation as potential tools, according to PR Newswire, but also acknowledged that those fixes often require capital many independents simply do not have. Expect more promotions, loyalty deals and targeted value messaging as restaurants try to keep customers coming in while navigating some of the tightest margins in the business world.
