What kind of challenges do restaurants face in 2025?

It may be an understatement to say that 2024 was a tough year for America’s restaurants. TGI Friday’s declared bankruptcy. Before that, Red Lobster filed Chapter 11. Denny’s, while not declaring bankruptcy, said it would close 150 restaurants to shore up its finances.

Alfred Goldberg, chief brand strategist at Absolute Marketing Solutions, said the last few years have been a unique time in the industry.

“The recent wave of restaurant chain bankruptcies, including TGI Fridays, reflects a combination of economic pressures and evolving consumer preferences rather than a single cause,” Goldberg told ConsumerAffairs. “While the economy has stabilized somewhat since the pandemic, restaurant chains are still grappling with several unique challenges.”

The James Beard Foundation, in collaboration with Deloitte, is trying to get a clearer picture of how restaurants – especially independent restaurants – will fare this year. It has unveiled its "2025 Independent Restaurant Industry Report," highlighting the critical juncture at which independent restaurants find themselves. 

The report provides a comprehensive analysis of the industry's current state and its outlook for 2025, focusing on the challenges of rising costs, labor shortages, and evolving consumer behaviors.

Clare Reichenbach, CEO of the James Beard Foundation, said the report found independent restaurants have resilience, tenacity and ingenuity in the face of mounting pressures," She reiterated JBF's commitment to supporting these businesses, which are integral to local economies and communities.

Main challenges

The report focused on these challenges and resulting strategies: 

1. Overcoming barriers to increase guest spend: Rising food, labor, and operational costs have tightened margins, prompting 55% of respondents to increase menu prices. However, establishments that raised prices by over 15% reported poorer performance, indicating a limit to price adjustments.

2. Intentional engagement to deepen guest connection:  With dwindling foot traffic and fewer regular patrons, restaurants are employing sophisticated engagement strategies. Social media has become a primary tool, with 75% of respondents using it for marketing.

3. New ways to attract and retain a winning team: Staffing remains a significant challenge, with increased wages and enhanced benefits becoming necessary to attract talent. Innovative retention strategies, such as cross-training and flexible scheduling, are gaining traction.

4. Increased urgency to evolve business models: Rising general costs have prompted over 85% of restaurants to implement non-traditional business models, such as alternative revenue streams and new staffing structures.

The report's findings are based on in-person interviews with chefs and a nationwide survey of over 400 restaurant owners and operators, representing a broad cross-section of the industry across 47 states.