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Ah, TGI Fridays spent 2025 valiantly working its way out from the shadow of bankruptcy. The plan included trimming the debt and shutting unprofitable venues. Ray Blanchette, the CEO, has grand plans to propel the chain back to its former glory. He envisions expanding into new global markets using both traditional and innovative units.
Yet, the fickle economy might not be so accommodating. “Less uncertainty would be delightful,” he mentioned. “A dash more confidence from the middle class wouldn’t go amiss, either. After all, that’s truly where casual-dining thrives.”
“I maintain a degree of optimism, yet these days, watching the news is quite the ordeal.”
Executive and operator views
Over the past two years, restaurant operators have felt the economic strain. “It’s an ongoing challenge,” stated El Pollo Loco CEO Liz Williams at a recent conference. “The consumer faces immense pressure, evident in myriad forms.”
Yet, despite economic hurdles, they remain upbeat about their strategies. Williams is certain her chicken chain will weather whatever storms appear. “We fit neatly between quick service and fast casual, and we’re highly affordable,” she assured.
Several operators believe the tide is turning in their favor. Last year was a difficult one, but hope springs eternal. Steve Kislow, CEO of Firebirds, expressed: “There’s a tad more certainty now. Consumers seem to be feeling more at ease with the current administration and the fact that tariffs didn’t quite bring the sky down.”
Fogo de Chao’s CEO Barry McGowan is confident that the economic indicators signal better days ahead. He noted a decrease in gas prices and rising wages.
Yet, the previous year promised similar improvements and fell short. Hence, some remain skeptical. Benny Tadele, president of NCR Voyix, noted, “The talent shortage remains severe. Rising wages, despite decreasing food inflation costs, make this a difficult landscape for restaurants.”
Predictions: Slow growth
The expectation for 2025 was to surpass the bankruptcy-laden days of 2024, especially with the election heralding stability. Alas, reality diverged from expectation.
California’s treacherous weather dampened sales, whilst tariff talks rattled consumers. A brief spell of calm was soon disrupted by an arduous government shutdown.
Even renowned establishments like Chipotle reported dwindling sales. Wall Street valuations tumbled, with restaurant stocks sinking 16% despite the market rising the same percentage. Technomic reported a 3% increase in restaurant sales, but inflation-adjusted, they actually fell 0.7%.
Technomic forecasts a slight improvement, predicting a 4.3% sales growth. However, after adjusting for inflation, that figure barely touches 1%. Technomic’s Managing Principal Joe Pawlak mentioned, “It’s a return to real growth, marginal though it may be.”
Fitch Ratings anticipates “low single digits” spending growth at restaurants this year, with traffic remaining stable. Fitch restaurant analyst Luis Rivas pointed out, “Inflation has fostered heightened price sensitivity among consumers.”
A bifurcated economy
The consensus suggests a 2.1% growth for the U.S. economy this year, though Goldman Sachs economists hold a rosier view. They’ve adjusted the likelihood of a recession to a scant 20%.
One major factor is the Big Beautiful Bill’s tax law alterations, promising heftier returns this spring. This relief follows a year where tariffs led to consumer cutbacks, potentially boosting restaurant visits as pockets fill with extra cash.
However, the benefits skew towards those with higher incomes who have consistently buoyed the economy. Arjun Chakravarti of Cogknition Analytics pointed out, “A high-income vacation offsets spending cuts by numerous lower-income households.”
Lower-income individuals might spend their tax refunds, whilst higher-earners may squirrel it away or invest. Meanwhile, lower-income earners face cuts to Medicaid and SNAP and losses due to end of ACA subsidies. Rising home insurance premiums drive rental costs up, further squeezing finances.
Chakravarti noted, “Disparities remain, as cuts to Medicaid, SNAP, and ACA disproportionately affect those at the lower end.”
This all suggests another year of uneven spending across income levels. Some restaurants may flourish, while others languish, depending largely on their core clientele.
Technomic’s Pawlak summed it up: “Winners and losers exist across different segments and markets within the industry.”
The perfect storm of inflation and heavy price competition has prompted chains to introduce new value offers. A price war over 18 months is challenging many, particularly franchise systems.
Noah Glass, CEO and founder of Olo, expects this trend to continue. “The deep discounts reset the value equation, unsustainable for franchisees,” he lamented.
Jonathan Maze, Editor-in-Chief of Restaurant Business, is an experienced journalist specializing in restaurant finance, mergers, and acquisitions, currently focusing on quick-service restaurants. View All Articles by This Author
