Eateries face rising perils due to soaring expenses and consumers' reductions in spending habits
In the United States, the restaurant industry is facing a challenging environment, with executives at major chains like Jack in the Box and Dine Brands, owners of Applebee's and IHOP, noticing similar trends. Over the past decade, the costs of essential restaurant items such as beef, coffee, eggs, and cocoa have significantly increased.
The surge in beef costs can be attributed to increased demand and supply challenges, making it the most advertised protein in recent times. Coffee prices have become volatile due to weather impacts on crops and global demand, while egg prices have fluctuated, with a recent decline in cage-free egg prices. Cocoa prices have reached record highs, making chocolate products more expensive to produce.
These rising costs have put pressure on restaurant profit margins and operations. Many food retailers and manufacturers have managed to maintain or even increase their profit margins by raising prices and adjusting product sizes. However, restaurants face the challenge of balancing higher input costs while maintaining price competitiveness and customer satisfaction.
Some businesses are innovating with new food concepts, such as fast-good and organic/local sourcing, as a way to justify premium pricing or adapt to changing consumer preferences. Tariffs on imports have further increased costs for ingredients like flour and sweeteners, affecting some segments like doughnut stores, which may pass on these costs as higher retail prices.
The American middle class is feeling the heat of high inflation, not just poor people. Restaurants today don't have the flexibility to set prices that they had a few years ago due to an increasingly cautious consumer. Some consumers are becoming less willing to pay higher prices due to nervousness about the economy's future.
The labor situation in the restaurant industry is also complicated. Finding quality talent is a top issue for small businesses, and Trump's crackdown on immigration potentially reduces the number of undocumented workers in the industry. In 2025, the restaurant industry faced a new challenge due to rising costs.
Ike's Chili in Tulsa, Oklahoma, which has been in operation for 117 years, is one example of a restaurant facing these challenges. The slower pace of spending in restaurants comes as low-income consumers continue to feel the weight of the higher cost of living.
In the first half of 2025, US restaurants and bars saw one of the weakest six-month periods of sales growth in the past decade. Restaurants have very little wiggle room to deal with these cost increases before they begin to eat into their profits. Despite these difficulties, the industry continues to adapt and innovate in order to preserve profitability in a competitive and evolving market environment.
The unpredictable fluctuations in coffee prices, coupled with the escalating costs of cocoa, pose significant financial burdens for the restaurant industry, increasing the production costs of popular beverages like coffee and chocolate-based drinks. In an attempt to remain competitive, some sports franchises, known for serving food and beverages, might also feel the pinch and adjust their pricing structures accordingly.
