SouthState: Restaurant Operators Face Rising Labor and Food Costs in 2025
- 89% of SouthState restaurant operators face increased labor costs, significantly impacting profitability and operational efficiency.
- 91% report rising food costs, with over half experiencing increases of 1% to 5%, complicating recovery efforts.
- Operators are prioritizing innovative marketing strategies to adapt and maintain competitiveness amid rising costs and changing consumer preferences.
### Rising Challenges for Restaurant Operators in 2025
Recent findings from Restaurant365's biannual industry survey shed light on the pressing challenges facing restaurant operators as they navigate the evolving economic landscape in 2025. With insights drawn from over 5,000 restaurant leaders, the survey reveals that a staggering 89% of operators are grappling with increased labor costs, a sharp rise from 79% the previous year. Most operators report experiencing labor cost increases ranging between 1% to 5%, which underscores the ongoing struggle to maintain profitability amid rising operational expenses.
Compounding these issues, a significant 91% of respondents report increasing food costs, surpassing the earlier prediction of 82% at the start of the year. More than half of the operators are facing similar increases of 1% to 5% in their food expenses, which, along with labor costs, remains a primary concern. Despite the financial strain, only 56% of restaurants intend to raise menu prices, down from 61% earlier in the year, indicating a hesitance to pass costs onto consumers. Moreover, 65% of operators affected by labor and recruitment challenges are operating below full capacity, further complicating their recovery efforts.
In response to these economic hurdles, restaurant operators are prioritizing enhanced marketing and sales strategies, with over 40% planning to increase their promotional budgets, particularly for off-premise dining, which has gained traction following the pandemic. CEO Tony Smith emphasizes that despite these challenges, the industry manages to achieve record sales and employment levels through innovation. As operators navigate the complexities of labor and food costs, sales volume remains their top focus, with 52% identifying it as their primary concern moving forward. This proactive approach reflects a commitment to resilience in the face of adversity, highlighting the industry's adaptability in a changing economic environment.
### Insights on Operational Adaptation
The survey results underscore the critical intersection of rising operational costs and the need for strategic adaptation among restaurant operators. With labor and food costs surging, the emphasis on innovative marketing strategies and operational efficiencies is paramount. As consumer preferences shift, particularly towards off-premise dining, restaurants are compelled to adapt quickly to sustain their competitive edge.
Additionally, the anticipated impact of tariffs on food costs looms large, with 78% of respondents expecting global trade barriers to exacerbate their financial challenges. The responses from restaurant leaders reflect a broader industry trend toward agility and innovation, as operators seek to balance cost management with the need to attract and retain customers in a volatile market.
