Full-Service Restaurants NAICS 722511

Apr 14, 2026 - Teetotaling Diners

• Restaurants profits are drying up as alcohol consumption drops, removing a key high-margin revenue stream, The New York Times reports. Traditionally, alcohol has generated a large share of profits at full-service restaurants, but many operators now report a shift toward food-heavy sales, with some eateries experiencing sharp revenue declines or closures. Alcohol sales are down across all restaurant segments, driven by health concerns, generational changes, economic pressure, and the rise of GLP-1 drugs, according to NYT. Younger consumers, especially Gen Z, are drinking less, while older consumers are cutting back. As a result, nearly a third (31%) of operators report severe declines in alcohol sales. Teetotaling diners are creating significant challenges because alcohol is more profitable than food, which has higher labor and ingredient costs. While some restaurants are adding nonalcoholic options or premium, experience-driven drinks, these often do not fully replace lost margins.
• About 9% of US full‑service restaurants are at risk of closing this year, with the highest concentrations of vulnerable units in the South and Midwest, according to Black Box Intelligence (BBI). The data-and-insight firm classified restaurants as “at risk” if in 2025 they lost more than 30% of their highest annual sales level recorded since 2019. A further 3% of units lost over 50% of sales, making their closure almost certain. With cumulative inflation up one‑third since 2019, it’s nearly impossible for underperforming FSRs to recover once sales fall that far, says BBI. To survive, proactive portfolio pruning is essential as closing bottom‑tier units can strengthen the system by reallocating capital and traffic to stronger locations. Operators should benchmark performance against local competitors to distinguish execution issues from market saturation. Nearby restaurants can capture displaced demand, but only if they offer strong value, consistent execution, and stable staffing.

• 2026 will be a year of modest growth but continued margin pressure for restaurants, with total restaurant and foodservice sales projected to reach $1.55 trillion and jobs added to total more than 100,000, according to the National Restaurant Association’s 2026 State of the Restaurant Industry report published in February. Cost pressures will remain a top challenge with more than 9 in 10 operators citing persistent food, labor, insurance, energy, and swipe fees as major constraints on margins. Consumer demand is forecast to be solid but constrained, especially among lower‑ and middle‑income households, with Gen Z and millennials continuing to drive off‑premises growth, although with overall limited spending power. Hiring will remain difficult, especially recruiting experienced managers and chefs. To manage labor gaps and control costs, technology adoption, including AI ordering, digital payments, loyalty, automation, and analytics, will be essential.
• Producer prices for all foods declined 3.9% in February compared to a year ago, after jumping 13.1% in the previous February-versus-February annual comparison, according to the latest US Bureau of Labor Statistics data. Employment by full-service restaurants rose 1.7% year over year in January, while the average industry wage increased 5.2% over the same period to $21.50 per hour, easing a bit from its record high in December, BLS data show. Tariffs on imported ingredients and other inputs, along with food and labor cost inflation, are driving up menu prices and squeezing restaurant margins.