Full-Service Restaurants NAICS 722511

Jun 14, 2025 - Restaurant Industry Downgraded

• Fitch Ratings lowered its 2025 outlook for the US restaurant sector to Deteriorating from Neutral in May, citing weakening consumer sentiment on discretionary spending and renewed inflationary pressures on the sector’s profitability. The credit rating agency predicts a low-single-digit decline in restaurant spending this year, versus previous expectations of flat to slightly positive. Fitch’s downgrade followed data company Technomic’s lowering of its 2025 projection, from about 5.1% sales growth to 3.4% to 4.6%, citing “uncertainty” for its adjustment. Consumer sentiment plunged to near record-lows in May as consumers braced for more inflationary impact amid President Trump’s trade war. According to Fitch, weakening consumer sentiment is expected to further reduce discretionary spending throughout 2025, as persistent inflation pressures disposable income, and tariffs exacerbate food inflation.
• The National Restaurant Association applauded the House’s passage in May of HR 1 (better known as President Trump’s “big, beautiful bill”), calling it a “major victory” for restaurant owners and employees. In a statement, the NRA cited the bill’s tax provisions, including the 199A qualified business income deduction, full expensing of capital investments, and the reinstatement of depreciation and amortization in calculating business interest expenses as vital for growth in an industry with pre-tax margins of just 3-5%. The budget proposal also includes the No Tax on Tips and No Tax on Overtime provisions. The NRA said the elimination of federal income taxes on tipped wages would benefit more than two million tipped servers and bartenders, while the overtime provisions would reward over 13 million hourly restaurant workers. Separately, Sen. Ted Cruz’s No Tax on Tips Act passed the Senate by unanimous vote in May.

• As demand for hard-to-get reservations has grown, the restaurant industry’s equivalent of ticket scalpers have been scooping up reservations and selling them online, the National Restaurant Association reports. Technology enables individuals and companies to scrape reservations from legitimate restaurant websites or partner reservation sites and then sell them on unauthorized online resale sites and social media, per the NRA. The practice is creating challenges for restaurants, like costly no-shows, staffing needs to manage the expectations of customers who purchase these third-party reservations, and potential damage to their brand. Amid rising frustration from diners and restaurant operators, state governments have begun working with the restaurant industry to create a regulatory framework to fix the system by returning control of reservations to restaurants. A recent survey of diners at full-service restaurants found nearly 2 in 5 were aware of third-party websites that charge for reservations and nearly 15% said they’d paid for a reservation.
• Driving on-premise traffic will be a higher priority for restaurant operators than capturing off-premise visits this year, according to the National Restaurant Association’s State of the Industry Report 2025. During the pandemic and its aftermath, restaurants, by necessity, focused on their take-out and delivery services. Now, according to the report, 81% of consumers say they would eat at full-service restaurants more frequently if they had more money to spend. Across segments, restaurants are prioritizing on-premise service with 90% of fine dining operators saying on-premise visits would be more important in 2025 than off-premise. Major brands – notably Starbucks and Subway – are focusing their efforts on improving the dine-in experience and make their eateries more appealing places to linger. QSR customers identified store cleanliness as one of the most important factors determining their visit, per the NRA survey.