Restaurants NAICS 722511, 722513, 722514

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 cheered 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. The bill awaits a vote in the Senate. President Trump, who campaigned on “no tax on tips” is expected to sign it.

• 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.
• The dramatic drop in consumer confidence is expected to cause diners to pull back on spending, presenting restaurants with ongoing challenges amid a deteriorating economic landscape, Nation’s Restaurant News reports. In April, consumer confidence fell off a cliff according to the University of Michigan, whose consumer confidence index fell 11% for the month and is down 30% over the past five months as US consumers have grown increasingly pessimistic about the prospects for unemployment and worried about more inflation. Restaurants rely on discretionary spending. When consumers feel stressed they skip dining out and eat at home instead. The U of M survey shows that Trump’s tariff pronouncements, along with the severe reaction of the stock and bond markets, are taking their toll on US consumers.