Restaurant traffic plunged in February, and then consumer confidence took a hit amid news of tariffs and their potential to lead to price increases.
Restaurant operators, however, are more confident. According to Technomic, 78% of operators said in a survey that they’ve already made changes to protect themselves from the potential of tariffs. And 74% said they were confident they could manage the situation.
Operator sentiment, meanwhile, is “at a very healthy spot,” Technomic Senior Principal Rich Shank said at the Restaurant Leadership Conference. Both Technomic and the conference are sister companies of Restaurant Business.
“The question I had, why are they so confident, given the uncertainty consumers are feeling in particular,” Shank said. A lot of that, he said, is because of the work operators have done to prepare for tariffs. “Another reason,” Shank added, “we’ve been here before. We’ve had a lot of economic uncertainty in our careers, and we’ve shown we can navigate through this.”
In addition, Shank said, restaurants tend to perform better than other industries during an economic downturn. Historically, restaurants maintain growth during recessions. There’s no reason to think this won’t happen again, if the economy does head that way.
Still, a lot of data right now is troubling, notably February traffic. Technomic said that traffic fell 4.9% in February, the worst result in a single month since the pandemic.
Consumer confidence has fallen since then. The Conference Board in March said that its consumer confidence index fell to its lowest level since February of 2021. Another measure of consumer confidence, from the University of Michigan, plunged this month to its lowest level since the 1950s.
Restaurant menu price inflation has normalized, to 2.7% this year. But now there are signs that industry costs are increasing. The producer price index for foods was 5.9% in February, one of the highest numbers since 2022 when inflation was at its peak.
“There’s a lot of early warning signs that we’re going to have to navigate through,” Shank said. “We’re going to really need to buckle down and be very hard on what we’re going to have to do over the next few months.”
The traffic challenges, coupled with tariff proposals, led Technomic to lower its projection for sales in 2025 across the industry.
Companies looking to win in a market like this need to lean into who they are and invest behind those areas. According to Technomic, restaurant chains that scored above average on surveys about innovativeness and brand identity generated 7.5% sales growth on average last year. Those who were just average on those scores averaged 1.9% growth.
Those who were below average on those metrics averaged a 3% decline.
“Now is really the time to invest in your brand,” Shank said. “What that looks like is going to be different from company to company. But it’s very important that you think about what your strategy looks like, so you can maintain momentum in choppy waters.”
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