Restaurant and foodservice sales are expected to reach $1.55 trillion in 2026, though restaurant operators expect traffic challenges to continue as consumers keep a tight grip on their wallets, according to the National Restaurant Association’s annual State of the Industry Report released Thursday.
That’s up from the record $1.4 trillion achieved last year, which was boosted by widespread menu price increases. Adjusting for inflation, consumer spending at restaurants is projected to rise at a relatively modest rate of 1.3% this year, according to the report. Higher-income consumers are expected to drive much of that growth, and value is expected to be a key factor in driving dining decisions.
Last year was shaped by uncertainty and a bifurcated economy, forcing operators to get creative in their attempts to drive traffic amid slower spending by lower- and middle-income guests.
But there were wins in 2025, according to the report, including “pro-growth” tax reforms, and the No Tax on Tip and No Tax on Overtime deductions, which will help workers keep more of their earnings, putting an estimated $6.4 billion back in their pockets. For tax year 2025, the changes will free up $5.1 billion for operator investment, wrote Michelle Korsmo, the association’s president and CEO.
And the industry is expected to add more than 100,000 jobs this year, reaching a projected 15.8 million jobs.
“Restaurants remain an economic powerhouse that, even when faced with soft consumer spending and sustained margin pressures, drives job growth and fosters entrepreneurship,” said Korsmo in a statement. “The industry’s resilience is driven by its people, its adaptability, and its ability to evolve alongside consumers, making continued investment in workforce, innovation, and smart policy solutions essential to long-term growth.”
The K-shaped economy that thwarted some operators last year remains in play, and will continue to impact restaurants, depending on their customer mix, the report said.
More than 6 in 10 operators said their traffic declined last year, compared with the prior year, and only 15% saw an increase. Consumers also said they were using restaurants less often, for both dine-in and off-premise, and only 2 in 10 said they were dining out more through either channel.
But demand is there, the report indicates. More than 7 in 10 consumers said they would eat out more often if they had the money. Still, 81% said access to daily specials, discounts or value promotions made a difference when choosing where (and how) to eat, and a solid majority said their membership in loyalty and rewards programs is important to them.
For operators, the cost of doing business remains a constant pressure, with 60% of operators saying business conditions deteriorated in 2025. Only 15% said conditions were better last year over the prior year.
More than 9 in 10 said food, labor, insurance and overall inflation remain significant challenges. And more than 8 in 10 also cited strain from credit card and debit card processing fees, as well as energy and utility costs.
Average food costs are now more than 35% above pre-pandemic levels, citing the U.S. Bureau of Labor Statistics’ Producer Price Index for all foods. Last year, 82% of operators reported higher average food costs, and more than two-thirds (68%) said tariffs drove higher food or beverage costs last year.
Even after some tariffs were lifted in November, restaurants had already absorbed the increased expenses, the report said.
Not surprisingly, about 90% of full-service operators and 85% of limited-service restaurants increased menu prices. Other strategies to protect margins included shopping around for new suppliers, menu trimming, adjusting portion sizes and cutting other areas of the operation.
More than half of operators (55%) said they would reduce headcount if business conditions continued to soften. But more than 75% of operators said they are likely to add staff in 2026, and employment across the industry is expected to grow at a moderate rate. The industry is expected to add an average of 150,000 jobs annually through 2036, the report said, reaching a total of 17.3 million.
In 2025, staffing levels were flat to lower for many operators, but only 22% said they lacked enough staff to meet customer demand, which is down from 32% in 2024 and well below the post-pandemic 78% in 2021.
About one-quarter of operators said hiring was easier last year, compared with 2024, while about one-third said it was more difficult, with recruiting remaining a day-to-day challenge and almost half of operators (47%) saying they have job openings that are difficult to fill.
Still, the biggest challenge ahead this year: the economy.
The (cautious) optimism is seen mostly in the full-service sector, with 32% of operators saying they expect sales to be higher this year than last. Another 21% expect declines, while 47% expect business to be similar.
Among limited-service operators, however, only 29% said they expect to see sales increase, while 27% project a decline, and 44% expect much of the same.
Consumers are giving mixed signals, the report said.
Higher-income diners are spending freely, while lower- and middle-income consumers are becoming more selective and dining out less often, expressing a more downbeat view of both their local and the national economies compared with a year ago.
Surveys indicate that 85% of consumers are holding back on spending because they are either very concerned about personal finances (38%) or taking a wait-and-see approach (85%).
“Success for operators this year will hinge on their ability to get the math right in a still-challenging economic environment,” said Dr. Chad Moutray, the association’s chief economist. “After a year when 60% of operators reported softer customer traffic, there is cautious optimism for improvement. At the same time, operators remain laser-focused on controlling costs, while delivering value and providing satisfying menu innovation that resonates with consumers.”
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