The restaurant sector has never been a place for the faint of heart. Still, today’s unpredictability and volatility have exacerbated age-old food industry challenges. Operators are now looking at what could be their most challenging year since the height of the COVID-19 pandemic.
Digging Into Today’s Top Restaurant Industry Challenges
What’s keeping operators up at night? Quite a lot. Today, any responsible and forward-looking restaurant owner is keeping their eye on the headlines to see how a changing country (and a changing world) could affect them. A month and a half into 2025, they’re already hard at work addressing the challenges we’ll explore below.
#1. Inflation and Rising Costs
It’s grown more expensive for American shoppers to put food on their tables or afford a trip out to their favorite restaurant. Across the U.S. and Canada, more than 50% of survey respondents say they’re eating out less often than they used to.
Inflation-fueled spikes in the cost of food are hurting restaurant operators more directly too. Many are contending with razor-thin margins and others have had to close their doors altogether. For these unlucky operators, surviving the dark days of pandemic closures has not meant finding a light at the end of the tunnel.
Over the last four years, the National Restaurant Association reports that the average restaurateur has seen their food costs go up by 29% while labor costs have increased 31%. Rising expenses have inspired increases to menu prices. Operators who ask customers to pay more run the risk of alienating customers who are already feeling the sting of inflation, though.
One ingredient in particular has dominated recent headlines about rising food costs and the effects of inflation on the restaurant sector: eggs. Dan Durkin, a Back of House consultant and restaurant owner, describes the current situation, saying, “Two years ago, 15 dozen eggs was 12 bucks. Now it’s $170.”
Egg prices pose an existential crisis for all the bakeries, diners, and brunch spots that can’t go without this staple food. Unfortunately, Durkin doubts that prices will ever return to their pandemic-era lows. “Probably they’re going to stay high,” he predicts.
Restaurateurs are left with a difficult choice — do they raise prices and risk alienating customers or bear the brunt of exorbitant egg prices on their own? Even nationwide chains are cracking under the pressure — Waffle House made headlines when they announced they’ll impose a 50-cent surcharge for every egg.
Eggs aren’t the only ingredient expected to cost more in 2025. The USDA estimates that total food costs will rise just over 2%, with noticeable increases in the price of staples such as coffee, beef, and orange juice.
#2. Immigration Crackdowns and Labor Shortages
Immigration was a major theme of the 2024 election and it has remained in the headlines throughout the first month of Donald Trump’s second term. Deporting undocumented Americans was a campaign promise that the Trump administration has already begun to deliver on.
Trump and his allies say that this move will ease inflation and lower consumer prices, but some experts have warned that mass deportations could ultimately stall production and drive up prices.
The Cato Institute, for example, predicts that ensuing labor shortages could affect production of certain products and ultimately raise costs for Americans. David Bier, the think tank’s Director of Immigration Studies, said, “If jobs are left open and production is unable to keep up with demand, that’s going to lead to higher prices.”
Whatever the long-term implications, any efforts to reduce the size of the undocumented workforce and slow immigration into the country will likely affect the restaurant industry more than nearly any other. As Melissa McCart writes in Eater, “It’s an open secret” that restaurants rely on a huge undocumented workforce.
She cites data from the Center for Migration Studies that puts the number of restaurant workers who could face deportation around one million. High turnover and rising labor costs are a persistent restaurant industry challenge. Any upheaval among the industry’s workforce can only make the problem worse for restaurant operators.
What do Back of House consultants think an immigration crackdown could mean for operators? “It won’t make anything cheaper,” says Durkin. He acknowledges the need for immigration reform, but focuses instead on eliminating the exploitation of the immigrant workforce.
Restaurateurs in cities including New York and Washington, D.C. have voiced their displeasure with the Trump Administration’s threats of anti-immigration crackdowns. On February 3, many shut their doors in an act of protest they called a Day Without Immigrants. Deportations have already been reported around the country.
#3. Potential Tariffs and Their Effects
An overhaul to America’s trade policies is another campaign promise that has remained top of mind during the early days of Trump’s second term. He has, for example, proposed implementing 25% tariffs on imports from Canada and Mexico and 10% tariffs on imports from China.
While the president placed a 30-day pause on tariffs for Mexican and Canadian imports, they’re still on the calendar. Restaurant operators should continue to monitor the issue to plan ahead for rising costs and potential disruptions to their supply chains.
Experts are divided on the potential inflationary impacts such a decision could have. The Tax Foundation praised the Trump Administration’s “goal of strengthening trade relationships and creating fair and favorable terms for America” while questioning the long-term wisdom of imposing steep tariffs. Fruits, vegetables, fish, baked goods, and beef are just some of the items that consumers could expect to pay a premium for if tariffs go on as planned next month.
Another Food Industry Challenge for 2025
Durkin says the primary challenge facing restaurants today has nothing to do with global unrest or a new presidential administration. It has to do with diners, their shifting tastes, and their evolving expectations about the restaurant experience. Operators' number-one challenge, he remarks, is “meeting customers where they are.”
Restaurant owners, he says, know what appeals to people of their generation, but what about younger diners? He adds, “Millennials and Gen Z are the largest cohort of customers entering the market in 60 years.” They’re also the first two generations of digital natives — they’re mobile-first customers who place a high value on sustainability and ethics.
Durkin suggests that a major mindset shift is in order. “Historically, our industry has been run on gut instinct,” but modern food industry challenges, he argues, call for a more data-intensive approach. Menu engineering supported by POS data, Durkin says, will help organizations better serve customers while weathering everyday challenges.
Let’s Address Restaurant Industry Challenges Together
Don’t try to tackle evolving food industry challenges on your own. Whatever you’re focused on, and whatever the rest of the year brings, the seasoned industry pros at Back of House are ready to offer strategic guidance. Talk to one of our consultants today about finding the right set of solutions for thriving in 2025 and beyond.
