Restaurant Industry Faces Persistent Headwinds in Q2 2025

The restaurant industry entered the summer of 2025 with high hopes that easing inflation and a still-solid labor market would reignite consumer spending. Yet, Q2 results revealed a more complicated reality: sales growth in some segments was offset by weakening traffic, rising costs, and shifting consumer behavior that is forcing operators to adapt rapidly.

Despite several companies posting year-over-year revenue gains, profitability was under pressure across much of the industry. As the numbers show, the gap between top-line growth and bottom-line performance is widening—a trend fueled by inflation, promotional discounting, and changing market dynamics. 

Macroeconomic Pressures & Consumer Behavior - A More Frugal Diner Emerges 

In the first half of 2025, U.S. consumers demonstrated a willingness to dine out—but with increasing caution. Industry data shows Americans consumed 1 billion fewer restaurant meals year-over-year in Q1, a trend that extended into Q2. The pullback is driven by higher menu prices, concerns over economic uncertainty, and the availability of more affordable at-home dining options.

Value has re-emerged as a top decision factor. Fast-food chains saw a 2.3% drop in visits, and overall restaurant visits fell 1% compared to the prior year.  

Inflation Remains Sticky

Food and labor costs—while moderating from their 2022 peaks—remain elevated, squeezing margins. Operators face a challenging balance: passing costs to consumers risks further traffic declines, while absorbing them erodes profitability. 

Segment Performance: Winners, Losers, and Strategic Shifts 

Quick-Service Restaurants (QSR) 

The value battleground remains intense in QSR. Major players are leaning into aggressive promotions to maintain traffic, with $5–$6 combo deals returning across the board. 
- Restaurant Brands International (RBI) posted $2.41 billion in Q2 revenue (+15.9% YoY) but net income dropped 34%, with EPS falling to $0.58. Gains from international markets (+9.8% system sales) could not offset higher operating expenses. 
- Yum Brands saw $1.93 billion in revenue, slightly missing estimates. U.S. same-store sales slowed to 4%, while global comps rose just 2%. Promotions boosted short-term sales but weighed on margins. 
- Wendy’s reported $560.9 million in revenue (-1.7% YoY) and cut its 2025 outlook despite beating EPS estimates (29¢ vs. 25¢ expected). U.S. sales softness and increased discounting were key drivers. 
 
QSR remains the most resilient segment in terms of traffic, but that resilience comes at a cost. With consumers trained to expect deals, operators risk eroding brand equity and long-term pricing power. 

Casual Dining 

- Bloomin’ Brands (Outback, Carrabba’s, Bonefish) reported $1 billion in revenue, down 10.4% YoY, but ahead of estimates. EPS of $0.33 beat expectations despite the revenue decline. 
- Denny’s saw revenue inch up to $117.7 million, but same-store sales fell 1.3%. EPS of $0.09 missed estimates, and the chain plans to close 70–90 locations this year. 
- Applebee’s and Chili’s are remodeling stores and testing co-brand concepts to reinvigorate traffic. 
 
Casual dining faces the toughest headwinds. Middle-income diners are trading down to QSR or choosing at-home meals, prompting operators to innovate menus and loyalty programs while closing underperforming units. 

Fast-Casual 

- Sweetgreen posted a $23.3 million net loss in Q2 (worse than last year’s $14.5 million loss) and a 7.6% same-store sales decline. The brand is now adding larger protein portions and $13 loyalty menu options to win back value-conscious guests. 
- Chipotle Highlights: 

Total Revenue: $3.1 billion, up 3.0% YoY, primarily fueled by new restaurant openings. 
Comparable Restaurant Sales: Down 4.0%, driven by a 4.9% decline in transactions, partially offset by a 0.9% increase in average check size. 
Margins: 

• Operating margin slipped to 18.2% from 19.7%. 

• Restaurant-level operating margin fell to 27.4% from 28.9%. 

 Fast-casual, once the growth darling of the industry, is being tested. Brands with premium positioning must now justify price points through portion size, loyalty perks, or experiential differentiation. 

Q2 2025 Revenue vs. Earnings by Company 

The Road Ahead

The second half of 2025 will test operators’ agility.

Key themes to watch: The Value Equation

Balancing competitive pricing with profitability will be critical, especially in QSR. 

- Operational Efficiency – Streamlining labor, reducing waste, and leveraging technology to offset costs. 
- Portfolio Rationalization – Expect more closures of underperforming units in both casual and QSR segments. 
- Menu Engineering – Brands will experiment with smaller, lower-cost options alongside higher-margin premium offerings. 
 
The industry’s Q2 results paint a picture of resilience under pressure. While revenue gains in certain segments offer optimism, persistent cost inflation, consumer caution, and competitive value wars signal that the fight for profitability is far from over. The winners will be those that adapt fastest—without sacrificing brand identity in the process.