42% of U.S. Restaurants Not Profitable in 2025, NRA Says

Surge in food and labor costs squeeze already thin margins, forcing tough choices on pricing, staffing, and operations.

Feb. 27, 2026 at 9:10pm

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According to the National Restaurant Association's State of the Restaurant Industry report, 42% of restaurant operators said their establishments were not profitable in 2025. Rising costs for food, labor, insurance, energy, and credit card processing fees have chewed into already slim margins, forcing many restaurants to cut hours, tighten menus, and rethink staffing just to keep cash flow positive. The industry is projected to see only modest real sales growth of 1.3% in 2026, as customers remain cautious about dining out frequency despite higher menu prices.

Why it matters

The restaurant industry is a major employer and economic driver, so the financial struggles of over 40% of establishments raises concerns about the broader health of the sector and its ability to recover from the pandemic. Widespread unprofitability could lead to more restaurant closures, job losses, and reduced consumer choice, especially in local communities.

The details

The National Restaurant Association report found that over 90% of operators cited higher costs for food, labor, insurance, energy, and credit card processing as major headwinds in 2025. To cope, restaurants have resorted to raising prices, redesigning menus, trimming hours, and pushing harder into off-premises dining and loyalty programs. Larger chains have continued expanding, while independent restaurants face tougher choices like closing or consolidating.

  • The National Restaurant Association's State of the Restaurant Industry report covers data from 2025.
  • The report projects modest real sales growth of 1.3% for the restaurant industry in 2026.

The players

National Restaurant Association

The National Restaurant Association is the leading business association for the restaurant industry in the United States, representing over 500,000 restaurant businesses.

Dr. Chad Moutray

The chief economist for the National Restaurant Association, who commented on the industry's challenges in 2025.

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What they’re saying

“It's been a pretty challenging year for restaurants.”

— Dr. Chad Moutray, Chief Economist, National Restaurant Association

What’s next

The National Restaurant Association has suggested that workforce development and automation could be potential tools to help restaurants cut costs and boost efficiency, though accessing the capital for such investments remains a challenge for many independent operators.

The takeaway

The restaurant industry's financial struggles in 2025, with over 40% of establishments failing to turn a profit, highlight the intense margin pressures from rising costs that have forced many operators to make difficult choices around pricing, staffing, and operations just to keep their businesses afloat. This raises concerns about the broader health of the sector and its ability to recover, potentially leading to more closures, job losses, and reduced consumer choice, especially in local communities.