Aneurin Canham-Clyne
2 min read
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Fitch Ratings said the U.S. restaurant industry is facing “significant risk” from tariff and immigration policy, and downgraded its industrial outlook from neutral to deteriorating.
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Fitch expects food-away-from-home spending to decline modestly — a downgrade from previous flat-to-slightly-positive projections — and traffic to fall while average ticket size holds steady.
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The outlook revision comes at the tail end of a difficult earnings season for U.S. restaurant chains. Many brands saw sharper than expected decreases in same-stores sales, and prior segment leaders Chipotle and McDonald’s saw declines.
Restaurants are facing multi-faceted pressures on supply and demand sides of the business, according to Fitch.
Tariffs are an obvious supply-side cost pressure, Fitch noted, though their impact is variable as the Trump administration revises its trade barriers on a country-by-country basis.
Full-service operators are mostly likely to feel pressure from the trade barriers, Fitch said, though “the ultimate impact of the tariff will depend on food basket exposure and workforce composition.”
The other potential supply-side pressure is labor costs. Another recent Fitch report argued deportations and restrictions on immigrations could drive “potential worker shortages, production delays, and increased wage inflation that hinders revenue growth, weakens profitability and lowers return on investment.”
Such changes threaten the rough equilibrium in restaurant labor markets of the last year, as wages, employment and turnover have all stabilized in the industry.
“Food and labor each account for about one-third of restaurant costs, so simultaneous inflationary pressures, coupled with weakening economic growth and slowing consumer discretionary spending, pose a significant risk to the sector,” Fitch said.
Restaurants have little ability to use pricing to offset input cost shocks, Fitch predicted, with consumer price sensitivity high and a highly competitive market exerting downward pressure through value plays.
Fitch said the demand-side pressures stem from weakening consumer confidence and lower discretionary spending.
Such predictions align with the earnings results posted by brands like McDonald’s, Sweetgreen, Dine Brands and Wendy’s. These forecasts also reflect research by groups like KPMG, which found consumers planned to spend about 7% less at restaurants in summer 2025 than in the year-ago period.
