Consumers are spending more on restaurants than ever. Where are the profits?

Many brands and operators are struggling, even as total industry sales increase. | Photo by Jonathan Maze.

It may be difficult to believe, given so much talk about consumers cutting back on dining and the resulting discount war, but the average American is spending more at restaurants than they ever have, at least as long as we have data.

In 2000, according to federal data, U.S. consumers spent 9% of their total food and retail spending at restaurants.

By last year, that percentage had grown to 13.6%. 

If we narrow that to just food spending, that has been increasing, too. So far this year, 53% of consumers’ food and beverage spending is spent at restaurants and bars. 

You can’t tell by looking at the condition of the restaurant industry right now. While topline numbers generally yield profits, that is hardly the case now.

According to the National Restaurant Association, profitability among both full-service and limited-service restaurants has declined since 2019. And 42% of operators tell the association that they are not currently profitable. That is as much a sign of just how difficult it is to operate an individual restaurant, particularly an independent. 

But it’s not as if chains are broadly thriving right now. Eight of the 20 largest restaurant chains in the U.S., per the 2025 Technomic Top 500, closed a net number of locations in 2025. Three others, including Chipotle, Chick-fil-A and Popeyes, faced surprising declines in their unit volumes. 

We’ve had a rash of franchisee bankruptcies this year. Some of the largest bankruptcies the restaurant industry has ever seen have been filed over the past couple of years, notably the still-struggling Red Lobster. And three companies—TGI Fridays, Hooters and Fat Brands—that use supposedly bulletproof whole business securitization financing filed for bankruptcy.

To be sure, a lot of restaurant companies are doing perfectly fine, even some that have seen their sales slow, like Chick-fil-A.

But an industry that in theory is enjoying the overall spending growth that it has had should be generating more profits.

There are a few reasons for the industry’s generally substandard financial condition. Many chains are owned by private-equity groups and other firms that use aggressive financing to open locations. They have costly leases, too much debt or both, which influences their level of profits.

And a lot of people believe they can start or run restaurants. This leads to the creation of a lot of independent restaurants. And it fuels the growth of a lot of upstart franchised brands. That fuels a lot of expansion. In addition, many chains push aggressive growth, even when they don’t necessarily have the demand to justify it. 

That growth both increases total sales while spreading sales among a larger number of locations, depressing unit volumes in the process.

Restaurants’ costs, of course, have increased, in breadth and scope. Restaurants face higher charges for roughly everything and have costs they didn’t have in 2000, like, say, third-party delivery charges. 

And of course, restaurants have increased their charges and added and expanded tipping, which means that the average customer spends a lot more than they did back in 2000. But because of the cost increases the average restaurant isn’t actually making more money. 

Given the state of the economy, none of this is going to get any easier.