Restaurant Executives Look to 2025 After Slow Traffic and Surge in Bankruptcies

After a challenging year, restaurant executives are eagerly looking ahead to 2025, anticipating a brighter outlook for the industry.

"I’m ready for ’24 to be behind us, and I think ‘25 is going to be a great year,” said Kate Jaspon, CFO of Dunkin’ parent Inspire Brands, during the Restaurant Finance and Development Conference in Las Vegas.

The sector has faced significant headwinds in 2024, including a 50% surge in restaurant bankruptcy filings and year-over-year declines in customer traffic through September, according to Black Box Intelligence. Even major chains like McDonald’s and Starbucks reported same-store sales declines during at least one quarter, disappointing investors.

However, signs of recovery are emerging. Fast-food traffic rose 2.8% in October compared to a year earlier, according to Revenue Management Solutions, with brands like Burger King seeing sales growth. Falling interest rates are also creating optimism, as lower borrowing costs could fuel expansion and improve consumer confidence.

Shake Shack CFO Katie Fogertey noted that lower rates might boost sentiment, saying, “If credit becomes cheaper, people feel like they can borrow more, even if it doesn’t directly translate to a $5 burger spend.” Shake Shack has already reported increasing sales every quarter this year.

Valuations within the industry are improving, potentially reopening the IPO market. While no major restaurant IPOs have occurred since Cava’s successful debut in June 2023, firms like Panera Bread and Inspire Brands could be contenders for public offerings in the near future.

Despite these positive signs, challenges remain. Many chains continue to face same-store sales declines, and the competitive “value wars” are squeezing profits. McDonald’s, for example, plans to expand its value menu in 2025, a strategy that may pressure other brands to follow suit. Meanwhile, some restaurants are still grappling with bankruptcy risks, particularly those heavily relying on discounts to attract customers.

While fears of a recession have eased, the consumer recovery from years of elevated costs may take longer than expected, tempering the industry's optimism heading into the new year.