This article was originally published in Franchise Times, sister publication to Food On Demand.
Restaurant and foodservice sales are projected to reach $1.55 trillion in 2026, a 4.8 percent increase from 2025.
The forecast from the National Restaurant Association earlier this year paints a promising picture for the industry. The path to getting there, however, is coming with its share of hurdles for restaurant operators facing ongoing challenges. Midway through the year, Restaurant365 surveyed more than 420 operators to understand the issues they’re facing.
The category most represented in the survey were casual dining operators at 38.8 percent, followed by fast-casual at 26 percent and quick-service restaurants at 11.4 percent.
Joe Hannon, Restaurant365 general manager of inventory and sales, sees a cautious optimism when it comes to industry operators considering artificial intelligence.
Representing nearly 10,000 restaurant locations, 86.6 percent of the operators polled reported a rise in food costs. Of those respondents, 51 percent reported an increase between 1 percent and 5 percent, 37 percent said the increase was between 6 percent and 15 percent, while 11 percent said increases were more than 15 percent.
A majority, 78 percent, expect costs to continue to increase this year. In response, more than half of operators raised their menu prices to offset the cost increases, though that’s down from 66 percent when operators were polled in an earlier survey.
Along with raising prices, another 22 percent said they were making an effort to check inventory more frequently to track and reduce waste. Additionally, 20 percent said they were considering supplier or vendor changes.
On the labor front, meanwhile, 77 percent of owners reported cost increases in the first half of 2026, with 65 percent noting an increase between 1 percent and 5 percent. For the rest of the year, 61 percent expect labor costs to rise even more. Additionally, 39 percent reported up to 10 percent turnover, the highest reading in three years.
Staff enhancements are a primary focus for technology spending, too, with 16.15 percent labeling it a priority. Joe Hannon, general manager of inventory and sales at Restaurant365 said it’s something the company has been seeing, too.
“We have a full, robust training module for onboarding restaurant employees and managers, and all the way up the chain of command,” Hannon said. “The great thing is that they can use our onboard templates to help train. That tool has caught fire over the last year and a half. We’re seeing operators kind of mix and match. They’ll use our template for a few things while putting their own brand inside of it.”
Recruiting and retaining was listed as the largest challenge at 32.9 percent, followed by food costs at 29.7 percent and sales volume at 18.5 percent. Recruiting and retaining the staff has remained a challenge, too, at 32 percent in mid-2024 and 27 percent in mid-2025.
To meet those challenges, restaurateurs are doubling down on culture, training and compensation. Of those surveyed, 32 percent said they’re committing to better training, 31.2 percent are increasing pay and 26.5 percent are looking at ways to improve work-life balance for employees.
Labor wasn’t the No. 1 area where tech investments are made at the moment, though, as 33 percent said they were focusing on marketing, promotions and loyalty programs, while 18.9 percent were focusing their spending on point of sales and back-of-house systems. Artificial intelligence remains a lower priority, meanwhile, with 9.1 percent investing in back of house AI applications and 6.3 percent looking toward front-of-house upgrades.
“I would say for the most part, operators are a little bit slower to adopt it, but that doesn’t mean they’re afraid of it,” Hannon said. “That just means they’re either holding out or asking if it’s going to help their ROI or move their margins. When it comes to AI, the gap is going to be between those who act on it and those who don’t. The uptick in folks who’re adopting our AI Tools is a slow burn to build trust and prove value.”
For operators who have invested in AI, 61 percent said it has reduced food costs, while 62 percent reported lower labor costs.
Nearly half of respondents reported gains in customer traffic, an improvement from 28 percent at the start of the year, while 31 percent noted declines.
For the rest of the year, 62 percent of operators expect the same level of traffic growth. However, 64 percent of restaurateurs are running below full capacity. As a result, 57 percent said in the second half of the year, they’re holding off from opening new locations, while 43 percent are planning to grow.
Of those considering growth, 22 percent are opening one more location, 15 percent are developing between two and five, and 5 percent are launching more than five.
“I think [the traffic increase] shows a lot of operator sentiment and optimism right now,” Hannon said. “I think the higher check average is helping that as well. But how much of that is sort of forced by the higher checks versus natural is still, I think, in question.”
