PHOTO: ENVATO
I n September, the federal government released a jobs report that could only be described as ugly. While restaurants added 11,000 jobs, continuing their run of relatively slow growth, the economy as a whole added 22,000. That probably shouldn’t have been that much of a surprise. A lot of data has suggested a weakening labor market. There are more people unemployed than there are available jobs, for instance. Layoffs soared 39% in August and are taking place at a rate unseen since the pandemic. A weak jobs market should make life a bit easier for restaurants looking for help. But that should be considered cold comfort given that restaurants aren’t exactly swimming in customers right now. A weak jobs market will almost certainly make sales and traffic that much more difficult for a broader set of operators. At the end of the day, the best indicator of industry sales is a consumer that has a job and income. If fewer consumers have jobs, there are more consumers cutting back, and that’s bad for business.
As we noted last week, the layoffs could help explain weakening sales at fast-casual chains like Chipotle, Sweetgreen and Cava. Those chains tend to have higher incomes than the fast-food brands that have heretofore struggled with traffic. The most recent labor report only adds to that concern. Many of the industries cutting jobs include professional services, manufacturing, construction, government and finance, industries that tend to pay better. In many respects, the weak job market should be expected by this point. The economy has withstood a lot over the past couple of years, including soaring inflation, consumer reaction to that inflation and a presidential election. Tariffs have driven up the costs of doing business and damaged consumer confidence. Immigration policies this year have hurt sales and labor availability in immigrant-heavy markets. All that has come on top of a low- income consumer that entered the year cutting back on dining at fast-food markets. But how does the restaurant industry respond to an economy like this one?
As it is, restaurants are heavily pushing value. More restaurant chains continue to push new discounts all the time. McDonald’s is lowering prices on its combo meals and bringing back Extra Value Meals. Subway is on television all the time pushing low-priced meals. One big reason casual-dining restaurant chains are seeing improvement now is their marketing of value offers. Even Chipotle, with its group-ordering Groupotle concept, gave customers a $10 digital coupon to try it. The simple fact is, a large and probably growing number of consumers need to be incentivized in some way to dine out. A lot of the time, that’s through value. Periodically, chains can get customers in through innovative marketing, such as Wendy’s Spongebob collaboration or McDonald’s Minecraft meal or whatever thing Taco Bell is doing. If the labor market continues its tepid pace, or it gets worse—and it definitely could get worse—the industry could be in for a rougher ride than anybody thought.
OCTOBER 2025 RESTAURANT BUSINESS
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