5 Realities Pressuring Foodservice

With the largest foodservice event in the Western Hemisphere happening in our own backyard, we fired up the Plated machine to review the state of the industry. While labor remains a long-standing challenge, we now face a whole new business climate, particularly around government oversight, food safety regulation, and new definitions of “healthy.” After combing our Intel Distillery databases, we identified five macro-realities foodservice operators are juggling in today’s social, economic and political climate.

• The ongoing challenge of high food prices
• The whiplash of on-and-off tariffs
• The compromises in food safety amid federal downsizing
• The uncertainties plaguing the workforce
• The new tenor of food trends

With Inflation Slowing, Why Are Food Prices Still Rising?

Increasing food prices have been on the minds of nearly every family for the past several years. Despite an inflation slowdown and an ease to the rate of increase, rising prices are especially worrisome to foodservice operators, who have had to grow increasingly creative to maintain menu innovation and restaurant traffic.

• The cost of eating out became a barrier to consumers for at least the past year. The Vericast 2024 Restaurant TrendWatch report from May 2024 found that 68% of respondents are opting for grocery store food over restaurant meals to avoid rising costs. More recently, fast-food giants like McDonald’s have reported declining sales, with a 3.6% drop in U.S. same-store sales for the first quarter of 2025. This marks the steepest decline since the COVID‑19 pandemic-related lockdowns (Business Insider).

• Despite having the biggest price acceleration seemingly in the rearview mirror, food prices are anticipated to rise slightly faster than the historical average. USDA predicted that food-at-home prices will increase by 3.2% in 2025, with a greater increase in food-away-from-home at 3.8%.

• Cocoa (Food Manufacturing), coffee (Food Ingredients First) and meat, especially beef, have witnessed particularly steep increases since January. The Wall Street Journal’s Patrick Thomas explained how “U.S. meat companies are embracing ‘white bone’ programs, aiming to pick every carcass clean as they move down processing lines.” Yum?

• Egg prices remain an issue, primarily due to the fourth year of the current avian flu outbreak. New York Times reporter Julie Creswell described (gift link) how one Ohio diner operator’s weekly egg costs jumped from $300 to $1,000. From a policy perspective, newly-minted USDA Secretary Brooke Rollins in late March posted the agency’s “Five-Pronged Strategy to Combat Avian Flu and Lower Egg Prices.”

• Technomic provided two easy reference points from fast-food to illustrate the point: “McDonald’s Big Mac increased to an average price of $5.47 in Q4 2024, up from $5.07 in Q3 2024, while a medium hand-tossed cheese pizza at Domino’s increased from $16.95 to $17.13 in that same timeframe.”

• CNN summarized a Pew Research Center report which found, “Ninety percent of adults in the United States say the price of healthy food has risen over the past few years, and over two-thirds (69%) say higher food prices are making it difficult to eat a healthy diet.” The pudding pack people have never been happier.

We RFK’d the fries. Our customers like the change to tallow ideologically, but they love the taste even more.

Dan Edwards, Steak ’n Shake’s chief operations officer (WSJ)

Tariffs: The Uninvited Guest

A well-rounded pulse check of the foodservice supply chain revealed near-universal opposition to President Trump’s proposed tariffs. Fearing a further squeeze on profit margins, reduced consumer spending, barriers to opening new stores, supply disruptions, and increased food and equipment costs, many prominent voices spoke out. The whiplash “on-then-off” tariff reversals only exacerbated their frustration. The entire food supply chain seems exhausted, and foodservice remains vigilant — hoping the current 90-day pause leaves room for compromise.
 

• Shortly after President Trump’s April 2 “Liberation Day” announcement on tariffs, the National Restaurant Association (NRA) played the diplomat, pleading for a food and beverage exemption: “[NRA] will also continue to share with the White House the real-life challenges these changes present for restaurant operators and ask to have food and beverages exempted from these tariffs.” This was six weeks after NRA CEO Michelle Korsmo, in a letter to the president, said tariff surcharges would cost U.S. restaurants $12 billion and about one-third of independent operators’ margins (Restaurant Business).

• Representing foodservice manufacturers, IFMA, The Food Away From Home Association, commented, “The zigs and zags by the White House have brought a tsunami of coverage analyzing the political fallout but very little calculation of the impact on restaurants, convenience stores, college foodservices and other food-away-from-home channels.”

• NPR interviewed analyst Phil Lempert, who listed 10 food items likely to feel the biggest impact from the tariffs. Alcohol rose high on the list, as the U.S. imports beer, wine and spirits from five continents. The imported alcohol sector is likely “to be clobbered,” Lempert suggested. He also noted that beer sold in cans will get a double hit on account of tariffs on Chinese aluminum.

• Food Dive interviewed several opinion leaders on the impact of tariffs on foodservice. Sean Kennedy from the National Restaurant Association mentioned it’s not just food costs but the cost of equipment, much of which is made in China. “Our kitchens are open at least 12 hours a day, seven days a week. That’s a lot of wear and tear on our equipment.”

• Clare Reichenbach, James Beard Foundation CEO, in an op-ed in Civil Eats, argued that uncertainty from tariffs would disproportionately affect independent restaurants. “This uncertainty makes it extremely challenging for restaurants to plan menus, pricing, and procurement strategies — crucial elements of staying afloat in an already challenging business.”

• Food & Wine reporter Stephanie Gravalese highlighted a new report from Yale’s Budget Lab that assessed the price impact of these import tariffs, claiming food prices could rise 2.6% in the short term, with fresh produce jumping more than 5%. Overall, the report claims tariffs will add nearly $5,000 to the average family’s annual grocery bills.

Food Safety — Diminishing Resources

Significant changes in food safety policy have raised widespread concern among public health experts, consumer advocates and food industry professionals. These concerns primarily stem from deregulation, budget cuts and the weakening of scientific oversight. The lasting impact specifically on foodservice will have a delayed effect, but many of these changes will promote an increased vigilance within the industry. Reduced federal resources, delays in the long-anticipated Food Safety Modernization Act and reduced public transparency with inspection data put foodservice operators at increased risk to potentially fatal E. coli and Salmonella outbreaks.

• Food Safety news described the early March elimination of two federal food safety committees within USDA that monitor microbiological criteria and inspect meat and poultry. These committees provided scientific guidance to other federal agencies on foodborne pathogens and inspection protocols. Brian Ronholm, director of food policy at Consumer Reports, lamented, “These expert panels provide impartial scientific advice and recommendations to USDA, FDA and the CDC on public health issues related to food safety in the U.S.”

• Bloomberg reported a shockwave at the FDA after Jim Jones, who was hired to head up the nascent Unified Human Foods Program there, abruptly resigned on February 17 amid what he labeled “indiscriminate” layoffs. These reductions will hinder the agency’s ability to oversee food safety protocols and conduct inspections. Two days later, Axios theorized, “The moves raise questions about how Health and Human Services Secretary Robert F. Kennedy Jr.’s Make America Healthy Again agenda will be implemented by the FDA.”

• By early May, more than 15,000 USDA employees accepted resignation offers, significantly reducing the workforce responsible for food safety inspections and nutrition programs (Politico).

• Food Safety Magazine explained how the FDA’s revised budget would further cut budgets and move some food inspection burden to states, further concerning health professionals.

• For reference, Reuters food and ag reporters Leah Douglas and Tom Polansek posted a high-level explainer of the federal food safety system. One food safety expert they interviewed identified an additional complication stemming from eliminating Department of Justice consumer protections: “Without prosecutors who specialize in complex food and drug safety law, it becomes far less likely that companies will face meaningful consequences.”

Workforce — ‘They Don’t Know What’s Going to Happen’

As the backbone of the entire food system, the workforce has been under a particularly hard strain since the pandemic. Increased attention concerning documentation of immigrant workers on farms, in food processing and at retail and foodservice channels has put the industry on alert: a compromised workforce in food production has implications in food prices, food safety, supply chains, community impact and more. Days after President Trump was sworn in, it became apparent that a U.S. Immigration and Customs Enforcement (ICE) crackdown on undocumented workers was imminent.

• On February 12, Eater boldly published a “how-to” guide titled “What Should You Do if ICE Comes to Your Restaurant?”

• On its blog, reservation app Hostme offered, “Positions such as line cooks, dishwashers, and back-of-house staff — roles that are already hard to fill — are now even more difficult to staff. For owners, this translates into higher recruitment costs, increased time spent on hiring, and the added stress of keeping operations running smoothly.”

• For context, the Center for Migration Studies estimated that 1 million of the 8.3 million workers without legal status employed in the United States have restaurant industry jobs. CBS News outlined how the foodservice and agriculture industries were two of the most vulnerable to the immigration crackdown.

• The Los Angeles Times captured how the chain Teddy’s Red Tacos experienced a 50% dip in sales, as restaurant patrons, in addition to staff, lived in fear of ICE raids. “People don’t want to go out because they don’t know what is going to happen with this administration,” said Teddy’s owner Teddy Vazquez.

• In response, several major U.S. restaurant chains have simplified their menus, aiming to enhance operational efficiency and address ongoing labor challenges. This trend reflects a broader industry shift toward streamlining offerings to improve kitchen workflow, reduce costs and adapt to changing consumer preferences. Investopia summarized how Starbucks, Outback Steakhouse, Papa John’s and Chili’s are among the chain restaurants trimming their menus.

• The uncertainty reached far and wide. Food Dive reported that Modelo, the top beer brand in the United States has seen crimped sales. “Deportation threats and the potential of job losses have led to decreased spending among Hispanic consumers who make up half of the company’s beer sales.”

Changing Trends: MAHA and GLP-1 Have Entered the Chat

Trailblazing new trends and delivering on current ones are worthwhile goals for foodservice at every level. Chefs and R&D staffers charged with building traffic and repeat business feel that pressure during ordinary times, but foodservice has been in “new normal” mode since the COVID‑19 pandemic. There has been a collective scramble to address strained supply chains, increased competition and higher prices among foodservice operators. Two recent influences — U.S. Department of Health and Human Services Secretary Robert F. Kennedy Jr. and his Make America Healthy Again (MAHA) movement and the introduction of GLP‑1 receptor agonists such as Ozempic — have introduced new challenges and opportunities to foodservice operators. One prevailing mega-trend uniting all of it: protein remains the macronutrient of the decade.

• Meat & Poultry quoted Smithfield CEO Shane Smith, reflecting optimistically on GLP‑1 users. “They’re really focused on maintaining a good level of protein and high-quality protein in their diet. So, we think we’re set up well as we go forward.”

• It’s comeback time for the once-suffering drinkable dairy category, which checks all the nutritional boxes (high protein, low sugar, GLP‑1‑friendly). Fairlife (owned by Coca Cola) and Chobani are both investing hundreds of millions in new plants. Danone launched a 30‑gram protein drink, entering the $7 billion protein shake market with its Oikos brand. (Food Dive)

• The New York Times covered an interesting dynamic: splitting the bill at restaurants when your dining partners are on GLP-1s. “Diners on GLP‑1s are figuring out which types of restaurants they feel comfortable visiting; how to leave food on their plates without insulting the chef or their dining companions; and how to get the most value out of the experience.”

• Restaurant operators are navigating a complex landscape shaped by the influence of Kennedy and the MAHA movement. For example, in a move away from “ultra-processed” foods, Popeyes, Outback, and Buffalo Wild Wings have all “RFK’d” their French Fries by cooking them in beef tallow rather than canola or another seed oil. (The Wall Street Journal)

• We’re eager to see how the Dietary Guidelines of America (DGA) will shake out this time in the MAHA era. On May 14, Food Politics blogger Marion Nestle posted an-up-to date speculation on DGA topics like beef, fats, sugar, ultra-processed, plant-based. Regarding sustainability working its way into this administration’s policy, Nestle said, “I would guess this one stays off the table, but you never know.”

• The restaurant business indeed must be nimble to trends but also protective against rapid MAHA policy shifts that can disrupt business too quickly. The Louisiana Restaurant Association summarized the position of restaurant groups nationwide. “These shifts may challenge restaurant operators to adapt menus, reformulate recipes, and collaborate with suppliers to meet evolving consumer expectations and regulatory requirements. The National Restaurant Association is actively engaging with policymakers to ensure that any proposed regulations are evidence-based and practical for restaurant operators.”