In 2026 Affordability Concerns Pinch Restaurants as They Juggle Soaring Costs
By Kim Gore
Restaurant operators in every subset of the business are readying for further belt-tightening in 2026 in response to intensifying pressures on their viability.
The labor crisis is not abating, with higher wages among the many cost factors squeezing profitability. Restaurants also are paying the price for “check fatigue” among consumers who also are feeling the pinch as their confidence in the economy slides.
Tech investments are imperative for the road ahead, but restaurateurs will be further challenged to balance the efficiencies gained with the costs, especially when affordability of the dining experience is a top guest motivator.
Here’s the restaurant industry outlook for 2026, and what operators need to know to manage through the turbulence.
The squeeze on profitability
“Value” is increasingly the operative word for the public when it comes to dining out, as consumers are more inclined in an inflationary era to dine out less and when they do, opt for the value casual experience and prices. It’s splitting the market to further moderate growth in 2026, putting a premium on resiliency as inflation drives sales more than real traffic.
Profitability will be pressured as labor and operating costs soar with the combined impact of a shifting regulatory environment – both tariffs and aggressive immigration actions – and inflation. Food, beverage and labor account for 70% of a restaurant’s expenses. In 2026, the former category is expected to rise 3.3% after a 3.9% increase in 2025. Just as problematic are labor costs, which 89% of operators expect to continue to rise – significantly, according to a third of them.
The hospitality industry overall also will need to manage higher insurance rates for certain lines. Restaurants especially need to tighten their risk protocols for liquor over service and violent acts as related liability coverage rose by as much as 20% in 2025’s fourth quarter.
Technology is key for lowering operating costs and boosting return on investment, and spending here will surge in the new year. Artificial intelligence figures big here as operators look at across-the-board gains: Ai-powered phone systems, predictive ordering and smart Kitchen Display systems among the applications. Voice recognition will figure prominently in customer service; use of voice assistants for commerce overall should explode by 320% as the year advances. Operators, though, must strengthen their defenses against the growth in cyber risk that accompanies tech investment.
The structural challenge of the labor shortage
If anything, the difficulties filling roles in restaurants will only intensify in 2026. While job growth has surpassed pre-pandemic levels, it’s spotty among segments: Quick serve and fast casual employee counts are ahead by 107,000 jobs, but full service establishments are 212,000 jobs below. The crunch is particularly pronounced for skilled cooks, chefs and managers, making recruitment and retention a top concern for 77% of operators in 2026.
The trends intensify the struggle. Fewer young (16- to 19-year-olds) workers are participating in the labor force to balance out larger number of retirements. And current immigration policies don’t help when unauthorized workers make up some 8% of leisure/hospitality employment.
The industry has sharpened its focus on the shortfall, with many operators bumping minimum hourly wages to $15 and adding perks, improved benefits and signing and retention bonuses. Benefits are a big differentiator, and recruitment and retention efforts in 2026 should look to individualized packages that emphasize employee wellness, like mental and financial health. Leveraging employee data through analytic resources like persona analysis is instrumental for modernized benefits programs that help stabilize staffing.
Insurance landscape tests resiliency
The restaurant industry also needs to be ready for a challenging landscape for insurance that has underwriting standards being tightened and policy terms becoming more strict. At the same time, carriers are increasingly requiring documentation of risk management planning, with special emphasis on protocols for workplace violence and harassment and active shooter incidents.
Workplace violence is a particular concern in restaurants and fast-food chains. An oft-cited survey by the National Institute for Occupational Safety and Health (NIOSH) found that 64% of restaurant workers experienced some form of workplace violence. It’s become an imperative for operators to have plans and training in place to help employees safely de-escalate aggressive customers.
Another concern is the continued rise in climate risks, whether strong winds and rains or flooding and excessive heat. It has complicated property insurance rates and policy availability, making it critical, especially in high-risk regions to take steps to minimize losses.
Expanded use of technology also creates a variety of exposures. In addition to adequate cyber insurance, staff training in security protocols is essential. And restaurants must thoroughly vet third-party vendors and their software, paying close attention to contractual details such as liability, the right to audit and breach notification requirements.
Those clients that can demonstrate strong defenses will likely receive more favorable terms in their cyber coverage – and other lines, too. It makes having a strong relationship with knowledgeable brokers and risk advisors important for successfully navigating the challenges ahead.
About the author
Kimberly Gore is the National Practice Leader of global insurance brokerage Hub International’s hospitality specialty practice. She has over 30 years’ experience in the insurance industry with a specialization in hospitality and tourism clients. Kim is responsible for a strategic approach to carrier relationships, specialization and best in class service to benefit each client. Kim is an active member of the insurance community serving as president of IIABHGC and as a board member for IIABSC and was awarded the South Carolina Young Agent of the year in 2010.
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