During a recent panel discussion at the Texas Restaurant Association Show in Houston, Barry McGowan, chief executive officer of Fogo de Chão, said the industry is going through a renaissance.
“The industry is changing. Brands that are big that haven’t reinvested in its people, products, its assets are fading away and being replaced with a lot of new concepts,” he said. “It’s pretty exciting.”
New data from Revenue Management Solutions supports an increasingly bifurcated industry, and the brands that are winning are taking market share at an accelerated pace. A higher percentage of restaurants — 37% — are healthy and growing. However, systematic decline has tripled throughout the past year, from 6% to 19%, signaling structural pressures for underperforming brands, according to Richard Delvallée, senior vice president, consulting services, RMS.
Systematic decline is defined as concepts experiencing both traffic and check decreases.
“Over the last 12 months, customers have become more selective about where they spend their money. Brands that balanced the value equation and continued to innovate are recognizing positive traffic trends. Conversely, based on our observations, the brands with higher share of restaurant locations in the systemic decline category are seeing an average traffic loss of -7% year-over-year,” he said.
Further, like underperformers, mid-performing brands are also seeing an increase in the number of locations slipping into decline. Delvallée said what’s helping them remain in the middle tier is a small but meaningful share of locations achieving balanced growth of both traffic and check.
The fourth quarter of 2024 showed that nearly 42% of quick-service restaurants were maintaining strong growth in both categories, but that number dropped to 32% in Q2 2025. Delvallée said the environment has shifted in recent quarters because consumers have become price fatigued.
“In 2022 and 2023, when most brands experienced negative traffic but still saw positive sales growth, the pent-up demand allowed restaurants to raise prices, often by more than 7%, which helped them offset the decrease in traffic,” he said. “However, today the situation has changed. Traffic remains low, but customers are very sensitive to prices. Therefore, struggling restaurants have limited opportunities to generate sales simply through pricing strategies.”
While this trend is concerning, Delvallée points to a silver lining, noting that a majority — 54% — of restaurants still experienced growth in Q2.
“This growth is primarily driven by balanced growth (32%), with increases in both traffic and average check, suggesting ongoing market stability,” he said.
Other Q2 numbers
As public restaurant companies begin to report second quarter results, RMS data shows that traffic declined 0.9% year-over-year in the quick-service category, while average prices increased 1.3%. Additionally, net sales grew 1.3% year-over-year, while the average check rose 2%.
Meanwhile, daypart trends continue to diverge. Breakfast traffic dropped 8.7% in Q2 versus 2024. Notably, this is on top of a -9.5% drop in breakfast during Q1, indicating that the morning business is being impacted by more than just inclement weather. Delvallée confirms a shift in consumers eating breakfast at home versus on the go.
On a positive note, some restaurant brands are making up for those lost sales during the late-night daypart.
“As breakfast traffic continues to decline, more brands are exploring late night dining as a growth opportunity,” Delvallée said. “We’re seeing operators extend hours and focus on offering meals and bundles that are easily assembled and profitable.”
RMS data shows that 34% of consumers are dining out more late at night, while 70% are ordering delivery during off-peak hours.
Contact Alicia Kelso at [email protected]