How Rising Costs Are Affecting Restaurant Hiring Budgets

Working in the restaurant industry is always an adventure, filled with ups and downs driven by customer tastes and the economy. In 2025, one of the most pressing issues we’re facing is the rise in costs. This is affecting many aspects of the business, especially hiring budgets. 

For restaurant professionals, grasping how these rising costs impact hiring decisions is vital. With a landscape that’s becoming increasingly complex, it’s important to adapt strategies to maintain quality service while managing financial pressures.

Methodology

To keep our insights relevant and well-informed, we concentrated on the latest reports and information available as of March 2025. By prioritizing data from industry experts and credible publications, we aim to provide a thorough perspective on this topic.  

Our sources include:
-National Restaurant Association Survey: Rising food costs and supply chain issues are creating challenges

-National Restaurant Association Report: State of the Restaurant Industry 2025

-USDA: Food Prices and Spending

-Toast Survey: 39% of restaurants say they started tracking key ingredients due to inflation

-Restaurant Dive Report: 31% of restaurants have reduced menu size due to inflation

-AON: Key Trends in U.S. Benefits for 2025 and Beyond

-ENERGY STAR for Small Business: Restaurants

Shifting Dynamics of Hiring Budgets

Historically, hiring budgets in the restaurant industry have been adjusted based on various economic factors, but recent shifts present unique challenges. The escalating costs of labor, food and operations mean that many establishments are reassessing their financial commitments to staffing.

Recent data highlights a significant change: many restaurants are now allocating a larger percentage of their budgets to labor. On average, staffing costs now account for about 50% to 60% of revenue — a steep escalation that has impelled many to reconsider their hiring strategies. 

This added pressure comes at a time when the industry grapples with a demand for an estimated 200,000 additional workers to meet growing customer needs.

3 Key Factors Contributing to Rising Costs

As we explore the reasons behind these rising costs, three key factors stand out: labor costs, supply chain challenges and operational expenses. Each plays a critical role in determining how restaurants allocate their hiring budgets.

1. Labor costs

Staff expenses have emerged as the most significant challenge for restaurants today. As operators strive to attract and retain talent, they are confronted with continuous wage increases across all positions. Moreover, basic wages represent only a part of the financial puzzle. 

Restaurant owners also face the challenge of rising payroll taxes, workers’ compensation and healthcare costs, which increased by 6% in 2024. In 2025, health care costs are projected to rise another 9%. These expenses have a direct impact on menu pricing and, consequently, on hiring budgets.

2. Supply chain challenges and food costs

The supply chain remains a persistent headache for the restaurant sector, with 95% of establishments reporting delivery delays or ingredient shortages. This tough reality inevitably leads to adjustments in menu offerings as restaurants seek cost-effective alternatives. 

U.S. food prices rose by 23.6 % from 2020 to 2024, forcing establishments to become more strategic in their ingredient selection. Operators are now scrutinizing every item, from staple ingredients to specialty products, to control prices and maintain profitability.

[Source: National Restaurant Association]

3. Energy and operational expenses

Energy costs are another area where restaurants feel the pinch. The average restaurant consumes five to seven times more energy per square foot than other commercial buildings. For quick-service restaurants, the number can soar to ten times. 

The substantial operational expenses incurred in energy consumption put additional stress on hiring budgets, as restaurants juggle various financial obligations.

Impacts on Hiring Budgets

As costs continue to rise, restaurants are tasked with finding innovative ways to manage labor expenses while ensuring they can still meet their staffing needs.

Strategies for managing increased labor costs

One of the most common strategies involves adjusting wage structures and offering non-monetary benefits to attract talent. Here are several effective approaches that operators are considering:

• Flexible hours and scheduling: Providing employees with adaptable work schedules to improve work-life balance.
• Health and wellness benefits: Offering comprehensive health insurance and wellness programs to enhance employee satisfaction.
• Employee recognition programs: Implementing rewards and recognition initiatives to boost morale and retention.

Limitations on hiring capabilities

The pressure to manage spending inevitably constrains hiring capabilities. Many restaurants find themselves reducing staffing levels, which can negatively impact service quality. There are often delays in filling open positions, which leads to establishments operating with fewer employees than needed. This limits their ability to effectively accommodate customer demand.

Shifts in recruitment strategies

To adapt to these challenges, restaurants are altering their recruitment strategies. The focus has shifted to enhancing retention efforts and investing in training programs. 

Moreover, technology is playing an increasingly vital role in recruitment and operational efficiency. Advanced systems help streamline hiring processes and optimize management, enabling kitchens to function at their best with limited resources.

Industry Response to Rising Costs

In light of growing economic pressures, restaurant owners are implementing various strategies to balance rising costs with customer satisfaction.

Menu adjustments and engineering

Smart menu adjustments have become a vital strategy in maintaining profitability while keeping diners happy. Many restaurants are reducing their menu sizes to improve efficiency and cut waste, with 31% of establishments reporting a streamlined menu approach. This update not only helps reduce operational costs but also allows for more focus on delivering high-quality dishes.

Value meal offerings and promotions are also in vogue as establishments compete to attract diners. For instance, chains like McDonald’s and Wendy’s have introduced value meal deals that are strategically priced to encourage add-on purchases.

In response to inflation, 39% of restaurants started tracking the price of key ingredients, while 38% have adjusted the number of food suppliers they use. These proactive measures highlight how restaurants are adapting their operations to grapple with rising costs while ensuring they can meet customer expectations.

Technology adoption to manage costs

The integration of technology into restaurant operations can lead to significant cost savings. Automated inventory systems and real-time data management help kitchens keep a closer eye on their ingredients, minimizing waste and optimizing ordering. 

By leveraging data analysis to understand dining patterns and preferences, restaurants can refine their menu offerings and pricing strategies effectively. Here are a few ways technology is making an impact: 

• Real-time inventory tracking: Monitoring ingredients to prevent over-ordering and reduce waste.
• Automated ordering systems: Streamlining supply orders and ensuring consistent ingredient availability.
• Data-driven decision-making: Using analytics to forecast demand and adjust menu prices accordingly.

Future Outlook

What does the future hold for hiring budgets in the face of ongoing economic challenges? As the industry progresses through 2025, the impact of rising costs will continue to shape recruitment and operational strategies.

Industry analysts believe that as labor and operational costs remain high, restaurants will increasingly adopt flexible pricing strategies to accommodate these challenges. This could mean implementing dynamic pricing models that adjust menu prices based on factors such as demand, peak hours and ingredient availability. Such agility in pricing could help preserve profit margins while attracting a steady flow of customers.

Organizations will likely continue to invest in staff training and retention programs to curb turnover rates and stabilize labor costs. Vital to maintaining service quality, these long-term initiatives are essential in ensuring that restaurants not only survive but thrive during tough economic times.

Conclusion

The rising costs facing the restaurant industry are reshaping how owners manage their hiring budgets. With escalating labor expenses, supply chain pressures and operational challenges, it’s essential for restaurant owners to approach these issues with strategic foresight. Finding the right balance between maintaining quality staffing and managing financial obligations is critical in this ever-evolving landscape.

For those navigating these complexities, platforms like OysterLink provide valuable tools and resources that can help streamline operations and improve workforce management.