This year restaurants and bars continue to grapple with many of the same cha
llenges they faced in 2024. The rising cost of labor and food, along with the ongoing
struggle to recruit and retain employees, remain among the top concerns for restaurant operators nationwide.
The good news: the restaurant industry is expected to reach new sales height
s again in 2025, according to the National Restaurant Association’s 2025 State of the Market report, which projects $1.5 trillion in sales and
employment growth of more than 200,000 new jobs.
The positive news doesn’t come without challenges, restaurant insurance specialists told Insurance Journal. Rising expenses a
gain will tighten profits for restaurant and bar operators, which makes the role of their in
surance agents and brokers even more critical, they say.
Tighter profit margins in restaurants today are one reason an opera
tor might seek the help of a new insurance partner, John Parkhurst, hospitality practice leader, Trucordia, told Insurance Journal. Toda
y’s market makes it a great time for new growth and opportunity for committed hospitality insurance specialists, he added.
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Challenges Restaurants Face
The most pressing issue that restaurants face today is the rising cost of lab
or. For the average restauran
t, in the past four years labor costs have risen 31%, according to the National Restaurant Association (NRA).
“There’s just a lack of people who want to work in the restaurant industry
, so that alone drives up your labor costs,” Parkhurst said. “They’re paying dishwashers in the city of Chicago and the suburbs $18 to $20 an ho
ur,” he said. When payroll goes up, so does workers’ compensation costs, he added.
Jon Siglar, executive vice president, carrier relations manager, at ALKEME, which writes mostly high-end chains and national chains in the fast-food, fast-casual, and fine-dining space in California, said it’s a mixed bag for his clientele. Siglar, who grew up in the family restaurant business working almost every position, said some of his clients are doing “amazingly well” today with “sales off the charts,” while others are struggling.
“Where my operators are struggling is in the franchise, fast-food space–those that are now paying $20 minimum wage,” he added. As of April 2024, all “fast food restaurant employees” in California must be paid at least $20 per hour. That wage increase is estimated to have led to 9,600 job losses from September 2023 to September 2024, according to a report by Edgeworth Economics in late November 2024.
The second biggest challenge for restaurants is the rising cost of food, which rose an average of 29% in the past four years, the NRA reported in February. And it’s not just the rising cost of eggs. “Chicken went from $40 a case to $140 a case for chicken wings alone,” Parkhurst noted.
Other expenses for running a restaurant–the building, supplies, credit card processing fees, and insurance–are also going up quickly, the NRA said. Yet, despite the sector’s cost concerns, the market overall is still healthy and growing.
“There’s still more restaurants opening up,” said Dan Beck, vice president at Snapp & Associates, an ALKEME company, which writes restaurants and bars ranging from a single operator taco shop to large fine-dining establishments, primarily in San Diego County, California. “We’re not seeing many closures; it’s just margins are tighter for the operators I speak to.”
