Texas Restaurant Association CEO Emily Knight wrote in a recent newsletter that data suggests “the slowdown we’ve all feared has materialized.”

TEXAS, USA — Texas Restaurant Association CEO Emily Knight sought to “sound the alarm” about economic headwinds facing the hospitality industry in a recent industry newsletter. 

The Texas Restaurant Association advocates for the state’s $138 billion food service industry. Knight wrote in a recent industry newsletter that data “suggests the slowdown we’ve all feared has materialized.”

“We’ve got a new Texas Restaurant Economics report for you today. Unfortunately, I have to sound the alarm a bit. Our data, combined with reports we’re reading from Black Box Intelligence and others, suggests that the slowdown we’ve all feared has materialized. I say this not to create panic but to prepare you,” Knight wrote. 

The Texas Restaurant Association’s economic report shows 40% of restaurant operators reported food costs increased significantly in the third quarter of 2025 over the previous quarter, with 48% reporting food costs increased slightly during the same time frame. For labor costs, 56% of restaurant operators reported a slight increase in the third quarter of 2025, while about 10% reported a significant increase during the same time frame. 

The report also indicated that 38% of restaurant operators reported sales and revenues decreased slightly in the third quarter of 2025 compared to the previous quarter, 40% reported profit margins decreased slightly, and 37% reported traffic decreased slightly during the same time frame. 

As for menu prices, 50% of restaurant operators reported a slight increase in the third quarter of this year over the previous quarter, while 46% reported they stayed about the same. 

Nationally, the National Restaurant Association reports food and labor costs for the average restaurant have increased 35% over the last five years, and customer traffic remains down from pre-pandemic levels. 

“That means the only way most restaurant operators can cover their higher input costs is to increase menu prices. Average menu prices increased 31% between February 2020 and April 2025, according to data from the Bureau of Labor Statistics, which is on par with the increase needed to maintain the average 5% profit margin,” the National Restaurant Association notes.  

Knight also discussed the impacts of the ongoing federal government shutdown in the newsletter. 

“Federal employees are missing paychecks, and services our industry relies on like alcohol label approvals, economic data collection, and SBA small business loans are paused,” the newsletter reads.

The newsletter notes, though, that the Texas Workforce Commission launched the Employer Child Care Solutions initiative to help businesses meet the childcare needs of their employees. 

Knight also pointed to some other reasons for hope despite the headwinds. 

Knight noted that the holiday season is coming up and encouraged restaurants to “review every aspect of your business with an eye for efficiency, ROI, and maximizing the guest experience.”

“Despite the economic headwinds, we have concepts in every segment succeeding—proof that there is hope,” she added. 

The latest Texas Restaurant Association economics report was first reported by the Dallas Observer.Â