Texas restaurants see impacts of tariffs

AUSTIN – The Texas Restaurant Association is monitoring signs of an economic slowdown in the state’s restaurant industry, which is responsible for 1.4 million jobs across Texas. 

Falling profit margins

Sixty-three percent of restaurant operators surveyed by the TRA say their profit margin fell from the quarter prior, citing factors including a spike in food and labor costs, as well as a drop in traffic and sales. 

Representatives for the TRA say that in Austin, diners trend younger. But right now, young adults are strapped with more debt while facing enhanced economic pressures. 

That’s a challenge for local restaurants, as young diners opt to eat out less often, and reduce their spending when they do. 

Tariff impacts

Restaurants are also feeling the impacts of tariffs, with 90% of restaurant operators surveyed by the TRA saying costs for key items including food and beverages, containers and to-go utensils, and equipment are up.  

The Trump Administration’s immigration crackdown is also taking a toll on the industry, with 19% of restaurants surveyed by the TRA saying they have lost employees and seen traffic decrease as a result. 

‘Margins are incredibly tight’

What they’re saying:

“Costs are rising, traffic is softening, and margins are incredibly tight for most operators right now,” said Emily Williams Knight, the President and CEO of the Texas Restaurant Association. 

“It’s kind of been frustrating for like, restaurant workers, for sure, because, you know, you can see the difference in the tips,” said Olivia Huey, a server at a Texas restaurant. 

“Zip codes with a high proportion of Hispanic residents, that is where we are seeing a very direct correlation between immigration enforcement activities and lower sales and traffic that are hurting restaurants. So, think about San Antonio South Texas,” said Kelsey Erickson Streufert, a representative for the Texas Restaurant Association. 

Representatives for the TRA say a drop in international tourism is another cause of reduced traffic at restaurants across the state. 

“International tourism is a large percentage of spend in restaurants, and so we are watching that closely,” said Williams. 

What’s next:

Representatives for the TRA say these external pressures have to settle before the state’s restaurant business can bounce back to the industry’s pre-pandemic high growth phase. In the meantime, the group says restaurant operators will need to be proactive in managing menu prices, optimizing efficiency and finding creative ways to bring in customers. 

The Source: Information in this report came from the TRA.

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