US Restaurants Face Growth Hurdles As Macro Headwinds Mount, Says Analyst

Goldman Sachs analyst Christine Cho on Wednesday provided a preview of the first quarter for U.S. restaurants.

What Happened: U.S. restaurant companies faced a tough start to 2025, with weaker consumer sentiment, weather impacts and tariff uncertainties affecting performance, except for a few like Brinker International Inc EAT.

Although first-quarter softness was expected, risks remain on the downside due to macroeconomic and policy uncertainties, as reflected in Chipotle Mexican Grill Inc.’s CMG same-store sales growth miss and lowered guidance.

These factors are likely to dominate investor attention during the earnings season, noted the analyst.

Despite no major changes in consumer intent for restaurant spending, recent adjustments to estimates reflect lower macroeconomic forecasts from GS economists, including slower GDP growth and a higher recession probability.

Restaurant sales trends are closely tied to consumer spending, and weaker macro conditions suggest lower comparable store-sales growth in the second half of 2025 and into 2026.

Inflation’s impact on margins is limited, and there’s a higher risk to global restaurant development plans, particularly in international markets, which could reduce long-term unit growth, the analyst said.

Economists predict a slowdown in U.S. GDP growth to 0.5% in 2025, down from 2.5% in 2024, with a 45% recession risk, up from 20% earlier in the year due to tightening financial conditions, foreign boycotts, and policy uncertainty.

Also Read: PepsiCo CEO Warns Of Tariffs Led ‘Increase In Supply Chain Costs,’ Cuts Annual Profit Outlook

The deceleration in consumer spending and macro headwinds are putting pressure on restaurant top-line growth, with varying impacts across different restaurant types.

Fast food restaurants show the lowest sensitivity to macroeconomic conditions, with higher resiliency compared to fast casual and full-service restaurants, which are more correlated with GDP and consumer discretionary spending.

Recent surveys show no significant shifts in consumer purchase intent for restaurants, with full-service restaurants seeing improvement compared to grocery stores, while limited-service restaurants have contracted in recent months.

What’s Next: Companies like Wendy’s Co WEN, Bloomin’ Brands Inc BLMN, Domino’s Pizza Inc DPZ, Wingstop Inc WING, Yum! Brands Inc YUM, and Jack In The Box Inc JACK have higher lease-adjusted net leverage, with Starbucks Corp SBUX and Domino’s facing notable near-term debt maturities.

Slower same-store sales growth and higher build costs are expected to hurt franchisee profitability and reduce demand for new stores.

Many fast food chains anticipate slower unit expansion in 2025, with Jack in The Box planning major cutbacks and closures, while fast casual/casual dining brands remain mostly on track.

Potential U.S. tariffs may raise domestic build costs, while international growth faces challenges from weaker global demand and rising anti-U.S. brand sentiment.

U.S. tariff actions and foreign policy stances have damaged international perceptions of the U.S., raising concerns about reduced demand for American brands.

While it’s too soon to measure definitive consumer pullback, monitoring sentiment is increasingly important for U.S. brands abroad.

Morning Consult data shows a YTD decline in U.S. favorability across most tracked countries, particularly Canada, Western Europe and Mexico.

Despite rising anti-U.S. sentiment globally, current data indicates no strong link between U.S. tariffs and Chinese consumer attitudes toward U.S. brands.

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