Restaurant Lending Outlook: 2025 Brings Stability, but Beef Costs Up 12%

August 11, 2025

Bob Coleman
Founder & Publisher

Main Street Monday — Restaurant Lending Outlook: 2025 Brings Stability, but Beef Costs Up 12%

For lenders eyeing the restaurant sector in 2025, the narrative is shifting from crisis management to strategic opportunity—but with a few red flags worth noting.

Inflation Easing, Planning Horizons Expanding
The Federal Reserve projects core inflation at 3.1% for 2025, with further moderation expected into 2026–2027. June’s CPI showed just a 2.7% year-over-year rise, and food-at-home prices are forecasted to climb a modest 2.2%—below the 20-year average. For restaurant borrowers, this stability means better cost forecasting, improved margin control, and more bandwidth to reinvest in growth initiatives.

Commodity Pressures Still in Play
Not all inputs are behaving. Beef prices have surged 12% year-over-year due to drought-related herd reductions, high grain costs, and a temporary ban on imported Mexican cattle over parasite concerns. Lenders should be alert to operators with heavy beef exposure, as menu reengineering or sourcing flexibility will be critical for profitability.

Tariff Impact Softening
Tariffs are no longer the headline risk they were a few years ago. A temporary U.S.–China trade truce has eased uncertainty and boosted consumer sentiment. Many operators are mitigating cost pressures by pivoting to domestic sourcing, renegotiating vendor contracts, and tightening supply chains—all positive signs for cash flow stability.

Supply Chain Resilience Driving New Models
Restaurants continue to adapt through local sourcing, vertical integration, and sustainable farming practices, including hydroponics and urban agriculture. Casual dining brands are experimenting with prix fixe menus, bundled offerings, and tech-enabled service to maintain value perception while protecting margins. These operational pivots are important indicators of borrower agility—often a key determinant of repayment strength.

Bottom Line for Lenders
The sector is showing resilience and a renewed capacity for profitability. While inflation, tariffs, and supply chain challenges remain part of the landscape, the prevailing sentiment is cautiously optimistic. For lenders, 2025 offers a window to finance operators who demonstrate strong cost control, strategic flexibility, and a customer-first value proposition.

Source: Citizens Financial Group Restaurant Industry Insights, July 2025

Lender Risk Concerns

  1. Commodity Volatility
    Significant beef exposure without sourcing flexibility or menu adaptability.

Heavy reliance on other commodities with unstable pricing (e.g., seafood, coffee, specialty grains).

  1. Supply Chain Dependence
    Single-source vendors or lack of domestic sourcing options.

Minimal investment in local or alternative supply solutions.

  1. Margin Pressure
    Inability to renegotiate vendor contracts or adjust pricing without losing customers.

High labor costs without operational efficiency gains.

  1. Capital Allocation
    Borrowers using capital primarily for maintenance rather than strategic growth.

Lack of investment in tech-enabled service models or customer experience upgrades.

  1. Market Position Risk
    Overreliance on discretionary consumer spending in a tightening economic environment.

Weak brand differentiation in crowded casual dining segments.