The restaurant industry is holding steady through the third quarter, both in visits and loan performance, though a closer look at traffic patterns reveals shifting consumer behavior, according to a new analysis from Trepp.
The National Restaurant Association’s Restaurant Performance Index rose 0.1% in August to 99.8—just below the expansion threshold of 100—indicating mild contraction. Despite the dip, operator sentiment has improved: 40% of surveyed restaurant owners expect higher sales volumes six months from now, up from 29% in July and the highest level of optimism since February. The association forecasts industry sales will reach $1.5 trillion in 2025.
While overall restaurant visits slipped slightly, same-store sales rose in August, suggesting consumers are becoming more selective amid ongoing economic uncertainty. Quick-service restaurants (QSRs) saw a nearly 4% year-over-year decline in foot traffic, according to Placer.ai. In response, brands like McDonald’s and IHOP have launched new value meal promotions to appeal to budget-conscious diners.
In contrast, fine dining establishments recorded a 3% increase in traffic in August and coffee shops saw gains of more than 2%. Visits to fast-casual and casual-dining restaurants edged higher in both July and August. Placer.ai also noted that many consumers frequenting QSRs have increased their visits to value-oriented retailers such as Aldi and Dollar General, which offer groceries. This trend suggests that some diners who previously chose McDonald’s, Chick-fil-A or Panda Express may now be opting for grab-and-go meals from grocery stores instead.
Despite these shifts, Trepp reported stable loan performance across the restaurant sector. Credit ratings have softened slightly, but delinquency rates remain near zero, with most borrowers continuing to meet debt obligations.
Over the past five quarters, Trepp’s analysis of banks’ internal credit risk ratings has shown a gradual migration toward lower grades. The share of loans rated “4” declined from 33% to 24%, while “5”-rated loans increased from 35% to 38% and “6”-rated loans rose from 2.8% to 5.3%. Trepp translates banks’ internal ratings into a standardized nine-point scale, where movements from grades 1–5 to 6–9 indicate weakening credit quality.
“The evolving credit distribution, as measured by standardized ratings, indicates a growing divergence between performing and struggling restaurants,” Trepp noted.
“That said, even the struggling restaurants are managing to service their debt.”
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.