From Covid to the end of 2025, the F&B and restaurant industry has fundamentally reset — not temporarily corrected.
The most significant change has been structural cost pressure.
Labor remains the biggest challenge. Qualified talent is harder to secure, and evolving workforce expectations around work-life balance have permanently raised operating costs. This is not cyclical — it’s a new baseline.
Inflation has amplified the problem. Over the past five years, food, packaging, logistics, importation, utilities, and services have increased sharply — in many cases more than doubled. Cost of sales has structurally expanded across the industry, compressing margins regardless of volume growth.
Rent has re-emerged as a major pressure point. Temporary Covid relief was reversed over the last 24–36 months, with landlords recovering lost ground aggressively. Occupancy costs are now one of the leading drivers of unit-level underperformance.
The result has been predictable:
Margin erosion
Cash-flow pressure
Balance sheets moving from stable to stressed
Increased creditor exposure
A healthier competitive landscape
One positive outcome: the exit of non-core investors who entered F&B assuming historical profitability would continue. The industry has become more rational, with competition increasingly concentrated among experienced operators and long-term restaurateurs.
Expansion strategies under scrutiny
Aggressive international expansion, often backed by external financing, has proven riskier than expected. Many brands underestimated operational complexity, governance challenges, and local execution risks.
As a result, we are seeing a shift toward:
-Tighter geographic focus
-Fewer but stronger markets
-Emphasis on unit economics over headline growth
-Emerging markets remain attractive, but history shows they can mature quickly. Dubai and China are near-saturation examples, where only highly differentiated and well-capitalized concepts continue to succeed.
Market recalibration underway
Competition is intensifying as demand softens
Large chains are rationalizing footprints (Starbucks, Subway, others)
Smaller, more efficient formats are becoming more viable than large-scale rollouts
Consumer behavior has also shifted:
-Reduced visit frequency
-Lower average spend
-Declining alcohol consumption
-A reshaping of nightlife and beverage-led concepts
-At the same time, health-driven, sustainable, and transparent food concepts continue to show resilience.
Outlook: 2026 and beyond
2026 will be a defining year:
-Increased M&A activity
-More selective and complex financing
Continued bankruptcies until market correction stabilizes
Growth will favor:
-Disciplined operators
-Strong balance sheets
-Scalable but controlled expansion models
-Clear brand differentiation
The industry is not contracting — it is consolidating.
Those who survive this phase will emerge with stronger market positions and long-term value creation potential.
At the end , wishing you all a happy and healthy 2026.
Cafe de Vie 