AI and Automation Offset Shrinking Restaurant Labor Pool

A shrinking labor pool is driving heightened interest in AI and automation among restaurant operators, according to data from TD Bank. In fact, 40 percent believe labor efficiency, training and scheduling are the top areas where AI can deliver meaningful improvements, followed by consumer data analysis/market trend prediction (34 percent) and customer experience/personalization (28 percent.)

“Most people would argue that AI application is just beginning to be fully realized,” Mark Wasilefsky, Head of TD Bank’s Restaurant Franchise Finance Group, told Modern Restaurant Management (MRM) magazine. “In the restaurant space, the ability to manage data collected through digital services and delivery platforms will be a significant AI use case."

Labor management will also be a key area for the adaptation of AI, helping restaurants become more efficient, he noted. 

“Retention of talent has always been critical and it will be increasingly imperative to maintain managerial staff who are trained and highly valuable to the organization as labor shortages increase.”

Key Takeaways and 2026 Outlook

The bank surveyed 253 restaurant and franchise leaders at the recent Restaurant Finance & Development Conference. Among the key takeaways: 

• 82 percent expect industry-wide growth to improve or remain stable in 2026 despite labor and economic pressures.

• 60 percent of operators are confident their business will achieve positive traffic over the next 12 months.

• Mobile ordering and value menus tied as the top expected revenue drivers for 2026 (both at 53 percent), underscoring the importance of convenience and affordability.

Participants also cited key macroeconomic and policy factors shaping the industry, including: 

• Recent tariffs (26 percent)

• Immigration reform (25 percent)

• Shifting interest rates (10 percent)

Labor markets may face additional pressure from immigration reform, as well as from states continuing to pause mandated minimum wage increases, Wasilefsky noted, adding that he considers restaurant operators to be cautiously optimistic in the coming year due to a number of factors including AI. 

“It can improve labor management and help manage data obtained through loyalty programs and digital and mobile apps. This allows restaurants to further refine their marketing and consumer management.  The potential for lower interest rates with the announcement of a new Fed chair also has some operators more comfortable borrowing for capital needs. Products like chicken, energy drinks (including coffee), Mexican and Mediterranean are also sparking optimism as they continue to see growth and attract Millennial and Gen Z consumers.”

Optimizing Experience and Navigating a 'K-Shaped Economy'

Operators identified fast-casual global concepts (26 percent), coffee/specialty beverages (24 percent) and chicken (18 percent) as the categories with the most growth potential next year. Chicken concepts and kiosk-based energy drink/coffee concepts will continue to grow in 2026, albeit chicken may see a cooling due to the number of players entering the industry, Wasilefsky said. 

Although beef prices have plateaued, beef-based products, particularly burgers, will continue to be challenged by the rise of chicken and Mediterranean, he added. Beef prices will have less impact on brands that serve frozen beef, as they have more flexibility within this market than those using fresh alternatives. 

To better position their businesses and meet guest expectations, brands need to deliver efficient and enjoyable experiences, Wasilefsky said. 

“Digital tools, such as mobile apps, delivery platforms, and loyalty programs, allow brands to improve their service levels by customizing products to meet consumer expectations and to create a more custom-tailored environment. AI will help in managing and analyzing this data, likely improving drive-through experiences via automated order taking and data analysis.”

Within a challenging economic environment, often called the “K-shaped economy,” operators must also take advantage of value meals to attract lower- to mid-income consumers, he added.

“Limited time offers are also an excellent way to boost sales, though they can be expensive from a marketing standpoint. Overall, it is critical that brands do not remove their marquee products as this could lead to a dilution of the brand and a perceived loss in quality from consumers.”

On the finance side, Wasilefsky anticipates a considerable increase in refinancing as five-year notes taken out during the record low interest rate environment  in 2021 and 2020 mature. 

“Unfortunately, any interest rate action taken by the Fed in 2026 and beyond will not likely bring these borrowers back to the rates they enjoyed in earlier years. Higher leveraged borrowers will likely need to refinance as their interest costs increase. For floating rates, less leveraged borrowers, and smaller scale borrowers, the interest rate environment will be seen as positive next year.”