From Pump to Plate: Fueling the Pressure on Restaurant Margins

The math doesn’t paint a pretty picture for restaurants. 

For every $1 increase in gas, QSRs can expect to see six fewer customers per day at the average drive-thru or a $22,000 annual loss, according to an analysis of 14.6 billion quick-service restaurant transactions from 2022 to 2026 across a wide range of QSR brands completed by Revenue Management Solutions (RMS.) 

RMS' Sebastian Fernandez cautioned that, while they don't have a crystal ball, they did model scenarios for an ongoing conflict predicting that if gas goes above $5 per gallon, they anticipate a three-percent decrease in traffic. 

Economic research shows that a sustained 10-percent increase in gas prices leads to about a five-percent reduction in restaurant spending, alongside a two-percent increase in grocery spending. In fact, consumers compensate approximately 70 percent of fuel cost increase by adjusting their behavior at restaurants and using more promotions at grocery stores.

When gas prices rise, Americans don’t actually drive much less – they change how they eat.

“When gas prices rise, Americans don’t actually drive much less – they change how they eat,”  said Dr. Thomas Weinandy, Principal Research Economist at cash back app Upside. “Since drivers still need to get to work and pick up their kids from school, they end up paying the higher gas prices but then cutting back in other areas, such as dining in instead of dining out.”

Higher oil prices do eventually impact food prices, research found, but the effect is modest and delayed. For example, a 10-percent increase in oil prices translates to about a 0.2-percent increase in restaurant prices after one year and a 0.6-percent in prices after two years. 

“This illustrates how consumers adjust their spending more quickly than restaurants as a result of oil shocks,” added Weinandy.

Struggling in the K-Shaped Economy

Rising gas prices are hitting restaurants at the worst possible moment, said Craig Miller, former Chief Information and Technology Officer at Sonic Drive-In and co-author of Bricks and Clicks: How We Drove Sonic Into the Digital Age. 

“This is coming after years of ‘food away from home’ inflation running hotter than groceries, since COVID, leaving operators with thin margins and consumers with thinner patience – especially in the lower and middle income cohorts of today’s K‑shaped economy.”

Because restaurants are the first discretionary spending households cut, even a temporary spike at the pump makes diners rethink nonessential outings, Miller added. 

“Many will eat out less; even more will avoid driving far for a meal.”

The Ripple Effects

Rising gas prices create a pressure on restaurants that goes well beyond what consumers would pay at the pump, said Alex Kushnir, retail and consumer partner at global consultancy Baringa. 

“From an operational standpoint, higher gas prices can create ripple effects across labor scheduling, delivery economics, and inventory planning. For example, if customer traffic becomes more localized or less predictable, restaurants may need to adapt staffing models and promotional timing more quickly.”

For operators, fuel inflation can raise distribution, food sourcing, and delivery costs, while also influencing how often and how far consumers are willing to travel for dining, Kushnir said, adding that operators with stronger data visibility across pricing, demand, and margin tend to be better positioned to protect profitability in this kind of environment.

“In practice, that means restaurants are often hit from both sides. They face higher operating costs and more selective customer spending. Restaurants typically can’t pass through fuel-related cost increases right away (albeit there are a few instances where additional blanket charges like a surcharge of three-to-five percent is applied on the bill), especially in a price-sensitive environment. Instead, many operators respond through a combination of selective menu price increases, portion optimization, tighter promotional planning, and menu engineering.”

Fuel price increases hit every part of the food chain, Eran Mizrahi, Founder and CEO of Source86, a global sourcing and supply chain partner in the food and beverage industry, pointed out. 

“When energy prices go up, production gets more expensive. A lot of food ingredients require processing, and those facilities run on energy. Then you have to get raw materials into the plant, ship the finished goods out, move them across the ocean, and that all runs on fuel too. And once it lands in the U.S., it’s still moving. Port to warehouse, sometimes to another warehouse, then to a distributor, then to retail, and sometimes all the way to someone’s doorstep. Every step adds cost when fuel rises.”

The bigger issue is that supply chains aren’t built to change overnight,  Mizrahi said. 

“Many sourcing decisions were made because something was cheaper to produce overseas. When fuel spikes, that math starts to shift, but you can’t just flip a switch and move ingredient production to another country or region. It takes time."

The Local Window of Opportunity

The current situation could open a window of opportunity for local restaurants and changes in the delivery dynamic, said Bala Subramaniam, Founder & CEO of Bites,an AI-native marketplace designed to combine the convenience of third-party delivery with the economics of first-party.

“Consumers have become more selective about the restaurants they choose to dine at or order from to save on personal gas costs, but also the imminent delivery fee increases because of rising gas prices. This opens the door for local restaurants to initiate special incentives or discounts to get people in the door.”

Local restaurants may benefit from that shift but still operate within tighter margins, so it’s crucial that they resist rising costs for customers as much as possible and cut costs elsewhere, he added.

Fernandez agrees there could be an opportunity for local restaurants because when gas prices rise, convenience closer to home becomes more appealing. 

“Restaurants with a strong neighborhood presence may have an opportunity to win guests who want an easy option nearby rather than making a longer drive. For independents especially, that can be a chance to lean into local visibility, convenience and a value story that feels practical and authentic.”

When it comes to delivery, restaurants are already pinched by third-party delivery service fees, creating a moment for restaurants to pivot toward owning their customers and activating delivery in a way that keeps price increases away from the consumer, and allows restaurants to truly profit from delivery sales, Subramaniam said. 

“The real opportunity here is not only driving demand, but making this demand sustainable.”

Looking Ahead to Summer Travel 

Kushnir said while transitory oil price spikes may be mitigated short term, prolonged elevated prices over several months would be fully expected to proliferate through the value chain. Lower discretionary household spend is expected to translate into less away from home excursions in the short term.

“I think a lot will depend on how quickly geopolitical conflict can be resolved, supply chains restored, and whether there is a significant pressure on demand until shocks subside. At some point, we will find the new equilibrium between affordability and businesses’ operating margin expectations … until then I do think that consumers will be more selective in which occasions warrant trips to restaurants."

Higher gas prices will have an impact on consumers' use of restaurants this coming summer, according to Charlie McConnell, VP Industry Insights, Education & Research at  IFMA, The Food Away from Home Association. Specifically, those restaurants located along heavily traveled highways that rely on summer driving will be the most impacted. Secondly, suburban restaurants that cannot be reached by foot are also at risk of seeing a decline in summer traffic.

“High gas prices should not make people more reluctant to go out to eat,” explained McConnell. “Instead, they might reduce their summer travel plans, especially if it involves a lot of driving. Delivery becomes a more attractive option for getting restaurant meals.”

Restaurants located in dense, urban areas that don't have parking lots and can be reached by foot, or public transit, will be the most immune from the summer driving cut back, he noted, however, there could be a general decline in domestic tourism if people decide they don't want to travel this summer due to high gas prices.

The Importance of Value and Affordability

McConnell said it would be counterproductive for restaurant operators to raise menu prices this summer due to increased gas prices because affordability is going to be a key driver of traffic.

For operators already absorbing higher distribution and fuel surcharges, the instinct is to raise menu prices again, but every additional increase risks accelerating the very traffic decline they’re trying to avoid, Miller cautioned. 

“There’s no crystal ball; the only reliable compass is understanding your customer and your local competitive landscape. And right now, that landscape is shifting unevenly across income cohorts in today’s economy.”

Weinandy added that the more immediate impact is behavioral.

“You’ll find that consumers pull back on convenience spending like a quick $5 gas station snack or add-on, but they still need to eat. That creates an opportunity for restaurants to win by leaning into value, planning, and digital engagement, especially through apps that help consumers make more deliberate choices.”

When budgets are tight, value is not just about price. It is also about convenience, consistency and making guests feel like they are getting more from the experience.

RMS' Fernandez believes the impact of rising fuel prices will be unequal, based on concept and unit makeup, adding that McDonald's grab at value may be the smartest play as value-oriented brands will fare best, but commuter locations and drive-thrus are likely to suffer. 

“Restaurants that rely heavily on commuter traffic, impulse visits and drive-thru convenience are likely to feel the most pressure. That includes suburban drive-thru locations, restaurants along commuter corridors and highway or travel-oriented stores.”

Fernandez said the most effective responses for operators are proactive, not reactive and value-oriented.

“Operators should lean into value messaging and bundle promotions, activate loyalty programs to reduce visit friction and use menu engineering to make existing value more visible. Location-specific pricing strategies, rather than brand-wide adjustments, tend to perform better because exposure varies significantly by trade area and daypart. When making price changes, brands should avoid increases that erode traffic.”

He anticipates brands will lean into technology more to help offset weaker drive-thru traffic by giving customers a stronger reason to visit and making the experience feel easy when they do. On the operational side, pricing technology can help brands model the traffic impact of price changes before they go live and respond more carefully by location. On the marketing side, digital loyalty programs can make ordering, rewards and offers feel simple and relevant. 

“When budgets are tight, value is not just about price,” Fernandez said. “It is also about convenience, consistency and making guests feel like they are getting more from the experience.”

One brand is hoping to take the edge off rising gas prices with an LTO that turns what diners are paying at the pump into savings at the table.  

Through April 3, dine-in guests at Snooze Eatery locations can receive savings based on their state’s average gas price. For example, the amounts would be $5.84 in California, $4.63 in Arizona, $4.59 in Nevada, $3.91 in Colorado, $3.41 in Georgia, $3.32 in North Carolina, $3.29 in Texas, $3.20 in Tennessee, $3.09 in Missouri and $3.09 in Kansas.

“We know gas prices are hitting everyone right now,” said Josh Kern, CEO of Snooze Eatery. “We can’t fix that, but we can give people a reason to feel good when they come in. Great food, real hospitality and a little relief where we can.”

Miller believes that unlike the sustained economic forces of the pandemic, this gas‑price surge is likely a transitory shock. 

“Short-term volatility doesn’t destroy demand -it redistributes it. Higher‑income diners may barely notice, while cost‑sensitive households stay home. That dynamic may create an opportunity for neighborhood independents to steal share.”

The challenge is that many restaurants, still recovering from years of margin pressure, have almost no room to absorb new costs and even less room to risk traffic losses from further price hikes, he said. 

“The operators who win will be the ones who can sustain traffic with strategic pricing, reinforce their value proposition, and stay top‑of‑mind in their immediate trade area. In a moment of volatility, customer loyalty and proximity become a competitive advantage – and the restaurants that understand their customers best will be the ones that keep them.”