Smarter Not Smaller: How Restaurants Are Navigating Economic Headwinds

In order to address ongoing economic strains, more restaurant operators are choosing to strategically use technology and data to become "smarter, not smaller." This approach focuses on targeted investments in technology designed to yield measurable benefits, helping them build more resilient and profitable businesses.

"Operators are investing in tools that deliver fast, measurable ROI," Samir Zabaneh, CEO of TouchBistro, told Modern Restaurant Management (MRM) magazine. "That means smarter scheduling, streamlined menus, better inventory control, and automation that frees staff to focus on hospitality. It's no longer about cutting corners, it's about running tighter, tech-driven operations that make every dollar count."

Data: A Backbone of Restaurant Success

Data has become indispensable for restaurant success. Operators are moving beyond reactive measures, proactively using insights to optimize every facet of their operations.

"Restaurateurs are using data to guide everyday decisions and improve margins," explains Zabaneh. A prime example can be seen in labor management. The TouchBistro 2025 State of Restaurants Report revealed that 99 percent of operators are spending more on labor. However, nearly 29 percent have successfully reduced labor costs by leveraging POS sales data to accurately predict staffing needs, ensuring efficient deployment without compromising service quality.

Data is also a driving force behind technology adoption. By analyzing performance data to pinpoint workflow inefficiencies, many operators are automating routine tasks. Over half of full-service restaurants have automated online ordering (57 percent), invoicing (54 percent), and email marketing (53 percent), leading to more efficient teams, increased productivity, and often, higher sales.

Even menu decisions are now data-driven. With escalating food costs, operators are streamlining menus based on detailed sales insights, emphasizing top-selling, high-margin items to protect profitability while maintaining a positive customer experience.

Proactive Measures Against Tariffs and Rising Costs

The lingering impact of tariffs, such as anticipated price hikes for imported spices, presents another hurdle. However, operators are taking proactive steps to mitigate these challenges.

Zabaneh suggests several strategies: "If a large portion of your ingredients are seeing price hikes, consider tweaking your menu to promote domestic staples and swap out heavily tariffed imports." Simplifying menu complexity can also streamline purchasing and reduce waste.

Furthermore, import tariffs are creating an opportunity to strengthen relationships with local producers. "‘Locavore’ or farm-to-table dishes continue to be attractive for consumers who appreciate supporting local growers," says Zabaneh, noting that highlighting seasonal and regional produce can enhance perceived value and offer a dynamic dining experience.

LTOs are proving to be an effective tool for attracting new diners and fostering loyalty. The report found that 81 percent of diners are more motivated to visit a restaurant with an LTO. Operators are leveraging this by introducing LTOs to drive visits without resorting to heavy discounting that eats into already slim margins.

Technology:  A Key to Efficiency and ROI

Technology is playing a pivotal role in enabling operators to work smarter. Advanced platforms like POS systems, inventory management software, and employee scheduling tools provide real-time insights and automate repetitive processes.

"AI-powered tools like menu optimization and reservations systems are key features," explains Zabaneh. A remarkable 95 percent of operators are already utilizing some form of AI, reporting significant returns on investment: 42 percent report increased staff productivity, 41 percent see higher sales, and 40 percent experience overall business growth.

"Now is the perfect time to invest in technology," Zabaneh emphasizes, as it empowers restaurants to adapt, innovate, and thrive in a competitive market by minimizing errors and freeing staff to focus on exceptional service.

Evolving Menus and Consumer Preferences

In the coming year, menus are expected to continue their evolution in response to financial conditions. While menu price increases are no longer a viable sole solution, operators are adapting in other ways. Almost one-third (32 percent) have already eliminated certain menu items to cut expenses.

"We anticipate that operators will be more intentional about what’s on their menus while taking a close look at which items bring in the highest revenue, whether through popularity or profit margins, and adapting to consumer sentiments," said Zabaneh. A notable shift is the increasing inclusion of non-alcoholic drinks, reflecting changing consumer habits, he noted. 

AI is also poised to play a greater role in optimizing menu design, streamlining inventory management, and reducing food waste. Restaurants may also focus on value-driven options, such as smaller portions or prix-fixe menus, to balance affordability with quality.

Loyalty and Personalized Marketing Win Repeat Customers

Attracting and retaining guests in a crowded market relies heavily on loyalty and personalized marketing efforts. These strategies create tailored experiences that make customers feel valued.

"70 percent of operators are now sending personalized offers based on customer preferences, helping redefine loyalty programs as more than just discount channels," said Zabaneh. The engagement with loyalty programs is also on the rise, with nearly half (47 percent) of diners engaging at least once a week, a significant increase from 34 percent in 2023.

By leveraging customer data and AI technology, restaurants are building meaningful connections and driving repeat visits. Furthermore, a strong digital presence, including platforms like TikTok—which has seen a massive spike in usage among operators—is crucial for expanding reach and keeping brands top of mind.