Foodservice: Channeling ‘permissible indulgence’

Although the pandemic is several years behind us, its effects still linger in the foodservice industry. Toss in inflation and soaring costs and the sector continues to struggle.  

According to Chicago, IL-based Datassential, prepared food and nonalcoholic beverage sales reached $940.4 billion in 2025, up from $897.8 billion in 2024. Consumers are willing to spend, they’re just being choosy.

“Traffic has stabilized, inflation has cooled slightly, and operators have become more adept at managing costs,” observes Deena Ensworth, senior content manager at Markon Cooperative, Inc. BB #:123315 in Salinas, CA.

“Still, margin pressure remains real, and consumer behavior is shifting in ways that reward some sectors and challenge others.”

Consultant Jill Overdorf, based in Torrance, CA as The Produce Ambassador, breaks it down further.

“Quick-serve restaurants (QSR), hospitality, higher ed, healthcare, and value-driven casual dining show strength, while independents, white tablecloth, K-12, and generic fast casual are struggling with different constraints.”

So what’s resonating most with consumers in how they decide to spend? We explore.  

“Consumers still want their foodservice fixes but they’re scrutinizing price more critically.” 

What Constitutes Value?

Given today’s economic realities, consumers and operators alike are prioritizing value.

“Limited-service segments like QSR are holding up better than full-service, as value-conscious consumers trade down,” explains trendologist Huy Do, Datassential’s research and insights manager.

“Consumers still want their foodservice fixes,” agrees Overdorf, “but they’re scrutinizing price more critically.” 

To lure consumers back into their establishments, nearly three-quarters of foodservice operators launched or revived value-based menu strategies in the past six months according to Datassential.

“Winning on value increasingly requires more than low prices,” cautions Do. “Nearly two-thirds of consumers define value through quality and experience, not just what something costs.”

For restaurants and other foodservice venues, value equates to savings on both sides of the register. To provide more value to consumers, they must be increasingly cost-conscious with their own spending.

“Full-service restaurants (especially independents) and catering are feeling the most pressure from rising input costs and inconsistent supplies,” notes Ensworth.

“Many are simplifying menus to control food costs (think cross-utilization) and ordering precut items to reduce labor costs by reducing prep. AI and automation are coming into the mix as well.”

Jasmine Monteil, director of business development and procurement for distributor CDS Foods Inc. BB #:169939 in Montréal, QC, concurs. “Demand is stronger where products provide consistency, labor savings, and reliable supply.

“Growth is coming from practical, value-added formats that help kitchens save time and reduce waste. Packaging that supports efficiency, food safety, and portion control is also increasingly important.”

Operational Shifts 

In addition to higher costs and changing consumer behaviors, operators and vendors face challenges ranging from unpredictable supply levels to currency fluctuations.

“This is forcing everyone along the supply chain to rethink sourcing, menu strategy, and operational efficiency,” points out Ensworth.

“Labor shortages remain a persistent challenge, and with reduced immigration, workforce pressure is expected to intensify as a major issue for foodservice.

“Value-added products reduce training needs, cut back on labor hours, and create some much-needed budget flexibility, helping operators manage costs without letting menu prices climb out of control,” she adds. 

Off-premises dining is still central to foodservice operations, and although it’s stabilizing, it’s still below previous peaks.

Datassential’s Do reports operators investing in digital-first ordering flows, especially via mobile, are seeing success.

Operators are also designing new locations built around dedicated pickup zones, mobile-order cubbies, separate delivery driver areas, and smaller dining rooms.

“The emerging opportunity for operators is permissible indulgence: giving consumers something that feels like a treat and a smart choice at the same time.”

Innovation Is Essential

To offset higher costs, collaboration from field to fork is not just ideal but paramount.

“Despite a challenging year, the industry is seeing real innovation,” points out Ensworth, noting myriad gains from value‑added fruits and vegetables, better forecasting, and packaging.

She also mentions waste reduction and improved shelf life, as well as cross functionality of ingredients, better sourcing strategies, and more collaboration. “These actions can’t eliminate volatility, but they will make the industry more adaptable, efficient, and stable over time.”

Functional wellness is trending upwards as well. “GLP-1s, protein, fiber, smaller portions, hydration, and plant-forward options are influencing menus,” notes Overdorf. “But diners still want pleasure, through flavor, service, and novelty.”

“The emerging opportunity for operators is permissible indulgence: giving consumers something that feels like a treat and a smart choice at the same time,” agrees Do.

Other trends influencing foodservice menus include beverage makeovers (including refreshers and functional drinks), global flavors, snackable experiences, and flexible daypart eating.

Competitive Pressures

Value and innovation aren’t just influencing restaurants of all types and sizes, but the retail grocery realm as well.

“Retail foodservice and meal solutions have evolved significantly over the past decade and have become a genuine source of competition for traditional restaurants,” Do says.

“Restaurants still hold a significant edge in creativity, variety, taste, and innovation, while retail is winning where consumer priorities have shifted: affordability, value, and speed.”

“Grocery cafés, prepared meal solutions, and upgraded convenience stores are capturing occasions restaurants used to own: quick lunch, dinner replacement, healthy grab-and-go, snacks, beverages, and value meals,” adds Overdorf.

“Fresh produce is central to this shift because it helps non-restaurant channels look fresher, healthier, and more meal-worthy.” Yet traditional restaurants, she says, still have the advantage.

“Those who adapt quickly and plan strategically will be the ones who gain the most ground.”

Future Outlook

What’s up for foodservice over the next year or so? Will costs come down or is this the new normal?

“Growth will continue but remain modest,” weighs in Keenan Marchesi, Datassential economist, who expects total industry spending to reach $978.8 billion in 2026 and retail foodservice to outpace restaurants.

“Consumers continue to spend despite the recent record-low consumer sentiment, emphasizing the role of foodservice as a reprieve and third space,” Marchesi adds. “Similarly, we’ve seen foodservice employment continue to increase over the last several months, signaling healthy growth in the industry.” 

The biggest risk factors, according to Marchesi, are policy-driven cost impacts and the ongoing conflict in Iran, which continues to affect gas prices and food costs, lowering consumer discretionary spending.

If there’s a definitive end to the conflict, Marchesi sys there’s no telling how quickly prices will fall. Nevertheless, Monteil sees a period of cautious optimism ahead.

“Operators that prioritize efficiency through value-added products and smart menu cross-utilization will be best positioned to navigate this environment,” she says.

Ensworth predicts technology will drive more change across the supply chain and in back-of-house operations. “Those who adapt quickly and plan strategically will be the ones who gain the most ground.”

Fresh fruits, vegetables, and herbs can certainly play a role to help drive growth.

“Fresh produce has a real opening, but only when positioned as craveable, functional, flexible, and margin-smart—not as a garnish, obligation, or vague wellness,” stresses Overdorf. “The winners will make produce feel like flavor, abundance, freshness, and value on the plate.”