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Mid-year analysis of more than 420 restaurant operators representing nearly 10,000 locations finds AI adopters report reductions in food and labor costs and greater operational efficiency as industry conditions improve.
This article first appeared in PR Newswire.
IRVINE, Calif., July 16, 2026 /PRNewswire/ — Restaurant365, the leading restaurant management platform, today released its 2026 State of the Restaurant Industry Mid-Year Report, identifying what it calls the Restaurant Profitability Gap – a measurable difference in business performance between restaurants using AI to turn operational data into intelligent action and those that have yet to adopt AI.
Drawing on survey responses from more than 420 restaurant operators representing nearly 10,000 U.S. restaurant locations across quick-service, fast casual, casual dining, fine dining, pizza, and coffee concepts, the research suggests AI is beginning to create meaningful separation in restaurant performance. Operators using AI report stronger results across key profitability drivers, including food costs, labor costs, and operational efficiency.
The findings come as restaurant operators continue to navigate elevated costs while benefiting from improving guest traffic and growing economic optimism. Rather than relying primarily on menu price increases, many operators are improving margins through better operational execution and increasingly, AI-enabled decision making.
“Every major shift in our industry creates a new line separating leaders from everyone else,” said Tony Smith, CEO and Co-Founder of Restaurant365. “We call that the Restaurant Profitability Gap, and our research suggests that the operators who are consistently pulling ahead aren’t simply adopting AI, they’re using it to make faster, better decisions everyday. That’s translating into lower costs, improved efficiency and stronger financial outcomes.”
Understanding the Restaurant Profitability Gap
Restaurant365’s research suggests the industry’s growing adoption of AI is beginning to create measurable differences in operational performance.
Sixty-two percent of operators have implemented or plan to implement AI in at least one back-office function – more than double the level reported at the beginning of the year. Reporting and analytics lead adoption, followed by scheduling and inventory forecasting.
Among operators actively using AI:
The data suggests restaurants using AI-assisted forecasting, scheduling, and cost management are better positioned to convert improving traffic into stronger profitability.
For operators not yet adopting AI, the leading barriers remain data privacy and security concerns (37%), confidence in output accuracy (34%), implementation cost (29%), and uncertainty about where to begin (18%).
Industry Conditions Beginning to Improve
While cost pressures remain, operators are becoming more optimistic about the second half of 2026.
Eighty-three percent of operators reported food cost increases during the first half of the year, while 75% experienced higher labor costs. Encouragingly, only 59% expect labor costs to continue rising through year-end—the lowest reading in three years of Restaurant365 research and a significant improvement from the beginning of the year.
Operators are also becoming less reliant on menu price increases to protect margins. Just 52% increased menu prices in response to food inflation, down from 66% at the start of the year, as more restaurants turn to inventory management, waste reduction, and supplier optimization.
Guest traffic has also rebounded more quickly than expected. At the beginning of 2026, only 28% of operators reported increased traffic. Mid-year, that figure has climbed to 46%, while 62% now expect traffic growth during the second half of the year.
The Staffing Challenge Is Evolving
Despite improving business conditions, recruiting and retaining employees remains among the industry’s most frequently cited challenge. Bureau of Labor Statistics (BLS) data puts restaurant turnover at approximately 74% as of March 2026. Black Box Intelligence, whose monthly workforce data represents the restaurant industry’s most widely cited labor benchmark, reports that non-management turnover in limited-service restaurants declined seven percentage points year-over-year in Q1 2026, reflecting early returns on pandemic-era wage investments, but structural challenges.
What is changing is how operators are addressing it. For the first time in Restaurant365’s research, better training programs have overtaken pay increases as the most frequently cited employee retention strategy. That shift reflects an evolution of what it takes to keep people: competitive compensation opens the door, but sustained investment in development, culture, and day-to-day experience determines whether employees stay.
Looking Ahead
As AI adoption accelerates across the industry, Restaurant365 believes the Restaurant Profitability Gap will become an increasingly important benchmark for understanding operational performance.
The 2026 State of the Restaurant Industry Mid-Year Report provides restaurant leaders with benchmarking data and practical insights across food costs, labor, staffing, guest traffic, AI adoption, and profitability to help operators evaluate where they stand and identify opportunities to improve performance in the second half of the year.
The report is available at restaurant365.com.
About Restaurant365®
Restaurant365 is the platform that unifies restaurant accounting, inventory, workforce management, payroll, and operations into a single system of action. Powered by R365 AI — the intelligence engine built for the back office — Restaurant365 helps operators control food and labor costs, accelerate financial close, reduce manual work, and make faster, more profitable decisions. Its connected ecosystem includes integrations with hundreds of leading POS systems, vendors, and banks, delivering unmatched visibility across the business. Restaurant365 is headquartered in Irvine, California, and is backed by Bessemer Venture Partners, ICONIQ, KKR, L Catterton, and Serent Capital. Additional information is available at restaurant365.com.
This article first appeared in PR Newswire.
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