The foodservice industry will continue to struggle with intensifying headwinds in 2026 – the labor crisis, higher costs and disaffected customers all contributing. There will be ways to strengthen the bulwarks against these forces, but they may not be enough to totally protect viability.

Here’s what to expect in the new year.

Profitability’s squeezed as consumers seek value amidst rising costs

Consumer sentiment is one of the biggest variables in the outlook for food service. Widespread uncertainty has led to “value” being the operative word for driving traffic through the doors. But not every player can deliver: While “dining on a deal” is up 1%, foodservice traffic overall is down. Inflation is driving sales growth more than real traffic is.

Adding to the pressure is the struggle to manage soaring costs that are impacted by the triple whammy of inflation, a volatile supply chain, and a deepening labor crisis that’s driving up pay levels.

Food, beverage and labor, for example, account for 70% of a restaurant’s expenses. In 2026, the former category is expected to rise 3.3% after a 3.9% increase in 2025. Then there are labor costs, which 89% of operators expect to continue to rise – significantly, according to a third of them. General foodservice wage increases should be in the 3% to 3.5% range, but the sector also faces minimum wage hikes in specific markets like California (a $20-plus minimum for fast food).

One factor that may help reduce the pressure is greater reliance on technology to lower operating costs and boost return on investment. Not only do tech solutions help narrow some of the staffing gaps (by allowing operators to do more with less), but capabilities like seamless payment and contactless options improve the guest experience. Artificial intelligence by itself will drive an expanding range of gains; use of AI voice assistants for commerce overall should explode by 320% as the year advances.

If there’s a downside risk to expanding technology investment (besides affording the costs) it’s in the increasing vulnerability to cyberattacks that can disrupt operations and cause financial loss. In addition to strengthening controls, it makes adequate cyber insurance essential. Rates in 2026 should stay stable for those that are vigilant about security.

In terms of other insurance lines, the foodservice must tighten their risk protocols for liquor overservice and violent acts as related liability coverage rose by as much as 20% in 2025’s fourth quarter.

Labor shortage is now systemic

The food service sector will continue to struggle to fill jobs in 2026. While job growth has surpassed pre-pandemic levels in some states, it’s still spotty among segments: Quick serve and fast casual employee counts are ahead by 107,000 jobs, but full service establishments are 212,000 jobs below. Recruitment and retention is a top concern for 77% of operators in 2026. It’s not just unfilled openings that’s a concern. Turnover’s an issue, running slightly higher than norms before COVID.  

What compounds the shortage is the lack of workforce participation by 16- to 19-year-olds to replace a large number of retirements. Current immigration policies are another factor, as unauthorized workers comprise some 8% of leisure/hospitality employment.

In response, foodservice operators are bumping minimum hourly wages to $15 and adding perks, improved benefits and signing and retention bonuses. Benefits are a big differentiator. Successful recruitment and retention in 2026 require individualized benefits that emphasize employee wellness, like mental and financial health. Leveraging employee data through analytic resources like persona analysis is instrumental for modernized benefits programs that help stabilize staffing. 

The resilience test: a tough market for insurance

Risk management has never been more important than in today’s tough business environment. The insurance side of the equation is challenging as underwriting standards are tightening, and policy terms are more strict. Further, carriers expect insureds to provide documentation of their risk management planning.

One area they’re looking hard at: protocols for addressing workplace violence and harassment and active shooter complaints. Workplace violence alone is a big risk, one that 65% of restaurant workers have experienced, according to the National Institute for Occupational Safety and Health (NIOSH). De-escalation plans and training have become imperative.

Climate risks are another concern, and they’ve made property insurance rates complicated and availability tight. Especially in high-risk regions, operators must have detailed plans in place to minimize losses.

The ability to demonstrate strong defenses will typically result in more favorable terms – whatever the coverage line. Operators that have forged strong relationships with experienced brokers and risk advisors will be best positioned for the challenges ahead.

Speak to your insurance advisor to learn more about implementing effective emergency and crisis management plans that include detailed carbon monoxide exposure prevention measures, as well as strategies for recovery. Learn more at: https://www.hubinternational.com/industries/hospitality-insurance/restaurant-insurance/