Nearly half of all Texas restaurants saw their revenues decrease over the last quarter, according to a new report from the Texas Restaurant Association. The vast majority — almost nine out of 10 — say their food costs are increasing.
And the Trump administration’s tariffs, along with its immigration policies, are partly to blame.
"We’re sounding the alarm on something that we’ve been watching very closely, that really played out in the Q3 data, and it’s really what operators are feeling, and that is an economic slowdown for our industry," Emily Williams Knight, the president and CEO of the Texas Restaurant Association, said during a virtual news conference Friday. "Costs are rising, traffic is softening and margins are incredibly tight for most operators right now."
The report surveyed more than 50 restaurants across the state in October. Eighty-eight percent of restaurants reported their food costs rose during the last quarter, while 40% said their costs went up “significantly.” Two out of every three restaurants also said their labor costs are increasing.
That's a result, at least in part, of some of the policies from the Trump administration, the restaurant association reported. All but 10% of restaurants said they were seeing costs increase as a result of tariffs. Fifty-eight percent said their food and beverage prices had increased, and 46% said their disposable items like containers and utensils had increased in price.
Beyond that, restaurants in predominantly Hispanic neighborhoods "are seeing a direct impact on sales and traffic in restaurants as a result of the immigration enforcement crackdown," said Kelsey Erickson Streufert, chief public affairs officer for the Texas Restaurant Association (TRA).
"We know that restaurants are following the law, checking immigration status, that type of thing, but there’s no doubt that there is fear amongst the community, even folks who have work status or are citizens, and some of them are afraid to be out in public," Streufert said. "And that is impacting not only our labor, which we need to be able to fully staff up during a busy holiday season, but it’s also impacting customer traffic."
According to the TRA's report, 19% of restaurants said they've seen traffic decrease and 19% reported losing employees as a result of immigration enforcement activities. Twenty-three percent said they've seen fewer job applications or job offers accepted because of the crackdown.
RELATED: Federal immigration crackdown slowing Texas job growth
Asked by a reporter about potential solutions, Knight was hesitant to provide insight, saying there were too many uncertainties to resolve for a definitive upturn.
"If I had a crystal ball, I would say we would love it to be sooner than later," she said. "But there are so many things right now out of the control of that restaurant, that small business owner, that I think that you have to have a number of them settle or be more defined on what the outcome is, for that operator to feel better about investing and growing — and for the consumer to feel better about going out and spending that money, because there is just so much uncertainty right now."
One outlier among Texas-based restaurants, the association noted, is Chili's, which is headquartered in Dallas. Casual dining restaurants generally are the only restaurants with more patrons this year, according to TRA. They attribute that to the restaurants’ predictability and its pricing.
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