SURVEY: MORE THAN 2 IN 5 CASUAL DINING RESTAURANTS LIKELY TO CLOSE THIS YEAR

SURVEY: MORE THAN 2 IN 5 CASUAL DINING RESTAURANTS LIKELY TO CLOSE THIS YEAR

COMBINATION OF RISING COSTS, FEDERAL WORKFORCE CUTS, DECLINING TRAFFIC JEOPARDIZE LOCAL INDUSTRY

More than two in five full-service casual restaurants in the District say they are likely to close in the coming year, according to a new survey by the Restaurant Association of Metropolitan Washington (RAMW). The survey, to be released at tomorrow's RAMW Annual Meeting, shows an industry struggling simultaneously with falling sales and customer traffic, escalating food costs, major federal layoffs, and the ongoing impact of tipped wage increases. The situation is particularly severe for neighborhood full-service restaurants that have long defined DC's dining culture.

Key Findings

Full-Service Casual Restaurants in Jeopardy: 44% of DC's full-service casual restaurants say they are likely to close in 2025 (11% very likely, 33% somewhat likely) as rising costs and tipped wage increases outpace revenue – almost triple the number of fast casual establishments (15%) and nearly double that of suburban restaurants (23%).
Customer Traffic and Sales Continue to Fall: Nearly half (49%) of all restaurants saw fewer diners in 2024 than the previous year (up 20%), while those experiencing lower sales jumped to 47% (up 52%). Diners are increasingly staying home due to rising prices, with 47% of DC residents saying they're dining out less frequently.
Job Cuts Deepen: Following a year of steady full-service restaurant job losses and tipped workers earning less (79%) and clocking fewer hours (56%), nearly 9 in 10 (85%) of DC full-service casual restaurants and almost two-thirds of other segments anticipate further cuts in 2025.
Under Pressure from Inflation, Federal Actions: Restaurants face unprecedented challenges from multiple directions and express mounting concerns over widespread rising costs, including diners’ price fatigue (91%), credit card fees (77%), and continued elimination of the tip credit (72%). Adding to these pressures are increased tariffs (82%), federal workforce layoffs (73%), and immigration changes (68%) made in the new administration's first 100 days.
Forecast Points to More Downturn: More than half (51%) of restaurants expect conditions to worsen in 2025 – a 21% increase from the previous year’s survey. The District's Chief Financial Officer estimates federal job cuts will lead to a $342 million decline in city revenues. RAMW models forecast that if the tipped wage increases another 20% in July, restaurant closures will spike 50% – exceeding 100 – and cut overall industry job growth by 2%.

“Our District's full-service restaurants – the gathering places that define neighborhoods and create the cultural fabric of our city – are facing a historic combination of pressures,” said Shawn Townsend, President and CEO of RAMW. “The data illustrates multiple substantial burdens converging at once, threatening not just single businesses but potentially altering DC's distinctive dining landscape. Without meaningful intervention, we risk losing the independent restaurants that make Washington a world-class dining destination.”

Falling Profits, Rising Costs

Profitability is declining across the local restaurant industry, with 62% reporting lower profits in 2024 – a 29% increase from 2023's survey. This decline is especially strong in the District, where 67% of full-service casual and 69% of fast casual report decreasing profitability, compared to 52% of suburban restaurants.

The financial strain comes from multiple directions – sales have fallen for 47% of all restaurant segments (a 52% increase from the previous year), while costs continued to rise. Food and beverage expenses increased for 68% of restaurants (averaging an 18% jump), with January wholesale food costs up 8% from last year. These mounting pressures are forcing difficult decisions, with 88% of restaurants expecting even higher expenses in 2025.

Higher Prices Changing Diners' Behavior

Customer traffic is similarly declining, with 49% of restaurants seeing fewer diners in 2024 – 20% more than did the previous year. The drop hits DC full-service casual restaurants hardest, with 53% experiencing decreased traffic, compared to 43% of suburban establishments.

A survey of District residents found rising prices are leading many to cut back on restaurant spending; 47% are eating out less, and 46% are more likely to choose restaurants in Maryland or Virginia. Other ways diners’ habits are changing in response to higher prices:

32% are selecting less expensive restaurants.
31% are ordering fewer dishes per visit.
24% are skipping alcoholic drinks.

These shifts compound the revenue challenges restaurants face, as customers not only visit less often but spend less when they do.

Job Cuts Deepen

Full-service restaurant jobs are contracting, with monthly employment averaging 3% below the same month of the previous year. The sharpest decline (6%) came in summer following July's 25% tipped wage increase and nearly tripling of the District's Paid Family Leave tax. By comparison, monthly restaurant employment fell just 1% year-over-year in Maryland and Virginia.

The survey shows the human cost of these economic pressures – 71% of DC restaurants have reduced their workforces. Cuts are most severe in full-service casual restaurants, where 85% have reduced staff hours, made layoffs, or implemented hiring freezes, compared to 54% of fast casual and 61% of suburban restaurants.

Entry-level positions suffered the worst. Supporting roles including bussers, food runners, and hosts faced the most significant reductions; 82% of restaurants have cut their hours, 43% have implemented layoffs, and 52% have stopped hiring for these positions altogether.

“We've already cut everywhere we can cut,” said one restaurant owner. “We've reduced hours, eliminated positions, and streamlined our menu. But with another wage increase coming in July and fewer office workers dining out, I honestly don't know if we'll make it to 2026.”

Earnings from Tips Are Down

Tipped workers’ earnings are declining across the board, with 79% earning less in tips and 56% working fewer hours in 2024 than the previous year. Tipped workers further expressed concern for the long-term viability of their jobs:

71% of tipped workers said they or someone they knew has had hours reduced.
54% said they or someone they know has been laid off.
78% have seen reduced customer traffic affect tips.
78% have experienced increasing customer resistance to higher prices, and 72% have seen higher menu prices negatively affecting tips.

“The data shows that while the hourly tipped wage is increasing, overall earnings are moving in the opposite direction,” Townsend said.

Inflation, Tariffs, Federal Job Cuts, Immigration Dominate Concerns

An overwhelming 91% of restaurants express concern about diners' willingness to pay higher prices, while 77% worry about mounting credit card swipe fees and 72% about the elimination of the tip credit. The new administration's first 100 days has compounded these challenges: 82% of restaurants are concerned over how tariffs will increase food, beverage, and equipment costs; 73% anticipate negative effects from federal workforce layoffs and relocations; and 68% worry about how immigration policies will affect their ability to maintain adequate staffing.

“The greatest challenge for the upcoming year will simply be keeping our doors open,” said a restaurant owner. “We're very close to selling or closing our DC locations – an extremely unfortunate situation given that our group has operated in DC for so many years. Overall, we're no longer profitable and are exploring other states to open in.”

Restaurant Turnover Intensifies

More than half (51%) of restaurants expect conditions to worsen in 2025 – 21% more than the previous year. The District’s restaurant market is increasingly volatile, with 155 new openings against 73 closures in 2024 – a 38% increase from 2023's 53 closures and 52% above 2022's 48. The accelerating churn signals a quickening pace of established businesses being replaced by newcomers.

The District's Chief Financial Officer projects that federal job cuts will cut city revenues by $342 million. In one early warning sign, 7,000 more unemployment claims have been filed in the first nine weeks of 2025 compared to the same period last year.

RAMW modeling forecasts that if the tipped wage increases another 20% in July, restaurant closures will spike by 50% – pushing the annual total beyond 100 establishments – and slow overall industry job growth by 2%.

“The challenges ahead aren't just significant – they're existential for many of our members,” Townsend said. “The path forward demands more than minor policy adjustments; it requires a fundamental reimagining of how we support the restaurants that define our neighborhoods and make Washington a world-class dining destination.”

About the Survey and RAMW Economic Model

The online survey of 217 Greater Washington restaurants was conducted between January 24 and February 11, 2025.

RAMW estimates job losses and restaurant closures to be influenced by changes in economic factors including tipped wage, Consumer Price Index, and utility costs. This was assessed by calculating the percentage change in each factor from the previous year and measuring how sensitive the dependent variables were to these changes.

The percentage change in each factor was calculated as:

%X = Xt - Xt-1Xt-1 × 100

where Xt represents the value of an economic factor in the current year, and Xt-1 represents its value in the previous year.

The elasticity of closures and job growth with respect to each factor was calculated as:

EC = CX EJ = JX

Using projected values for 2025, we estimated the overall impact of each economic factor on job growth and restaurant closures:

CX=EC × %X JX=EJ × %X

The predicted the number of closures and job growth for 2025 follows:

Ct+1=Ct × (1+CX100) Jt+1=Jt × (1+JX100)

About RAMW

The Restaurant Association of Metropolitan Washington (RAMW) is the regional trade association representing restaurants and the foodservice industry in the Washington, DC Metropolitan Area. Established in 1920, RAMW is an advocate, resource and community for its members. The Association works to promote and sustain the growth and development of the industry while providing its members legislative and regulatory representation, marketing and small business support, programming and events. RAMW strives to serve its members with professionalism and integrity, and provide them the training, education and support they need to grow a successful business.

Following are results from the Spring 2025 survey of members of the Restaurant Association of Metropolitan Washington (RAMW).

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