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
April 4, 2025
Updated Following March US Bureau of Labor Statistics Benchmarking
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 survey by the Restaurant Association of Metropolitan Washington (RAMW). The survey, released at RAMW’s 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 steady full-service restaurant job losses and tipped workers earning less (50%) 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.
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 and cause a 1% decline in restaurant revenues with job losses in the hospitality sector. 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 burdens converging at once, threatening not just single businesses but potentially altering DC's 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 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 [1] 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.
[1] Findings from an online survey of 209 District residents by Morning Consult between December 23 and 26, 2024.