A Restaurant Rotation Is Underway: Traffic Tells the Story

Industry Overview - The restaurant sector faced a challenging year in 2025, with an overall decline of approximately 0.7%, significantly underperforming the S&P 500's 16% increase [1] - Analysts projected industry sales growth of 4%, reaching $1.5 trillion in 2025, despite a decline in guest traffic for many operators [2] Stock Performance - Individual restaurant stocks experienced significant volatility, with Sweetgreen collapsing by 80%, Cava Group dropping 50%, and Chipotle Mexican Grill falling 30% [1] - Quick-service restaurants (QSR) like McDonald's reported a 2.4% increase in domestic same-store sales, showcasing resilience in a turbulent market [4] Market Dynamics - The gap between quick-service, fast-casual, and sit-down dining has narrowed due to rising prices, affecting fast-casual chains' ability to maintain premium pricing [3] - Fast-casual restaurants, particularly Chipotle and Cava, struggled with a slowdown, while Sweetgreen was notably impacted as consumers cut back on $15 salads [5] Casual Dining Resurgence - Casual dining is experiencing a surprising comeback, with operators like Texas Roadhouse reporting a 4.3% increase in traffic, indicating a strong value proposition that resonates with diners [6]