INDUSTRY OUTLOOK  ·  BTIG RESEARCH

Restaurants Brace for a "Humbling Year" as Costs Converge

BTIG's December 2025 industry outlook describes 2026 as a year of converging headwinds: food cost inflation driven by tariff uncertainty, softening consumer traffic as lower-income consumers pull back on discretionary spending, and delivery platform margins that continue to compress. Operators who weathered 2021–2023 on the strength of menu price increases will find that lever largely exhausted — consumer price sensitivity has returned after years of tolerance.

The firms best positioned, per BTIG, share one trait: disciplined cost structure that doesn't depend on volume growth to stay profitable. The firms at greatest risk carry floating-rate debt now repricing and operate in high-minimum-wage states where labor cost relief is not coming. The separation between the top and bottom quartiles of operators is not narrowing — it is accelerating.

Read the BTIG December 2025 outlook →

BENEFITS COSTS  ·  MERCER / AON / BGH

Health Insurance Renewals at 15-Year Highs — Three Major Surveys Now Aligned

Three of the most closely watched employer benefits surveys are in agreement on 2026 health insurance renewal trends, and the picture isn't good. Mercer's annual survey of 1,700+ employers projects a 6.5% average renewal increase — the highest reading since 2010. Aon's Global Medical Trend report puts U.S. medical trend at 9.5%. The Business Group on Health survey of large employers projects 7.6%.

For companies whose labor costs are already elevated by minimum wage increases, the health insurance renewal letter this spring may be the single most unwelcome document of the year. The math is forcing conversations that were optional 24 months ago.

Mercer survey data →

LABOR POLICY  ·  CALIFORNIA FAST ACT

California's $20 QSR Minimum Wage: Six Months of Real Data

The first full cycle of data from California's FAST Act minimum wage increase shows a more complicated picture than either side predicted. Large chain operators absorbed the increase through a combination of menu price increases, reduced hours per shift, and targeted automation investment. Independent operators have fared measurably worse — the cost structure differential between a 1,000-unit chain and a 12-unit family group has never been more consequential.

The data also shows that the wage floor spread faster than anticipated — neighboring states accelerating their own legislative timelines in response to competitive labor dynamics. What is happening in California right now is a 12-to-18-month preview for operators in six other states. Operators watching from the sidelines in Arizona, Illinois, Michigan, New York, and Washington are not watching early-stage news. They are watching their own future.

Restaurant Dive coverage →

FRANCHISE FINANCE  ·  PE STRATEGY

The Franchise Finance Playbook: How PE-Backed Groups Are Winning on Cost Structure

Private equity-backed franchise groups are approaching margin compression with a toolkit that most independent operators don't have access to: sophisticated labor scheduling software, centralized purchasing leverage, and — increasingly — treasury-level thinking about payroll structure. The operators who are examining every line item on the P&L, including items most companies have historically accepted as fixed, are finding room that volume alone doesn't create.

The gap between PE-managed operators and family-owned groups is widening on cost structure, not just scale. The tools available to both are often the same. The difference is whether anyone has introduced them.

Restaurant Business →

The Hidden Payroll Tax Your Company Is Still Overpaying

A provision of the tax code that has been federal law since 1969 — used by Aflac for 70 years — is reducing payroll tax expense for the employers who know about it. Most don't.

If you operate a company with 500 employees, there is a reasonable chance you are writing a check to the federal government every two weeks that you don't have to write. Not because of aggressive tax planning. Not because of anything complicated. Because of a provision of the Internal Revenue Code in place since 1969 — one that the largest employee benefits companies in America have used for decades — that most companies have never been introduced to.

Under Section 125 of the Internal Revenue Code — the same provision governing every pre-tax health insurance premium and every FSA — when an employee's compensation includes a qualifying pre-tax fixed indemnity benefit, the employer's FICA obligation on that portion of compensation is eliminated. This isn't a loophole. It is the explicit design of the law. The logic is straightforward: pre-tax benefits reduce taxable compensation, which reduces the FICA calculation base for both employer and employee simultaneously.

Based on $600–$900 per enrolled W-2 employee. Actual savings calculated from census — 48-hour turnaround.

The critical distinction worth understanding before any implementation conversation: the plans that hold up to scrutiny are fully insured by licensed carriers — not self-funded arrangements or captive structures. The IRS has drawn this line explicitly in its own published guidance, and the employer exposure profiles of the two structures are categorically different. Any plan worth evaluating will have independent legal opinions available for your general counsel and will name its underwriting carriers specifically.

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