Square Data Shows How 2025's Economic Volatility Is Impacting the Restaurant Industry
New Square insights show that tipping is falling and quick service restaurants maintain the strongest margins
Today, Square unveiled new data on the restaurant industry in 2025, which is finding its footing amid economic uncertainty.
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New Square insights show that tipping is falling and quick service restaurants maintain the strongest margins (Photo: Square)
As consumer confidence dips, so does tipping
In Q1 2025, Square found that the average tip on food and beverage transactions was 15.17%, and this continued to fall into Q2 with the average tip coming in at 14.99%, aligned to dropping consumer confidence in the economy.
Bars regularly receive the highest tips; in Q1 their average tip was 17.36% on each transaction, though this too fell to 16.96% in Q2. Cafés and quick-service restaurants received 14.72% and 14.64% in Q1, respectively, and dropped to 14.57% and 14.2% in Q2. Tips at full-service restaurants also declined from 14.76% in Q1 to 14.64% in Q2.
"As previous Square research has underlined, tips make up a major part of workers' wages – the average restaurant employee earned nearly 23% of their income in tips in 2024," said Ming-Tai Huh, Head of Food and Beverage at Square. "As consumer confidence in the economy shifts and tips fall, workers are taking home less which could lead to a return to labor uncertainties for the industry – adding to the crunch local restaurants are continuing to feel."
As price of oat milk falls, it's a top choice for coffee orders in coastal states – but dairy still wins in middle America and the South
Oat milk has had a meteoric rise as a choice for coffee drinkers, and previous Square research showed that it was the top milk alternative in 2024, comprising 33% of orders in the United States and Canada.
Now, in 2025, nearly half of coffee orders in some states like New Mexico, Maine, and Oregon include the vegan alternative:
- The top states that prefer oat milk with their coffee are New Mexico (48.6%), Maine (47.41%), Oregon (45.94%), and Vermont (45.59%).
- The states where people stick most with dairy and order oat milk the least are Wyoming (18.83%), Mississippi (21.99%), Louisiana (23.17%), and West Virginia (25.36%).
And while the dairy alternative can be a pricier add-on, the cost has fallen steadily since the beginning of the year – in January 2025, selecting oat milk for a coffee drink cost an additional 67 cents, but in June 2025, this upcharge fell to an average of 65 cents.
Quick-service restaurants rule when it comes to profitability, with fine dining leaning into experiences
Square and leading hospitality accounting firm Paperchase have partnered to combine Square's transaction data and Paperchase's restaurant accounting and financial services data to evaluate how hospitality profitability is faring against the backdrop of 2025's economic volatility. The data weighs the differences between quick-service and fast casual restaurants versus fine dining restaurants across sales, margins, growth, and cost efficiency.
Overall, QSRs and fast casual concepts consistently outperform fine dining in consistency, efficiency, and scalability, with consumers continuing to seek value for their buck amid economic uncertainty:
- In terms of sales growth, fast casual restaurants peaked at 9.3% in Q4 2024, with a moderation down to .9% in 2025. QSRs peaked at 15.8% in Q4 2024 with continued strength into 2025 between 8.7% and 9.1%.
- As Square research has previously shown, labor margins are steadily trending downward for both fast casual and quick-service concepts, indicating improved labor efficiency or cost reduction, likely enabled by investment in technology like self-serve kiosks. Fast casual restaurants using Paperchase see a lean and consistent margin between 17.4% and 21.2% amid 2024 and early 2025, while QSRs trended down from 21.1% in 2024 to 18.8% in 2025.
- EBITDA margins1 are strong and steady for both QSRs and fast casual businesses, at 18.9% and 23.6% in Q1 2025, respectively. Both kinds of businesses show resiliency, scalability, and adaptability, underscoring the advantages of operating standardized and leaner restaurant business models amid economic uncertainty.
"Opening the business from scratch, you have so many worries. You gotta train employees, you gotta buy food, you gotta pay rent, make sure the water's good, make sure the plumbing's good. But inventory, employees, labor – Square helps me track everything I need to do," said Quie Slobert, COO of Charles Pan-Fried Chicken, a fast-casual restaurant chain in New York City that uses both Square and Paperchase. "In a business, you only control two things, and that's labor and inventory – using tools to track what we sell and forecast is amazing because you can do the math yourself, but this business is a numbers game."
On the other hand, fine dining excels in experience-driven differentiation, albeit with cost and margin trade-offs:
- Sales at fine dining restaurants declined by 13% in early 2024 compared to late 2023, likely due to reduced discretionary spending, but recovered to between 2.1% and 3.1% growth by early 2025, signaling renewed interest in premium dining experiences.
- Labor margins ranged from 19% to 26% amid 2024 and early 2025, and they peaked during holiday periods, reflecting the intensive and variable staffing needs of fine dining.
- EBITDA margins for higher-end restaurants are highly volatile – rising from 1% in early 2024 to a peak of 19% in Q2 2024 before falling to 12.2% in early 2025 – demonstrating the sector's sensitivity to external factors.
In partnership with Paperchase, Square is offering restaurants a seamless path to smarter operations through deeper financial insights and streamlined bookkeeping.
Online ordering and delivery are a necessity for food and beverage businesses today, but these sales channels continue to cut into margins
In the past few years, omnichannel ordering has become essential for running a restaurant, whether that's through first-party online ordering or through third-party delivery platforms. According to Square's 2025 Future of Commerce report, 78% of restaurant owners said online ordering is the channel that drives the most orders to their business – so ensuring this ordering option is streamlined is key to a successful business.
The margins on this can be tricky – Square found that while online order revenue continues to increase both via first-party ordering and via third-party delivery partners, delivery rates are also rising. Overall, leaning into first-party ordering is more profitable for sellers, with the profit margins being 64% higher than third-party delivery. With Square, too, sellers save an average of 30% through first-party online ordering.2 The advantages of partnering with a third-party delivery provider, though, include a built-in customer base to market to and simplified delivery logistics. Overall, with these various online ordering options, restaurants are aiming to balance margins with the need to expand their customer bases.
With these tighter margins, cash flow is also key – and with Square Instant Payouts, restaurants using Square Checking are receiving earnings for orders made through third-party delivery platforms instantly and without additional fees, giving sellers immediate access to their earned revenue – as many as 11 days sooner than traditional payout methods.3
About Square
Square makes commerce and financial services easy and accessible with its integrated ecosystem of commerce solutions. Square offers purpose-built software to run complex restaurant, retail, and professional services operations, versatile e-commerce tools, embedded financial services and banking products, buy now, pay later functionality through Afterpay, staff management and payroll capabilities, and much more – all of which work together to save sellers time and effort. Millions of sellers across the globe trust Square to power their business and help them thrive in the economy. For more information, visit www.squareup.com.
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1 Earnings Before Interest, Taxes, Depreciation, and Amortization
2 Delivery commission saving is an estimate based on an assumed 30% commission charged by third-party delivery partners on premium plans.
3 Block, Inc. is a financial services platform and not an FDIC-insured bank. FDIC deposit insurance coverage only protects against the failure of an FDIC-insured deposit institution. If you have a Square Checking account, up to $250,000 of your balance may be covered by FDIC insurance on a pass-through basis through Sutton Bank, Member FDIC, subject to aggregation of the account holder's funds held at Sutton Bank and if certain conditions have been met.
Square Debit Card is issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard.
Funds generated through Square's payment processing services are generally available in the Square Checking account balance immediately after a payment is processed. Fund availability times may vary due to technical issues.
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