Jodi’s Journal: Are we in a restaurant recession?

Oct. 12, 2025

If only we all could be the Texas Roadhouse of our category.

Earlier this year, the casual dining chain known for its budget-friendly steaks, free peanuts and unlimited rolls with honey cinnamon butter dethroned Olive Garden as the country’s top casual dining chain for systemwide sales according to restaurant industry research firm Technomic.

Texas Roadhouse posted sales growth of 14.7 percent in 2024; Olive Garden edged up less than 1 percent.

If you’ve ever attempted to visit the location at The Empire Mall, you know why I’m thinking it has to only be a matter of time before we see an east-side Texas Roadhouse.

The formula plays well in Sioux Falls as it does across the country — the chain has managed to keep prices fairly stable despite large increases elsewhere, allowing a night out for a steak to still feel like an achievable indulgence for most diners. The menu also doesn’t change much, cutting down on everything from R&D to the need to market new offerings and train staff on them.

“The restaurant has lots of upselling options that drive up profit margins, and staff are heavily encouraged to push them. Toppings like cheese, mushrooms, and onions can add several dollars to an order, and servers are tracked on how much they upsell,” according to one industry analysis.

“Cheap steak also draws people in to spend more on higher-margin items like sides, appetizers, and alcohol.”

I start with this to underscore that a recession is not inevitable in the restaurant industry. There still are dining out dollars to be captured by savvy operators.

But I do think a downturn already is underway locally, and it feels like the right time to explore what’s happening.

This week marks the one-year anniversary of Big Sioux Burger and Dahlia Kitchen and Bar, two full-service restaurants that brought different kinds of cuisine to The Steel District — plus some great new patio options.

After years during the pandemic that saw only smaller, fast-casual restaurants open, the Sioux Falls market has experienced an influx of larger, full-service options — especially downtown.

In addition to Big Sioux and Dahlia, Ironwood brought a new high-end steakhouse late last year. Cascata Italian Cuisine opened inside the new Canopy by Hilton. Shenanigans backfilled the Papa Woody’s space at the Cascade. In the last month or so, Jack Rose Social Club has joined the Steel District development and Rivage Oak Kitchen and has opened at Cherapa Place.

Outside of downtown, Tavern Grill and KPOT opened in southwest Sioux Falls, Ranch and Roost opened at Lake Lorraine, and pretty soon Plaza Azteca will open in east Sioux Falls.

Those are just the full-service options — and I’m sure I’m forgetting someone.

Against this backdrop, there’s this: Research I received this week from Advance America, a loan provider that surveyed 3,002 families about their finances with representation in every state.

When South Dakota families were asked what they would cut first if they were having trouble with their household budgets, 47 percent said dining out or takeout food. It was followed by 26 percent that would cut entertainment or streaming subscriptions.

When families were asked what bills are rising the most, food spending topped the list, with 56 percent saying their cost of food had jumped the most in the last year.

This also was revealing. “How would $1,000 feel if it landed tomorrow?” respondents were asked. Nearly one in four described it as “life-changing.” And 41 percent said it would be “helpful, but gone quickly.” Another 29 percent called it “a big help,” while just 7 percent said it would barely register.

That says a lot about the consumer with a choice to make: Dine out, or save the money?

I asked the city’s director of finance, Shawn Pritchett, to take a look for me at how taxable sales have trended in restaurants and bars.

“In general, if you look over the past 12 months, sales have been essentially flat for restaurants, even with many new opening, and bars have been down slightly,” he said.

That tracked with my general sense of the market — the pie of consumers is being carved up more ways, leading many individual restaurants to feel the impact.

Numbers were strong in September — which represents actual sales in August — but my sense is that traffic dropped off noticeably once school started and has struggled to rebound in many cases in recent weeks.

Like retailers, restauranteurs depend on strong dining out in the fourth quarter, especially around the holiday season. It’s a good time to remember that when budget allows, dining out at your favorite restaurants will help ensure they can continue to compete. For restauranteurs, it’s insightful to consider the Texas Roadhouse playbook even if it’s not your cuisine or demographic: Today’s customer is responding to value and consistency while still opening the door to spending more if motivated by your offerings.

Our market feels saturated and a little precarious at the moment. I’m not sure we’ve grown population or visitors at the same rate we’ve grown restaurants. At the same time, consumers are less likely to spend on dining out and restaurant operators are facing increased costs. Somewhere in there is still a recipe for success, but it feels like an increasingly complex one to execute.

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