Restaurants may be in store for a bumpy end to an already challenging year. After spending the past few quarters trying to win back price-sensitive guests who largely cut back on dining out, the election could add another headwind into the mix.
A recent report from William Blair looked at the weighted year-over-year change in monthly retail sales from October through January during presidential elections compared to the trailing 12-month average to determine how political cycles impact consumer demand. The analysis excluded 2008 and 2020 due to the outsized economic effects of the Great Recession and COVID-19.
It found retail sales excluding gas and auto sequentially decelerated by an average of 0.7 percent over five election cycles. The impact was most pronounced during the peak of the holiday selling period in December, with retail sales sequentially decelerating by an average of 1.8 percent. Sales declined by an average of 0.4 percent in October and November before ticking upward in January with an average acceleration of 0.4 percent.
“When you’re feeling less certain about the future, there’s just a natural tendency to tighten your belt a bit and rein in your spending,” says William Blair research analyst Sharon Zackfia. “Restaurants aren’t immune from this. There’s definitely a slowdown. We see it in almost every election cycle.”
The good news is that restaurants are typically more insulated from the consumer spending pressures than other categories. Excluding 2008 and 2020, sales have dipped during every election cycle since 1996—down 2.2 percent in 2000, 1.4 percent in 2004, 0.9 percent in 2012, and 1 percent in 2016. That’s worse than grocery (up 0.7 percent on average) and e-commerce (up 0.9 percent) but better than higher-ticket segments like electronics and appliances (down 3.8 percent) or furniture (down 2.7 percent).
Other factors are at play in the industry’s Q4 forecast. Thanksgiving falls later this year, and a shorter Christmas season could amplify election-related pressures.
“You have to adjust for all of those things,” Zackfia says. “But just looking at the election cycle alone, it’s hard to paint it as a good thing for the fourth quarter.”
Beyond consumer uncertainty amid a tempestuous political cycle, the election will have much wider consequences for the business environment restaurants operate in going forward. The stakes are high since the results will shape the regulatory and legislative landscape for the next few years.
“Politics matter for the restaurant industry,” says Sean Kennedy, executive vice president for public affairs at the National Restaurant Association. “We’re the nation’s second-largest private employer, so labor policies coming out of Washington have an outsized impact on us.”
Comprehensive immigration reform and expanded visa programs, like the Essential Workers for Economic Advancement Act, could boost workforce numbers and alleviate the labor market pressures facing restaurants, he adds.
That’s just one area the Association is focusing on in the lead up to the election. It also is pushing for federal policies that foster restaurant growth and ensure the industry’s interests are well-represented when tax legislation takes center stage in the House and Senate next year.
“Republicans and Democrats alike acknowledge that 2025 is going to be a key year for tax legislation,” Kennedy says. “Both sides say they want to see comprehensive tax reform, but there are very different priorities on the scope and contours of that. We want to make sure that restaurant priorities are at the forefront of those discussions.”
The Credit Card Competition Act is another issue that’s top of mind this election season. The legislation aims to introduce competition to the credit card processing market, which is currently dominated by just two companies. Kennedy says increased competition could lower processing fees and enhance security. That would be a significant boon for restaurants operating on slim margins. Other important issues include protecting the tip credit and opposing the FTC’s proposed “junk fees” rule.
Kennedy says the Association aims to avoid relying on any single party or individual to achieve those legislative and regulatory goals. That’s why its advocacy work during the election cycle focuses on delivering pro-restaurant messages to candidates across the political spectrum.
“You always have to be talking to everybody—Republican or Democrat, liberal or conservative,” he says. “We need to build bipartisan coalitions, and they need to be able to withstand whatever changes occur in Washington come election day. The stakes are high because we’re in a tremendous period of political uncertainty where voters don’t know what they want, and they’re very comfortable flipping control of the House and Senate or White House. Our job is to stay above all of that and push an advocacy agenda that can be endorsed by Republicans and Democrats alike.”
The Association’s goal is to ensure that restaurant priorities are front and center as lawmakers navigate an increasingly polarized political landscape. Active engagement from the industry is crucial, he explains, because the decisions made in Washington can have far-reaching consequences on operators big and small.
“I don’t think you have to be political to be engaged,” he says. “You just have to drive home the message that restaurant issues are community issues, and if they’re presented well, they can be nonpartisan issues.”
Take credit card swipe fees as an example. They’re often the third-largest cost for restaurants after labor and food, and they’ve doubled over the past decade with no signs of going down.
“We know it’s because we have an entrenched duopoly in place,” Kennedy says. “There is common sense bipartisan legislation in Washington. Do we finally inject competition into that space and bring down those costs for quick-service operators?”
Ultimately, he says, there are numerous ways restaurants can engage in the political process without taking sides.
“It’s just by sharing the facts, the opportunities, and the challenges of the nation’s second-largest employer,” Kennedy says. “It’s saying, ‘Here’s how the government can really help me grow, help me expand, and have even more of a presence in the community.’”
