|
Getting your Trinity Audio player ready...
|
More than 9 in 10 restaurant operators cite labor, insurance, energy, and payment processing fees as significant challenges to profitability.
The Value Gap Widens
Vermonters are joining a national trend of eating out less frequently as the cost gap between restaurant meals and home cooking continues to widen. While this shift has been characterized in regional reporting as customers “ditching” takeout, the numbers reveal a more measured pullback driven by straightforward economics: restaurant prices are rising roughly twice as fast as grocery costs.
The pattern shows up clearly in Vermont’s tax collections. The state’s Meals and Rooms tax revenue came in 2.0 percent below targets for the General Fund and 4.0 percent below targets for the Education Fund, with collections from January through October 2025 running 1.0 percent lower than the same period in 2024. That decline occurred even as restaurant prices were climbing, suggesting Vermonters made significantly fewer restaurant purchases.
The Numbers Behind the Shift
According to the Bureau of Labor Statistics, food away from home rose 4.1 percent in the twelve months ending December 2025, compared to just 2.4 percent for food purchased at grocery stores. That gap represents a fundamental change in the value equation for many households.
The trend affects different types of restaurants unevenly. Full-service restaurant meals saw prices increase 4.9 percent, while limited-service meals and snacks—the traditional takeout category—rose 3.3 percent. For context, meats, poultry, fish and eggs at grocery stores increased 3.9 percent, making home-cooked protein dishes increasingly competitive with restaurant options.
Federal projections indicate the gap will persist. The Economic Research Service predicts food-away-from-home prices will rise 4.6 percent in 2026, while grocery prices moderate to a 1.7 percent increase—a difference of 2.9 percentage points.
Why Restaurant Costs Keep Rising
The restaurant industry faces cost pressures that grocery stores can more easily absorb or avoid. According to industry surveys, more than 9 in 10 restaurant operators cite labor, insurance, energy, and payment processing fees as significant challenges to profitability.
Energy costs hit the Northeast particularly hard. In 2025, utility gas services rose 10.8 percent and electricity costs increased 6.7 percent in the region. These back-of-house expenses get passed directly to menu prices, widening the cost gap even when wholesale food prices remain stable.
Labor markets remain tight, with national industry expectations to add 100,000 jobs in 2026 despite many operators reporting difficulty filling skilled positions. The scarcity has forced wage increases that flow through to final prices.
Vermont’s Compounding Challenges
Vermont’s restaurant sector faces additional headwinds beyond the national trends. The loss of Canadian tourism has emerged as what state economist Tom Kavet termed “a costly unforced error” stemming from federal trade and immigration rhetoric. Canadian visitors historically provided crucial revenue for Vermont restaurants, particularly during shoulder seasons. State economists identified the decline in cross-border traffic as a key factor in meals and rooms tax collections falling roughly 2 percent below targets.
Federal policy changes have also affected Vermont households’ dining budgets. The “One Big Beautiful Bill” expanded work requirements for the Supplemental Nutrition Assistance Program and removed utility deductions for many families, reducing disposable income for low-to-middle income households who traditionally drive the takeout market.
A proposed fast food wage bill introduced in February 2026 would raise minimum pay for workers at restaurant chains with more than 60 locations nationwide to $20 per hour by 2027. Industry analysts suggest this could further increase prices at limited-service establishments, traditionally the most economical takeout option.
Industry Adaptation and Survival Strategies
Despite declining transaction volumes, some Vermont restaurants are finding success through strategic pivots. Chico’s Tacos in Middlesex reported a 65 percent sales increase after relocating from Montpelier to a lower-rent location, demonstrating that overhead reduction can be more effective than price increases.
New concepts are emerging built around cost-conscious models. Instant House in Essex Junction offers a self-serve ramen bar that minimizes labor costs while providing an interactive experience. Poorhouse Pies is expanding its production kitchen and adding a café to meet demand for specialty quiches and pies, focusing on comfort food with local appeal.
Nationally, the restaurant industry is responding with menu strategies designed to justify premium pricing. The National Restaurant Association’s 2026 culinary forecast highlights trends toward smashed burgers, global comfort foods, and high-margin beverages—items that operators believe customers cannot easily replicate at home.
Technology adoption is accelerating as well. Industry reports indicate that 81 percent of consumers are likely to join digital loyalty programs, while restaurants increasingly use AI for demand forecasting and personalized offerings to reduce waste and optimize pricing.
What Happens Next
Vermont’s economic outlook for 2026 suggests the dining cost gap will persist. The Joint Fiscal Office projects that economic growth will be “extremely uneven,” with top income brackets benefiting disproportionately while middle and lower income households face continued pressure.
Meals and rooms tax collections are expected to remain volatile, according to state revenue forecasts, with the sector increasingly dependent on high-end tourism and corporate events rather than habitual local takeout consumption.
The restaurant industry remains optimistic about underlying demand. National surveys show that 7 in 10 consumers report they would use restaurants more frequently if they had more disposable income, suggesting desire for dining out remains strong even as ability to afford it has contracted.
Whether Vermont’s restaurant sector stabilizes or continues contracting will likely depend on three factors: whether the structural gap between restaurant and grocery inflation narrows, whether Canadian tourism recovers, and whether proposed wage legislation passes in a form that allows limited-service establishments to maintain competitive pricing.
Discover more from Vermont Daily Chronicle
Subscribe to get the latest posts sent to your email.
Categories: Business
Montpelier are you listening? The education our children are getting is not worth what is being paid. The “job” you are all doing, sucks. You can’t control spending, you can’t make logical, reasonable, cuts. Stop asking for more, if you can’t be responsible with what you have now. You’re biting the hand that feeds you. Enough is enough, real people are suffering, not because of Trump, because we are governed by irresponsible children. Think about it for a minute, less taxes mean more money spent, which in the long run means more tax revenue. Greed has no bounds. We need to stop voting these progressive, rino’s, and democrats in to take our hard earned money. I’m tired, anyone else?
It is easier for Montpelier to blame President Trump and the One Big Beautiful Bill than be introspective and see their policies and run away spending on UN projects are causing problems in Vermont
About a decade ago, I spoke with a VT Inn owner who sat in on a committee hearing regarding the rooms and meals tax. The chair glibly opened the proceedings with a remark; “How’s our favorite cash cow?”
The favorite cash cow has moved to property, reference the tax and land values of the past year and this one. they are doing the milking via machine to get more quicker than by hand. Machines are mindless.
To Josh, good comment, fully agree, thanks
Confucius (551 BC – 479 BC)
“In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.”
No idea what a cup of coffee at LEUNIGS costs these days. Do you? –D. Morrisseau
I’m going to try and stay with in the line’s, eating out, has become a competitive challenge between my wife and I. When we ask where we want to go eat out, the challenge is, first is the food any good? Second, can we get in without a reservation? The third is, how good is their service? And finally, does the price make sense?
Our experience is most of the time, at 74 years old, the food isn’t that good. Sadly to say, most of the time.
Those worth eating at are doing so well, we can’t get in unless we go very early, or very late, but that’s not a negative.
A deal breaker is service in almost every case, I mean why go out an eat, if your service is do bad you rather walk out than eat, there.
Finally, the price, this really isn’t that concerning, I mean we budget for our adventures, and look forward to our nights out. If they fail on the first three, we’ll then yes, price matters, and we’re not coming back…
Well that’s my survey, take it or leave it, and that’s just what we do…
Love eating with the college students, the tourists, the Canadian’s, the new Americans, our neighbors, … but avoid at all cost, eating in defunded police communities, and areas that lack safe parking.
Just a thought…if anyone cares?
Questions I ask myself when deciding where to eat out:
-do I need an app on my phone just to park?
-is the host municipality worthy of my tax dollars?
The Vermont house and senate members are eating out every day thanks to you taxpayers.
I prefer to have my Keurig coffee, home made waffles, Healthy Choice frozen dinners and tossed salads to shelling out big bucks to Starbucks, McDonalds, and expensive restaurants (including tips demands). Savings add up to meet the needs of families…and it works. Needs and Wants are two different things.
I like to update my previous response, if you let me.
You see my daughter recently made an appointment to an Italian Restaurant on Church street, Burlington.
She couldn’t make it so asked if my wife and I wanted it. We decided we would, mostly as an adventure.
We’ve haven’t eaten downtown in years, and thought we should give it another chance.
So on a federal holiday, we drove into a parking garage at about 5:30 pm, to our surprise, not many vehicles were using it.
We decided to park directly by the exit. We walked near the elevator, and took it down to the first floor area. We tried to pay for parking at the machines, but they told us, no fee on holiday days.
So pleasantly surprised, we continued through an alley way, meeting a warbling large male walking towards us, he passed without saying a word. My wife mentioned the art work on the wall, I mentioned did you see the two monkeys have sex on it?
We then came out on to Church Street, where we notice very few people out and almost all the stores closed. Then to our left in a door way, a young male sitting on the ground, getting himself ready to inject his drug of choice.
We continued on briefly, and entered our restaurant early. They had no problem sitting us early. A very nice place with comfortable atmosphere and seating. The service was friendly and helpful. We ordered a very nice meal, with a water serving us a very elegant meal. And we expressed that to him. He was very pleased.
We ate our meal, had great conversation and paid. It was expensive, but we enjoyed it and tip well because of the service, and experience they gave us was so enjoyable.
After dinner, we went to a nearby chocolates store, and got myself a hot chocolate.
We decided things were closing even more now, and didn’t think staying around was a good idea. So we headed, back to the garage, as we walked a strong Oder of pot hit us as a small group of youth, passed us.
We were a little concerned our vehicle maybe vulnerable to vandalism or theft, happily when we arrived we observed a security vehicle just feet away parked and running. We got in drive home and said, we loved our meal and service, happy we gave them a good tip, as they honestly earned it.
We the. Added, would we go back, answer no. Not until, they fund the police, and support local businesses so couples like us don’t have to avoid basic obstacles and challenges to get a simple meal.
I like to add Church street was lit up beautifully, I just wish, businesses felt like it was worth staying open, and we felt safer to walk the area. Not just during tree lightning?
Top down! Biden left that out when he babbled, “bottom up, middle out”
I grew up about 30 miles from Burlington in the 60’s. Burlington was the place we often went to shop, get something to eat, watch UVM sports, go to concerts and other things. I went to UVM in the early 70’s. The drinking age was lowered to 18 around that time because of the Vietnam war. Downtown was a great place to be back then. There were tons of bars that were always crowded. A few years ago we went to a concert at the Flynn. When we walked by City Hall Park there were some people shooting up and some were passed out. I haven’t been back since and I won’t ever go back. It has been downhill ever since Bernie and his progressive comrades took over in the 70’s and 80’s. It’s sad.