TD Bank recently released a survey that collected insights from 175 restaurant operators and financial professionals to uncover their expectations for 2025. The survey found that technology, like online and mobile ordering as well as artificial intelligence (AI), is trending. When it comes to finance, interest rates, value menus, and the mergers & acquisitions market is on the minds of franchisors.
Let's take a deeper look at the findings!
Getting Help from Tech
Restaurant owners and franchisees are increasingly turning to tech to find ways to drive revenue and simplify operations.
One type of tech they're turning to in large amounts is mobile and online ordering. In fact, the TD Bank survey found that 77% of restaurant owners and franchisees see mobile ordering as a key revenue driver. Similarly, 59% of respondents believe mobile apps that offer easy online ordering will have the greatest impact on operations.
"For independent restaurant owners, taking on a third-party mobile app is a smart and necessary investment if you want to participate in the takeout and delivery markets," says Mark Wasilefsky, Head of Restaurant and Franchise Finance at TD Bank. "Some restaurants still rely on phone orders, but those operators are missing out on a majority of the market, even with the revenue share they may have to give up."
AI-driven customer insights are also becoming crucial for restaurants in everything from marketing to decision making. TD Bank's survey found 43% of respondents believe that using AI to analyze customer data and predict market shifts will have the greatest impact on operations, followed by the automation of admin tasks to let restaurant managers spend more time helping employees (34%).
Wasilefsky believes data is king when it comes to technology. "Collecting the data, managing it, and leveraging it to optimize the customer experience is essential to running a successful business in the food service industry. This data helps restaurant and franchise owners find the right place for targeted promotions and recommendations for peak purchasing times," he said. "The continued collection of data and resultant consumer behavior patterns will continue to feed AI and make it better and smarter. This will provide more detail on individual and group behavior and allow brands to put together better, more accurate feeds to influence customer behavior, increasing frequency and tickets."
Value Menus Still Valuable
With prices rising thanks to inflation and looming tariffs, value menus continue to attract customers, with 60% of franchisee respondents saying the increase in foot traffic offsets the margin compression for those meals.
But Wasilefsky says it's a difficult balancing act, "Value menus are a double-edged sword, balancing traffic counts and margins impact is difficult, especially in the current economy, which is affecting the lowest 20% of earners the most. Value menus are very attractive to consumers, and dollars per calorie can often not be found more cheaply, even with food at home. The real danger here is brand dilution."
To avoid damaging a brand's image, Wasilefsky says it's important to refrain from discounting marquee products, which are higher margin offerings that have a high association with the brand. "The danger of brand dilution is not as severe as when brands discount their secondary offerings," he says. "When marquee products are offered, it may make sense to modify them a bit and differentiate them from the big sellers via portion size or even ingredients. For example, McDonald's will often discount its Egg McMuffin with sausage, but rarely its marquee breakfast sandwich, the original Egg McMuffin (with Canadian bacon). Brands must use value offerings sparingly and carefully to avoid diluting the value of their brand."
While TD Bank's survey found that more than half (52%) of respondents say they've seen improved underlying foot traffic trends as compared to just three months ago, Wasilefsky cautions that margins pressure will continue to be a challenge throughout 2025. "The number of new entrants into the space (such as hot chicken), and a less liquid consumer, especially at the lower end of the economic spectrum...will continue to keep the environment competitive," he says. "As the bottom half of consumers still continue to struggle from COVID-driven inflation, their ability to manage day-to-day continues to be pressured and has resulted in a shrinking pool of consumers, at least in the short-to-medium term.
"Value menus will continue to be a necessary evil as restaurants must retain traffic for the brand to remain relevant," continues Wasilefsky. "Consumer behavior patterns can change easily, and keeping customers coming back with solid value and good experiences will always be critical to a brand's long-term success."
M&A Growth
A third influencer of the franchise market is mergers and acquisitions (M&A), with 84% of respondents to TD Bank's survey believing M&A activity will increase over the next 12 months thanks to lower interest rates and technological innovation.
"We expect pent-up demand will increase as many operators have de-levered since taking advantage of the low-interest rate environment in the early 2020s. This provides additional borrowing capacity for those looking to grow, and it allows for more proceeds for those looking to sell," says Wasilefsky. "The reactivation of re-imaging programs over the last few years have also left many franchisee networks in great shape, providing an attractive option for those looking to grow."
Independents also have opportunity in M&A—especially for those reaching scale (about 25 stores or more) and those in coffee or chicken. "There's a tremendous amount of private capital interested in taking brands and growing them either with a franchise model or with an independent/private model," says Wasilefsky. "Scale has a direct impact on sales multiples, as the ability to grow a brand as its value increases becomes easier and more profitable to leverage. Even though interest rates are not expected to decline as much as they were six months ago, there is enough pent up interest and growth within the industry to allow for improvement in M&A in the second-half of 2025 and through 2026."
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