Sticky Inflation, Shrinking Traffic
Two Headwinds Pointing at 2026
December 2025 Update
It’s been a while since we looked at CPI. The headline number finally dipped below 3%—November came in at 2.7%. Progress, technically. But if you’re waiting for the Fed’s 2% target to become reality, I’d suggest finding a comfortable chair.
We’re in a different world now. De-globalization. Massive government debt. The structural floor on inflation is higher than it used to be. The only way to get meaningfully below current levels is through economic deterioration, and that will create problems that will make us reminisce about the good ole days of 3% inflation.
The Restaurant Demographic Gap
Headline CPI is range-bound & restaurant inflation hasn’t moved. Food Away from Home sits at 3.7%—same as September.
The breakdown:
Category YoY Inflation Headline CPI 2.7% Food Away from Home 3.7% Full-Service Dining 4.2% Limited-Service (QSR) 3.2% Food at Home (Groceries) 1.9%
Full-service ticked up slightly. Limited-service ticked down—trying to compete with at-home. Neither moved enough to matter.
The gap between eating out and eating in continues to widen. Restaurant prices have been outpacing grocery inflation for several years now, and that differential compounds. For price-sensitive consumers doing mental math at the grocery store versus the drive-thru, the cumulative gap increasingly favors the grocery store.
The Demographic Fault Line
We ran a sample of 387,242 transaction records through SignalFlare.ai Navigator, comparing the most recent four months (August through early December 2025) against the same period last year. The hypothesis: restaurants in high-Hispanic trade areas are underperforming those in low hispanic trade areas. It’s a question we’ve been getting that we’ve been working to get line of sight into using our database of mobile traffic and credit card purchases for the past several months.
But what is “High Hispanic” trade area (70th Percentile for Hispanic Pop)? In 2025, self-described Hispanics make up ~20% of the population nationally - but that jumps to ~40% in California & Texas. So, while I acknowled that this study is a broad generalization - it is built from localized data and can serve as a starting point for building an action plan. Alongside data, like competitive saturation, local data and media spending it’s fundamental to building location strategies.
The customer traffic performance gap between ‘High Hispanic” and ‘Low Hispanic’ trade areas from August to December was 7.7 percentage points. That’s to say - stores in trade areas that are heavily hispanic are behind on guest traffic by 7.7 percentage points.
That’s not a rounding error.
The pattern held across 87.5% of brand groupings we examined. The probability of that consistency occurring by chance: 3.5%.
What’s Driving It
The gap is traffic, not ticket. Average check shows no meaningful difference between segments. Customers who show up spend the same. Fewer are showing up.
Some observed extremes:
Largest traffic gap: -19.4 percentage points
Largest sales gap: -27.4 percentage points
These were outliers in smaller samples, but even the larger samples showed gaps of 4-7 points consistently.
What the Counter-Trends Tell Us
The sample included a diverse set of brand attributes, and the exceptions to underperformance weren’t random.
Some premium fast-casual burger concepts performed well in high-Hispanic areas—though not all of them. Authentic Mexican limited service concepts held up better than main-stream limited service. The biggest gaps showed up in bar & grill and casual dining, where a dine-in experience seems to align with anecdotes around hispanic customers in heavily hispanic areas being more hesitant to dine out.
The pattern suggests format matters. Quick-service and fast-casual concepts with strong value positioning or cultural relevance may be better positioned. Sit-down formats relying on the occasion of dining out face steeper headwinds in these markets.
Connecting the Threads
The inflation story and the demographic story aren’t independent.
Hispanic households skew lower on median income. That means they are more likely to be more price-sensitive on discretionary spending. When groceries run 1.9% inflation and restaurants run 3.7%, the arbitrage is obvious to anyone watching their budget.
Add employment exposure—construction, hospitality, services—and you have compounding pressure on a specific customer base in specific trade areas.
The result: high-Hispanic markets are experiencing both direct economic pressure on their core customers AND the competitive disadvantage of restaurant pricing versus grocery.
What To Do With This
If you operate restaurants:
Figure out your exposure. How many locations sit in high-Hispanic trade areas? What’s the revenue concentration?
Assess your format. Fast-casual and QSR with value positioning or cultural relevance appear better insulated than casual dining and bar & grill formats.
Test something. Culturally-tailored marketing. Value-oriented LTOs. Menu modifications. Pick stores and measure.
Adjust your models. If you’re building new units in these trade areas, your pro-formas may be optimistic—especially for dine-in concepts.
Get specific. If you're a SignalFlare.ai customer, your CSM team will be reaching out to discuss how this affects your portfolio. If you're not and want to dig in, drop a note in the comments or on our site.
The Bottom Line
Restaurant inflation is stuck at 3.7% while groceries run 1.9%. That’s a structural headwind.
Layered on top: high-Hispanic trade areas are underperforming by 4-7 percentage points on traffic, with 83% probability the pattern continues.
The gap isn’t uniform—format and positioning matter. But the probabilities point one direction: restaurant traffic in 2026 is going to be a fight.
Plan accordingly.
Data sources: Bureau of Labor Statistics (November 2025 CPI); SignalFlare.ai Navigator analysis of 387,242 transaction records, August-December 2025 vs. prior year same period.