The End of ‘The Middle’ in the Restaurant Industry

The End of ‘The Middle’ in the Restaurant Industry

Danny Klein

Wed, August 12, 2026 at 11:00 PM GMT+3 7 min read

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The restaurant industry is in the middle of a strategic sorting that in many companies still feels like the gyrations of our macro environment, but increasingly, it is not that. What is happening increasingly in successful businesses across QSR, fast casual, and full service, is the market rewarding the brands that have made a clear choice about what they are and withdrawing from the ones that haven't.

The pattern is easier to see looking across segments. In casual dining, Chili's and Texas Roadhouse are both posting consistently strong performance. In quick service, McDonald's and Chick-fil-A are doing the same. In fast casual, Jersey Mike's and CAVA also winning. What may not be as obvious is that in each of these segments, winning companies can generate strong performance with different winning strategic choices.

Where companies across the rest of the industry may be struggling, many are attributing this to a disappearing consumer, and this is definitely the demand constraint today. However what can often be observed in these companies, is that the core strategic choices (how are we going to win?) have not actually been made. These are the companies and brands in The Middle.

The Middle is Where the Losses Are Concentrating

The industry is contracting selectively, not uniformly. Casual dining's net unit growth has been negative 3.3 percent since 2022 while QSR grew 5.8 percent and fast casual grew 15.5 percent over the same period. Inside every segment, the pain seems concentrated in the middle. Mid-tier casual dining chains are closing units on a scale not seen in a decade. Mid-tier QSR burger and sandwich brands are being squeezed from both directions. Black Box Intelligence provided an early 2026 analysis which stated that 9 percent of full-service restaurant units are at risk of closure in 2026.

Fast-casual concepts that positioned themselves as "premium enough to command a price, accessible enough to compete on value" are struggling to hold both ends of this spectrum, and the consequences are showing. Brands do not really drift into the middle, they land there by not making the necessary choices that their segments now require, especially in this economy. These brands sometimes mistake a legacy position for a strategy, even as changing sentiment requires them to make tougher choices.

I have watched restaurant brands attempt to hold the Middle out of caution, often out of a fear of alienating customers in an already constrained revenue environment.

However, this type of caution actually closes off the operating clarity that restaurant companies need for success. The brands winning in each segment obviously aren't lucky; they have made the right strategic choices for their brands and segments.

Overt Value Leadership as a Discipline

The most obvious example here is Chili's, which is now on 20 consecutive quarters of same-store sales growth as of Q326. While a key part of this is value at the $10.99 price point, what Chili's leadership has built is a winning operating model. The $10.99 3 For Me platform sits on top of menu rationalization, throughput engineering, and smart marketing that reinforce both value and craveability. McDonald's is also a good example. Over the past 12-18 months they appear committed to QSR affordability leadership. The return of Extra Value Meals, followed by $2/$3 options more recently, combined with premium product & promotion innovation (Big Arch, adult kids meals), is strong application of a "barbell" promotional strategy.

Importantly, McDonald's also has the throughput capability and marketing muscle to make this work. Other competitors in the QSR burger segment are responding as best they can, but the ones who try to imitate the tactics without the operating model, have a difficult time.

Within fast casual, Jersey Mike's is also a good example.

In a segment formerly driven by low prices, they have maintained strategic discipline around product quality and operational execution at a level which has created a large and successful brand in what feels like a short period of time, even though they've had 20 years of consecutive same-store sales growth. Value leadership done right is not a promotion strategy, it's an operating model. I have observed that at times, industry people look at some of these stories and conclude that price is the strategy, when it's really just the visible tip of the strategy. The reality is far from that, in these successful companies, the strategy is visible to the consumer but runs back through every layer of the organization and its stakeholders.

Experience Leadership, Delivered with Precision

The clearest example of a restaurant business model built on experience is Texas Roadhouse.

Q1 2026 same-store sales were up 7.1 percent on 4.5 percent traffic growth, completing 61 consecutive quarters of comps growth going back to 2010, and named America's Best Restaurant Experience by the Datassential 500 Awards two years running. On their Q1 earnings call, the TXRH CEO stated, "our guests continue to trust us to provide an experience worthy of their time and money."

The clearest QSR example is easily Chick-fil-A; $8 million AUV versus a QSR industry average closer to $2 million. Chick-fil-A does not compete on price, it competes on service culture, experience consistency, and menu execution. CAVA is a fast casual example; Q1 2026 same-store sales were up 9.7 percent on 6.8 percent traffic growth, and restaurant-level margins at 25.1 percent.

Their CEO's description of their business, "our position as a clear industry leader and our ability to meet the moment for the modern consumer."

CAVA has committed to ingredient quality, category-of-one positioning, and a modern physical experience. Interestingly, many of these brands achieve value leadership in their segments without pursuing the lowest prices. Ultimately guests assess value as what the guest feels they received compared to what they paid. Experience leadership built on operating models that enable it, are an equally valid way to win on value with consumers.

The Middle Is Not a Position. It's Often the Absence of Choice

In many cases, the brands experiencing softness today are not merely the victims of a tough macro environment. More often they are experiencing the consequences of not having built an operating model focused on an outcome that they can win on. Some are trying to compete on price without value discipline, or on experience without the investment in their operating model, or sometimes, both.

Discounting tactics without the necessary discipline to develop and validate them can produce short term results, and at the same time create long-term margin decay. Premium positioning on the other hand, without the underlying investment in experience, quality, and atmosphere, produces higher guest spend in the short term, but can result in long term transaction decay and declining loyalty. Neither position, half-committed, holds.

Leadership's responsibility is to choose the best strategy and invest in the operating discipline to hold it. These decisions are harder than they sound, because they also require leadership to stop doing certain things which be associated with revenue, margin, or established habits. The position in the middle is more common than it should be, because it does not require leadership to say no to anything.

Value-focused brands have to say no to margin-eroding experiences, while experience-forward brands have to say no to deeper discounting. The middle ground asks leadership to say no to nothing, and unfortunately, can destroy value in restaurant companies. The discomfort of choosing is exactly the point; leadership teams who make the right choices and execute against them (avoiding distractions) are the ones building durable growing businesses.

Success in our industry in recent times is not a segment story; each major segment can demonstrate consistent success in brands that choose, invest, and execute against the right strategies. The industry is not neutral about the absence of strategic choice; it is shrinking away from those companies who have not yet done so.

While strong economies often obscure unfocused businesses, weak ones do also. There is real money to be made in value leadership, just as there is in experience leadership, but there is almost no value creation possible in The Middle. But, the restaurant industry consumer is a surprisingly forgiving one; when restaurant brands and companies, even ones who have struggled, commit to a strategy they can win on, good things happen.

James O'Reilly is CEO of Latitude Food Group, franchisor of fast casual brands &pizza and Tijuana Flats. He has more than 25 years of leadership experience across public, private, and PE-backed restaurant and consumer businesses, including prior CEO roles at Ascent Hospitality, Smokey Bones, and Long John Silver's, and earlier executive roles at Sonic and Yum! Brands. He was recognized as a 2025 Georgia Titan 100 CEO, and his brands have earned Newsweek America's Favorite Restaurant Chains honors.

Editor's note: This is the latest column in a recurring series by James O'Reilly, multi-time industry CEO (Ascent Hospitality, Smokey Bones, Long John Silver's, and former Sonic and Yum! Brands executive). O'Reilly explores industry hot topics and offers a roadmap for how operators can win over consumers in an ever-changing restaurant dynamic. The first story, on what drove traffic last year, is here. The second, on why pricing alone won't fix the problem, is here. The third, on why pressure reveals the strength of a restaurant brand, is here. The fourth, on four leadership disciplines for a soft restaurant market, is here. The fifth, on the narrowing set of decisions driving restaurant performance, is here. The sixth, on the restaurant brands winning on value know exactly what value means, is here. And the seventh, on how to win the beverage race, is here.

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