Square: Sales up, labor costs down at QSR, fast-casual chains
Quick-serve and fast-casual restaurants are continuing to thrive amid consumers’ hunt for value.
New data from business technology platform Square and hospitality accounting firm Paperchase reveals that sales growth at fast-casual restaurants peaked at 9.3% in the fourth quarter of 2024, with a moderation down to .9% in 2025. QSRs peaked at 15.8% in the same quarter, with continued growth in 2025 between 8.7% and 9.1%.
The data also revealed that labor margins are steadily trending downward for both fast-casual and QSR chains, indicating improved labor efficiency or cost reduction, likely enabled by investment in technology like self-serve kiosks. Fast-casual restaurants using Paperchase see a lean and consistent margin between 17.4% and 21.2% amid 2024 and early 2025, while QSRs trended down from 21.1% in 2024 to 18.8% in 2025.
The vast majority (78%) of restaurant owners surveyed online ordering is the channel that drives the most orders to their business. Overall, leaning into first-party ordering is more profitable for sellers, with the profit margins being 64% higher than third-party delivery.
While fine dining excels in experience-driven differentiation, there are significant cost and margin trade-offs. Sales at fine dining restaurants declined by 13% in early 2024 compared to late 2023, likely due to reduced discretionary spending. However, the sector recovered to between 2.1% and 3.1% growth by early 2025, signaling renewed interest in premium dining experiences, according to Square. Labor margins at fine dining establishments ranged from 19% to 26% amid 2024 and early 2025, peaking during holiday periods.
[READ MORE: Report: Full-service restaurants attempt to overcome value perception challenges]
Square’s report also reveals a correlation between consumer confidence and tips at restaurants. The average tip on food and beverage transactions was 15.17% in the year's first quarter, but fell to 14.99% in the second quarter, aligning with dropping consumer confidence in the economy.
Bars regularly receive the highest tips. In the first quarter of the year, the average bar tip was 17.36% on each transaction, though this too fell to 16.96% in the second quarter. Cafes and quick-service restaurants received 14.72% and 14.64% in the first quarter, respectively, and dropped to 14.57% and 14.2% in the second quarter. Tips at full-service restaurants also declined from 14.76% in the first quarter to 14.64% in the second quarter.
“As previous Square research has underlined, tips make up a major part of workers’ wages – the average restaurant employee earned nearly 23% of their income in tips in 2024,” said Ming-Tai Huh, head of food and beverage at Square. “As consumer confidence in the economy shifts and tips fall, workers are taking home less which could lead to a return to labor uncertainties for the industry – adding to the crunch local restaurants are continuing to feel.”
