During a year when many U.S. consumers continued to feel the pinch from inflation and shaky household finances, many opted to cut back on their spending by dining out less. Predictably, this trend weighed on restaurant stocks in 2025, including those in the fast-food and fast-casual segments.
Things were so rough for restaurant equities last year that Darden Restaurants (DRI +1.75%) was one of the stars of the group, despite gaining just 1.6%. Investors in the Olive Garden owner could have done better in a high-yield money market account or a basic S&P 500 index fund. But with the company aiming for 8.5% to 9.3% revenue growth and Olive Garden leaning into healthier, lighter portions, the stock could have a stronger showing in 2026.
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Investors seeking alternative restaurant rebound ideas in 2026 have a range to choose from, including once-high-flying Texas Roadhouse (TXRH +0.30%). That stock shed 6.6% last year, but there are reasons to think the steakhouse chain could get its sizzle back.
Where's the beef?
One of the apparent reasons that shares of Texas Roadhouse faltered last year is that the operation is particularly sensitive to swings in commodity prices, specifically for beef. Over the course of 2025, beef prices surged, boosting costs for burger- and steak-intensive chains.
Those chains naturally attempted to pass those higher costs on to their customers via higher prices, but on that front, consumers' tolerance has been pushed to the limit. Further weighing on stocks like Texas Roadhouse in 2025 was the simple fact that it was cheaper to eat at home. In the November Consumer Price Index report, the year-over-year increase for items in the eating-at-home category was 1.9%, but inflation in the food-away-from-home category was nearly double that.
So it's clear that dining out isn't cheap, but this is where things get interesting for investors mulling stocks like Darden and Texas Roadhouse. Higher meal prices and also the specter of "shrinkflation" -- providing smaller portions at the same or increased prices -- are among the reasons why so many fast-casual restaurant chains' results and share prices slipped last year.
NASDAQ: TXRH
Key Data Points
That's relevant in discussing the Dardens and Texas Roadhouses of the world because, as prices rise at fast food and fast-casual outlets, some consumers are concluding that if they are going to spend more either way, they'd rather do it at sit-down restaurants with waitstaff -- an experience with a higher perceived value. That trend could support improved results for Texas Roadhouse this year.
Tax changes could indirectly benefit Texas Roadhouse
This is neither an endorsement of nor a criticism of President Donald Trump's "big, beautiful bill." Still, it's possible that as the legislation's no-tax policies on overtime and tips go into effect this year, restaurant stocks such as Texas Roadhouse may benefit.
The prevailing sentiment among restaurant industry observers is that employers won't directly benefit from those policies, but there are intangibles in play. For example, those tax deductions could serve as employee attraction/retention tools, and that shouldn't be glossed over, because the dining industry is notorious for high staff turnover.
Additionally, the combination of more retained earnings from overtime workers in other fields and larger tax rebate checks could be catalysts for more casual dining spending in 2026, potentially fostering a rebound for Texas Roadhouse along the way.
