The Shrinking, Social Media-Obsessed, Menu-Slimming L.A. Restaurant Scene

When contemplating the dining scene in Los Angeles, it can be easy to get caught up in nostalgic despair, as a proliferation of institutions such as Papa Cristo’s in Pico-Union and Cole’s French Dip have closed. Amid inflation, minimum wage laws, and changing dining habits, the story appears to be one of mounting challenges to beloved restaurateurs.

But that narrative misses how a wave of openings — powered by different operating models and an attempt to read the pulse of rapidly shifting food trends — have changed the way America goes out to eat, with significant implications for restaurant real estate.

Data from the L.A.’s Office of Finance show 758 eateries opened in 2025, surpassing the previous record of 729 set the year before. While 397 were classified as full-service restaurants, 303 of the openings were limited-service restaurants, which de-emphasize traditional front-of-the-house service staff and seating to focus on delivery, takeout, and open seating layouts.

The anxiety over closings, amid an historic upswing in both openings as well as new restaurant concepts, speaks to the larger transition taking place as business owners and restaurant tenants try to figure out the right model.

“Food has never been bigger from a mainstream culture perspective,” said Matt Newberg, an L.A.-based industry expert and founder of food media platform HNGRY.

And it could be argued that the cards have rarely been so stacked against restauranteurs, especially in L.A. Jot Condie, president and CEO of the California Restaurant Association (CRA), said that the struggling entertainment industry, the rising minimum wage, and stagnant revenue mean “the piece of the pie that each restaurant gets is slimmer.” The National Restaurant Association found wholesale food prices remain 34 percent above pre-pandemic levels, and last August, CRA launched its WTF (“What The Fork!”) billboard campaign decrying overbearing and economically depressing regulations.

The national picture remains somewhat dim for indie operators; data from Technomic shows the number of independent restaurants fell 2.3 percent last year, with full-service spots dropping 2.6 percent.

But amid the economic anxieties, the Southern California restaurant industry and its real estate sector remain strong, said Matt Hammond, principal at Coreland Companies. There’s tremendous demand and solid employment, with diners seeking out “chef-driven, menu-centric, place-making types of restaurants.”

It’s been a boon for landlords; due to the high cost of outfitting a new space, operators seek older or recently closed spots to repurpose and renovate. It may lead to significant tenant improvement costs, which can contribute to higher rents, but second-generation spaces remain cheaper and avoid zoning headaches. Converting retail space to restaurants not only takes more time, but can run up $150-per-square-foot conversion costs.

In both L.A. and nationally, there’s still significant real estate challenges facing legacy restaurants and chains, burdened with larger spaces and the therefore expanded labor costs. Many sit-down restaurants, often highly leveraged, squeezed through the pandemic only to be tripped up by rising food costs, said Stephen Cohen, a lawyer with a national practice representing restaurants. 

Fast-casual chains with a 2,000-square-foot footprint remain ascendent — and with private equity money flowing into the space, most can easily secure capital and slide into strip centers of smaller spaces. Older eateries stuck with triple the space, meanwhile, seem to have a concurrent amount of financial strain and struggle to downsize.

The K-shaped economy, and the tightening vice of energy and food costs caused by the conflict in Iran, means that high-end dining remains relatively healthy while lower-cost, quick-service dining is hurting: Closures at Wendy’s and Pizza Hut, and franchise challenges at Applebee’s, reflect this pressure.

Cohen said that consumers, worried about gas prices, have adjusted their spending habits in a bid to cope with the current state of uncertainty.

“You’d think the McDonald’s of the world would be doing better, but their customer base is getting hurt,” he said. “Gas prices going up doesn’t hurt the consumer willing to spend hundreds of dollars on dinner. It hurts the family that’s going to spend $30, who is much more price sensitive.”

These pressures are causing restaurant operators to think long and hard about their menus, pivot more toward faster service and less seating, and adjust their offerings to both fit the delivery paradigm and also protect margins, said Linchi Kwok, a professor of hospitality management at Cal Poly Pomona. Profit margins on specialty drink stores with small real estate footprints remain relatively high, which help explain the flood of boba tea and matcha cafes.

The new limited-service models that HNGRY’s Newberg has seen thrive in this environment share a few common traits: smaller footprints, less table service, a focus but not over-reliance on delivery, and a streamlined, limited menu laser-focused on a hot trend or new dining concept. Everyone wants to be “the best place for X.” Think Sobuneh, a Persian breakfast-burrito concept with a pair of locations in West L.A. and West Hollywood, or Ggiata, an East Coast delicatessen chain with six locations. The revenue pie for this new model should be roughly 20 percent dine-in, half delivery, and the rest takeout, Newberg said.

“There’s a bit of an identity crisis here,” he said. “The neighborhood cafe, that uses tips as leverage to pay server wages, gets squeezed out.”

Cohen sees a similar dynamic: Restaurants in the 1,600-square-foot to 2,200-square foot range, especially with a patio and outdoor seating, can keep costs low without the high labor overhead, and still generate a strong sales-per-square-foot return. Restaurant spaces in South Bay, Manhattan Beach, El Segundo, Culver City and West L.A. remain in high demand.

Ghost kitchens aren’t working anymore, Newberg said, because they struggle to establish a brand identity as they compete with delivery apps for both attention and ever-larger pieces of revenue. The exception that proves the rule is Goop Kitchen, a delivery and takeout concept situated within Gweynth Paltrow’s healthy living empire. With 14 locations in California, the best of which make roughly $20,000 a day, and plans to expand into New York, Goop is a rare breed that has the star power to succeed.

For many ghost kitchens that still operate, they’re sort of “meeting in the middle,” bridging the gap between their model and standard models by adding outdoor seating and a food hall-like experience.

Despite repeated headlines about automation and robotics — Cava and Chipotle are utilizing automation tech from a firm called Hyphen — that technology hasn’t achieved widespread adaptation or made impact beyond the margins, said Joseph McKeska, principal of dining-focused A&G Real Estate Partners. Salad chain Sweetgreen made a lot of noise with its Infinite Kitchen automation system, but it recently sold the technology to private equity firm Wonder.

Delivery also remains far from a panacea, said Newberg. When a restaurant grows its reliance on third–party delivery, it becomes “insanely unhealthy,” he said, as these apps take up to 30 percent off more and more orders.

Going forward, the creative destruction within the industry is expected to accelerate as weighed-down legacy concepts make way for newer models. McKeska said he believes the industry will see more closures in the short term, and extensive repurposing of that real estate, especially free-standing buildings. The restaurant industry in L.A. and nationally has always attracted new ideas and entrepreneurs due to lower barriers of entry; today’s tumultuous marketplace may serve as a launching pad for many.

“There’s definitely opportunities out there for people who want to grow, and there’ll be more, because there’s going to be more closures, no doubt,” said Cohen.