NEW YORK — The restaurant industry is regaining its footing after a turbulent 2024, but not all players are seeing smooth sailing. Starbucks, set to release its quarterly earnings on Tuesday, will open a wave of reports from major restaurant companies. Investors are cautiously optimistic about improving demand, but lingering challenges for giants like McDonald’s and Starbucks underscore the uneven recovery within the sector.

Several restaurant chains, including Red Robin and Noodles & Company, revealed positive preliminary results earlier in January during the ICR Conference in Orlando. Fourth-quarter sales trends showed significant improvements, boosting investor confidence and lifting shares for many companies. However, Shake Shack disappointed with underwhelming forecasts, causing its stock to dip.

Industry leaders, including Yum Brands, Chipotle, and McDonald’s, will release their earnings in the coming weeks, offering more insight into the sector’s performance. McDonald’s, often seen as a bellwether for consumer trends, is slated to report its results on February 10.

Despite a rollercoaster 2024, the restaurant sector appears to have ended the year on a positive note, setting the stage for a promising 2025.

Fourth-Quarter Momentum Drives Optimism

Industry data suggests that fourth-quarter sales outpaced earlier periods of the year. According to Black Box Intelligence, same-store sales increased in October and November, although December saw a slight decline due to a late Thanksgiving.

“We came out of the fourth quarter with a lot of momentum and started off really strong,” said Shake Shack CEO Rob Lynch. “Consumers are still spending, and there are plenty of jobs. We’re bullish about 2025.”

Casual dining, which faced significant challenges throughout 2024, is beginning to see signs of a comeback. Chains like Chili’s, operated by Brinker International, reported double-digit same-store sales growth last year. Meanwhile, Red Robin expects a 3.4% increase in comparable restaurant revenue for the fourth quarter.

“We’ve been working hard behind the scenes, and you can’t rush these stories,” Red Robin CEO G.J. Hart said. The chain has revamped its operations by adding bussers and bartenders, improving its burgers, and launching loyalty programs to attract customers.

California Pizza Kitchen also reported a strong finish to 2024, with sales momentum continuing into 2025. “We’ve had a great start to the year, driven by strong in-dining guest traffic,” said CPK President Michael Beacham.

Starbucks Faces Turnaround Challenges

While the casual dining segment is showing resilience, Starbucks remains in the early stages of a significant turnaround under CEO Brian Niccol, formerly of Chipotle. Analysts expect the coffee giant to report a 5.5% decline in same-store sales for the quarter, reflecting ongoing operational challenges.

“Fiscal Q1 will likely be another tough quarter as Starbucks implements operational changes,” said Wells Fargo analyst Zachary Fadem. “Investors are focusing on long-term potential despite near-term headwinds.”

Niccol has revamped Starbucks’ advertising strategy but faces hurdles in overhauling menus and improving service speed. The company also announced plans to lay off some corporate staff, though details remain unclear.

McDonald’s Grapples with Fallout from E. Coli Outbreak

McDonald’s faced a public relations crisis in late 2024 when the Centers for Disease Control linked a fatal E. coli outbreak to its Quarter Pounder burgers. The chain temporarily removed the item in affected areas and switched onion suppliers.

Traffic to McDonald’s restaurants dipped following the outbreak but began to recover by December. UBS analyst Dennis Geiger noted, “While November trends showed pressure from the E. coli outbreak, franchisee discussions suggest guest counts rebounded in December.”

2025 Outlook: Cautious Optimism Amid Industry Risks

Restaurant executives are optimistic about 2025, citing improving consumer sentiment and higher wage growth. Darden Restaurants, owner of Olive Garden and LongHorn Steakhouse, credited frequent visits from middle-income diners for its strong fourth-quarter performance.

“I’m cautiously optimistic about where we’re headed,” said Red Robin’s Hart.

Still, challenges remain. Restaurants are contending with seasonal weather disruptions and the aftereffects of wildfires in California, which displaced residents and temporarily closed some locations.

“We see green shoots already for restaurants not impacted by weather or other crises,” said Fogo de Chão CEO Barry McGowan.

As the sector enters 2025, investors will closely monitor first-quarter trends to gauge whether the recovery momentum can sustain itself throughout the year.