Rising costs and price wars push chains and small restaurants to the brink

Thailand’s restaurant industry is facing a difficult year as rising costs, weaker consumer purchasing power and fierce price competition put pressure on both major chains and smaller operators.

Several large restaurant groups reported weaker first-quarter earnings, with net profits falling sharply despite their strong brand positions.

MK Restaurant Group Plc posted net profit of 163 million baht, down 70 million baht or 30.1% from the same period last year.

S&P Syndicate Plc recorded net profit of 44 million baht, down 4 million baht or 8%.

After You Plc reported net profit of 54 million baht, down 17%, while Suki Teenoi saw net profit fall by 101 million baht, or 37.3%, to 170 million baht.

Pluk Phak Praw Rak Mae Plc, the operator of Ohkajhu, was hit harder, reporting a loss of 30.4 million baht, an increase of 147.7%.

Central Restaurants Group, or CRG, stood out as one of the few stronger performers, with net profit rising 50% to 232 million baht.

Costs, weak spending and promotions weigh on profits

Nath Vongphanich, chief executive officer of CRG, said restaurant operators had to manage their businesses carefully in the first quarter of 2026.

Although many brands were still able to generate sales, industry profitability remained under pressure from higher costs, intense competition and consumer purchasing power that had yet to fully recover.

He said three key factors were shaping the sector: fragile consumer spending, stronger price and promotion competition, especially in the mass market, and persistently high operating costs, including labour, rent, utilities and platform-related expenses.

Current cost conditions remain uncertain, with raw materials, labour, utilities and marketing expenses still elevated.

Some raw materials also face further upside risk as the Middle East situation and oil prices feed through to packaging, transport and ingredient costs.

Nath said CRG was responding by managing stock in advance to reduce exposure to price volatility, seeking alternative raw materials and suppliers, and cutting food waste at every stage.

However, operators are also facing rising hidden costs, including promotions, delivery platform fees and the cost of retaining customers.

He said the key was not simply to wait for costs to fall, but to improve efficiency across the supply chain and raise labour productivity.

Diners seek better value

As the restaurant sector moves into the sixth month of 2026, competition is expected to remain intense through the first half of the year, while consumers are placing greater importance on value.

Nath said diners were becoming more selective, cutting the frequency of eating out and choosing brands that offer clearer value.

Many consumers now look for restaurants that can deliver quality, price and experience at the same time.

He said the formula for restaurant success this year depends on several factors, including value for money, strong brands, distinctive products, efficient operations and an ecosystem that keeps customers engaged with the brand for longer.

He also pointed to the importance of loyalty systems, data use, multiple growth channels beyond dine-in service, delivery, retail products and new store formats that respond quickly to deeper consumer needs.

CRG’s strong first-quarter performance reflected its ability to balance revenue growth with operating efficiency, he said.

Nath added that CRG was not chasing sales growth alone, but was focusing on brand portfolio management, productivity, cost control, new formats and long-term business sustainability rather than short-term price competition.

The restaurant market, he said, was no longer about who grows fastest, but who can grow sustainably while maintaining profitability.

Price wars force smaller players out

Ruangshine Supanpong, chief operating officer of Food Passion Co Ltd, said competition in the “self-cooking” restaurant segment, including hotpot, boiling, grilling and barbecue formats, had been intense for two consecutive years.

He said the main trigger was the arrival of new market leaders, with intense competition hurting small and medium-sized operators and forcing many smaller players out of the market.

Larger operators have also had to manage costs as efficiently as possible.

Ruangshine described the past two years as a period of endurance.

Price wars have had a major impact, he said, but consumers’ appetite remains the same while their choices have increased.

This has reduced traffic, especially for dining outside shopping centres.

Despite the intense competition, Food Passion does not plan to enter a price war.

Ruangshine said consumers would not see Bar B Q Plaza offering buffet prices starting from 200 baht.

He said 2026 was difficult for all operators, with the economic slowdown and oil-related pressures pushing up costs across the board.

The restaurant business is among the sectors with both a high number of new entrants and a high number of closures, reflecting constant competition.

Food Passion, which has operated for 39 years, has been through several cycles, including the post-1997 downturn, the rise of out-of-mall barbecue restaurants, the buffet era, foreign-brand competition, the mala trend and the current price war.

Ruangshine said the company had seen at least five major cycles over the past 15 years and understood that such phases eventually pass.

Looking to the second half of the year, he said challenges remain significant, especially consumer purchasing power and household debt, which directly affect the restaurant market.

He said the industry had passed the halfway point of 2026, and first-quarter performance was relatively good compared with the same period over the previous two years.

However, high household debt remained a major concern because it would immediately affect the mass restaurant market if it stayed elevated.

He expressed hope that government stimulus measures would help improve the overall economy soon.

Bar B Q Plaza currently has 106 branches.

Food Passion plans to open another 13 to 15 branches this year, with investment of about 8 million to 10 million baht per branch, or around 100 million to 120 million baht in total.

In 2025, the company posted total revenue of more than 3.587 billion baht, down 2.72%, while net profit fell 47.40% to more than 129 million baht.

MK says buffet model weighs on margins

Tantawan Thirakomen and Tee Thirakomen, co-presidents of MK Restaurant Group Plc, said the economic slowdown had brought more players and competitors into the restaurant market, keeping competition intense.

They said consumers were increasingly looking for value, although the definition of value differs from person to person.

Same-store restaurant sales in the second quarter are expected to remain broadly flat from the first quarter.

Gross profit is also expected to decline as some MK restaurants are converted into buffet models and as Bonus Suki, a fully buffet-based format, expands rapidly at around one to two branches per week.

The executives said the rising share of buffet sales was affecting profits because buffet margins are thinner than à la carte margins.

They said gross profit was likely to fall further, although not sharply, because buffets were weighing on margins. The company would review the pace of Bonus Suki expansion and work to improve profitability.

Other factors affecting profit include raw material prices linked to the Middle East situation, transport costs and supplier price increases, all of which remain uncertain and require close monitoring.

MK’s weaker first-quarter profit was mainly due to the 299-baht MK Suki buffet model, the expansion of the fully buffet-based Bonus Suki format and the impact of the Middle East conflict on oil prices, transport costs and some food ingredients.

The company said the MK buffet model had received a good response, but its profit structure was weaker than the à la carte model, even under a hybrid format.

Bonus Suki also carries higher costs because its 27 branches are equivalent to about 50 MK Suki branches in expense terms, due to larger store sizes, buffet operations, higher staffing needs and greater operating expenses.

MK said it would continue to improve gross profit over the longer term and monitor the Bonus Suki format closely because it remains a key variable.

In terms of net profit, the company will focus on top-line growth, with MK still seen as competitive and capable of generating profit growth.

Other expanding brands are expected to support sales, while the company pays closer attention to costs.

In the medium term, MK expects to restore net profit to previous levels, particularly before the Covid-19 pandemic, when profit exceeded 2 billion baht.

State stimulus may not fully benefit restaurants

The first and fourth quarters are normally the strongest periods for restaurant sales. With the second quarter expected to slow, another factor weighing on the sector is the government’s “Thais Help Thais” economic stimulus scheme.

Industry operators expect the measure to have another impact similar to previous co-payment schemes, as restaurants may not fully qualify for the benefits.

This means operators will need to launch their own marketing activities to stimulate sales and drive growth.