Restaurants and Other Eating Places (U.S.) — NAICS 7225

A short rollup primer for a general audience, covering both public-market and private ways in. NAICS (the North American Industry Classification System) is the U.S. government's standard scheme for grouping businesses by activity. Code 7225 is an industry group — a four-digit level that sits one rung above the five-digit industry beneath it. This one has a single child, 72251, so the group and the child describe the same businesses. Federal figures here are our ground-truth Census statistics for the 7225 level; for full company detail see the 72251 primer.

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1. Overview

NAICS 7225, "Restaurants and Other Eating Places," is the whole American restaurant business in one line — every sit-down dining room, drive-thru, coffee counter, and buffet, taken together. It is one of the largest consumer industries in the country: roughly $800 billion in annual receipts, about 618,000 employer locations, and 11.4 million paid workers, close to one in fourteen private-sector jobs.[1][2]

For investors the single most important fact about this level is structural: 7225 is a pass-through. A four-digit industry group can hold several five-digit industries, but this one holds exactly one — 72251 — so the group's numbers and the child's numbers are the same figures. There is no extra activity captured at 7225 that is not already in 72251. The real variety lives one level further down, inside 72251's four national industries (full-service, limited-service, buffets, and snack-and-beverage). This page is a signpost; the full analysis is in the 72251 primer.

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2. What's inside — and why the level equals its one child

The NAICS ladder for restaurants runs: 722 (Food Services and Drinking Places, the subsector) → 7225 (this industry group) → 72251 (the industry) → four six-digit national industries.[3] The 7225 group was created to separate eating places from their two sibling groups under 722 — 7223 (special food services: caterers, contract/cafeteria operators, and food trucks) and 7224 (drinking places, i.e., bars whose main business is alcohol).[3] Everything that is not one of those cousins, but is a restaurant or eating place, falls into 7225 — and all of it into the lone child 72251.

Because 72251 is the only industry inside 7225, the two are identical in scope. All the meaningful contrast sits inside 72251's four children:[3]

• 722511 Full-Service Restaurants — you sit, a server takes your order, you pay after (casual, family, and fine dining).
• 722513 Limited-Service Restaurants — you order and pay first, at a counter, drive-thru, or app (fast food and fast casual).
• 722514 Cafeterias, Grill Buffets, and Buffets — one fixed price, serve yourself.
• 722515 Snack and Nonalcoholic Beverage Bars — a narrow, signature product bought often and cheap (coffee, treats, boba).

The one-sentence version: full-service and limited-service are two co-equal giants (together ~92% of sales), snack-and-beverage is a smaller but growing and unusually concentrated slice, and buffets are a shrinking rounding error. See the 72251 primer for the segment-by-segment breakdown.

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3. How big it is (this level's rollup figures)

All figures below are our ground-truth federal statistics for NAICS 7225 — and, because 7225 = 72251, they equal the child's totals exactly. County Business Patterns (CBP) is the Census Bureau's annual count of employer establishments, jobs, and payroll; the Economic Census (EC) is its every-five-years survey and the source for receipts, firm counts, and concentration.[1][2]

Average receipts per firm work out to about $1.77 million ($800.1B ÷ 452,314, both 2022 EC) — but that average is pulled up by a handful of giants; most of the 452,000 firms are single-location small businesses. Locations (618,476) exceed firms (452,314) because multi-unit operators and franchisees run many restaurants under one company.

Undercount caveat. Restaurants are captured fairly well because almost all have employees and payroll. Two gaps remain. First, CBP and the EC count only employer businesses, so the smallest no-employee operators — a one-person espresso cart, a cash-and-tip stand, a self-run boba kiosk — sit in the separate Nonemployer Statistics, and our ground-truth file has no nonemployer total for this level, so we state none.[1] The true outlet count is therefore somewhat higher than 618,476, but little revenue is missed. Second, the receipts figure is from the 2022 EC and predates recent menu-price inflation, so current sales are higher; for scale, the National Restaurant Association (NRA) estimates the entire U.S. restaurant-and-foodservice industry — a broader definition including bars, caterers, contract foodservice, and food trucks — reached about $1.5 trillion in 2025.[4]

Do not blend the two datasets mechanically. Receipts, firms, and concentration are 2022 EC; establishments, employment, and payroll are 2023 CBP. Ratios within one dataset are valid; do not divide across them to manufacture a sales-per-location or margin figure.

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4. The investable universe (where value concentrates)

Because 7225 is identical to 72251, so is the way you invest in it. Two rules govern the whole level. First, the biggest brand is often private — Chick-fil-A, In-N-Out, Raising Cane's, Dunkin', Golden Corral, and Panera cannot be bought on any exchange. Second, where franchising dominates, the public "company" is usually the brand owner collecting royalties, not the restaurants. Value concentrates unevenly across the four children: limited-service offers the richest public menu (asset-light royalty compounders and company-operated growth chains), snack-and-beverage a short but real list led by one blue-chip, full-service about a dozen public operators atop a mostly private base, and buffets essentially no clean public pure-play. Everything else — the majority of the industry by location — is private or private-equity-owned. The names, tickers, and scale figures live in the 72251 primer's investable-universe section.

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5. How the money works

Restaurants are a thin-margin, high-turnover business built on one equation — guest visits × average check = sales — plus alcohol, takeout, delivery, catering, and retail. Owners win by filling seats or counters repeatedly and controlling the two big costs, food and labor (together "prime cost"). The economics split along two axes: operator vs. franchisor (a company-operated unit keeps the whole sales dollar but bears every cost, while a franchisor licenses its brand and collects a high-margin ~4–6% royalty on franchisee sales), and a child-specific cost trade (full-service carries the heaviest, often-tipped labor; limited-service lives on throughput; snack-and-beverage on frequency and high gross margin; buffets swap low labor for high food cost). The most-watched metric across all of it is same-store (comparable) sales, split into traffic versus check. The full mechanics — royalty models, AUV, off-premise economics — are in the 72251 primer.

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6. What drives demand

Demand rests on one durable habit: Americans eating food someone else prepared. Food-away-from-home spending reached roughly $1.52 trillion in 2024, about 58.9% of the U.S. food dollar.[9] The main drivers — discretionary spending and downturn "trade-down," value perception (a 2025 limited-service value war in which traffic fell even as dollar sales rose), convenience and digital (mobile order-ahead, delivery, drive-thru), dayparts and demographics, and the emerging GLP-1 weight-loss-drug headwind to per-person consumption — hit the four children differently. See the 72251 primer for how each driver lands by segment.

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7. Regulation

Restaurants are lightly regulated as an industry but heavily exposed to labor and food-safety rules that move costs, mostly at state and local level with federal overlays. The load-bearing items: the federal minimum wage and tip credit under the Fair Labor Standards Act (FLSA) — a $7.25 floor, a $2.13 tipped cash wage, and up to a $5.12 tip credit;[6] state fast-food wage mandates such as California's $20/hour rule for large chains;[7] the Federal Trade Commission (FTC) Franchise Rule and its Franchise Disclosure Document (FDD);[5] and the Food and Drug Administration (FDA) model Food Code plus calorie-posting for 20-plus-location chains.[8] The detailed regulatory map is in the 72251 primer.

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8. Consolidation

Measured by firm, this level looks almost perfectly competitive — a four-firm concentration of just 5.2% and an HHI of 11.3.[2] That understates real power, because franchising splits big brands into thousands of separate franchisee "firms" and the independent full-service base is genuinely atomized: the honest read is fragmented ownership, concentrated brands. Consolidation runs on three tracks — private-equity roll-ups of franchisors (Roark, JAB, Blackstone buying capital-light royalty streams), brand rollups and take-privates in full-service (Darden acquiring; mid-caps going private), and consolidation-by-attrition in buffets (survivors gain share as rivals close). The deal-by-deal detail is in the 72251 primer.

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9. Risks

The level's core risks apply identically at 7225: consumer cyclicality and traffic erosion after years of price increases; labor-cost inflation from rising minimums, tip-credit rollbacks, and fast-food wage councils; food and commodity inflation; punishing third-party delivery economics; fixed-cost and lease risk; food-safety and reputation events; the structural decline of buffets and the GLP-1 volume headwind; deal and leverage risk in PE roll-ups; and private-market illiquidity for the large private majority of the industry. The most dangerous combination anywhere is falling traffic alongside fixed rent, debt, and labor commitments. Full risk detail is in the 72251 primer.

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10. How to invest, and the outlook

Because 7225 is its one child, the investment playbook is 72251's. There is no clean pure-play index for the level, and broad consumer-discretionary or restaurant exchange-traded funds (ETFs) give only diluted exposure — so a public position is built stock by stock: franchise-royalty compounders (concentrated in limited-service) for steadier, capital-light exposure; company-operated growth chains for higher growth and volatility; large full-service operators for scale and dividends; a short snack-and-beverage list for the beverage story; and effectively nothing clean in buffets. Compare same-store sales split by traffic and price, average unit volume, restaurant-level margins, new-unit returns, franchise mix, and lease and debt loads. Private routes — owning or buying an independent, franchising an established brand, or private-equity/private-credit platforms — are where most of the industry actually lives; underwrite the individual location's sustainable four-wall cash flow, not headline system sales.

Outlook. The level enters 2026 with modest projected real growth, cautious value-seeking consumers, and persistent cost pressure, its four children pulling in different directions — snack-and-beverage growing, limited-service fighting a margin-pressuring value war, full-service mature and cyclical, buffets shrinking. The underlying demand base is durable and enormous, but growth is uneven and the economics are unforgiving. For the complete build-your-position guidance and forward view, read the 72251 primer. Forward views here are judgments, not guarantees.

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Sources

1. U.S. Census Bureau, County Business Patterns, 2023 — NAICS 7225 / 72251 (establishments, employment, annual and first-quarter payroll; employer-only coverage). https://www.census.gov/programs-surveys/cbp.html
2. U.S. Census Bureau, 2022 Economic Census — Concentration/Comparative Statistics, NAICS 7225 / 72251 (firms, receipts, CR4/CR8/CR20/CR50, HHI). https://data.census.gov/table/ECNSIZE2022.EC2200SIZECONCEN
3. U.S. Census Bureau, 2022 NAICS Definitions — 722, 7223, 7224, 7225, 72251 and children (scope and exclusions: drinking places, special food services, and mobile food excluded). https://www.census.gov/naics/?year=2022&input=7225
4. National Restaurant Association, 2026 State of the Restaurant Industry / 2025 outlook (~$1.5T total industry; traffic declines; value priority). https://restaurant.org/research-and-media/research/research-reports/state-of-the-industry/
5. Federal Trade Commission, Franchise Rule (FDD, 23 items, 14-day disclosure). https://www.ftc.gov/legal-library/browse/rules/franchise-rule
6. U.S. Department of Labor, Wage and Hour Division, Fact Sheet #15: Tipped Employees Under the FLSA ($7.25 minimum; $2.13 cash wage; $5.12 tip credit). https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa
7. California Department of Industrial Relations, Fast Food Minimum Wage FAQ (AB 1228, $20/hour, effective April 1, 2024). https://www.dir.ca.gov/dlse/Fast-Food-Minimum-Wage-FAQ.htm
8. U.S. Food and Drug Administration, FDA Food Code 2022 and Menu Labeling (model code; 20+ locations post calories). https://www.fda.gov/food/fda-food-code/food-code-2022
9. U.S. Department of Agriculture, Economic Research Service, Food Prices and Spending (food-away-from-home ~$1.52T, 58.9% of food spending, 2024). https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/food-prices-and-spending/

Company-level facts, tickers, and the full source list are carried in the child primer, NAICS 72251.