How do the different difficulties differ?
There are three difficulty levels, Picnic, Standard and Expert. The manual doesn't really state how these three choices differ, and the only in-game descriptions suggests that the only difference has to do with how many times you can restart after dying. However it doesn't go into any details on how this exactly works, specifically does this just mean I get restart per fight, one restart per floor, or something else?
How do the three difficulty levels vary, and how does the restarting after death feature work?
The Japanese Wiki for the game has the following information. I can't confirm it all myself but it makes sense and fits how the two difficulties in Etrian Odyssey 4 worked.
The short version is that enemy difficulty goes up as you increase the difficulty, and the game becomes less forgiving of party wipes.
On Picnic and Normal, after your party dies in battle, it will reload prior to the battle. This can happen indefinitely on Picnic, but only once on Normal.
Ariadne Threads don't get used up on Picnic. This matches how Etrian Odyssey 4 worked on Casual.
Damage dealt and received change based on difficulty. Normal is a baseline of 100% damage dealt and received. On Picnic you deal 133% damage and receive 33% damage. On Expert you deal 66% damage and receive 166% damage.
On Picnic, healing spells operate at 150% efficiency. It is 100% for Normal and Expert.