Chain restaurant bankruptcies are reportedly at their highest level since the pandemic

Chain restaurant bankruptcies are reportedly at their highest level since the pandemic, with several well-known brands struggling to stay afloat.

One of the latest casualties is TGI Friday’s, a casual dining chain, which joins over a dozen high-profile restaurants that filed for bankruptcy protection between January and October of this year, Bloomberg News reported Thursday (Dec. 5), citing data from BankruptcyData.

This marks the highest number of filings through that period since 2020, and the outlook for next year remains bleak. Rising restaurant prices, driven by higher labor costs, supply chain disruptions, and growing interest expenses, are reducing consumer demand for dining out.

According to Bloomberg, data from Black Box Intelligence showed that restaurant prices surged 44% between 2015 and March 2024, compared to a 26% increase in grocery prices over the same period.

“It’s really hard for somebody to go to a restaurant at the same pace as we did before,” said Victor Fernandez, vice president of insights at Black Box Intelligence. “That’s putting a lot of pressure on brands.”

Other chains filing for bankruptcy this year include Italian restaurant Buca di Beppo, fish taco franchise Rubio’s Coastal Grill, and the parent company of BurgerFi and Anthony’s Coal Fired Pizza. Struggling seafood chain Red Lobster has also sought reorganization as economic headwinds batter the dining industry.

“I don’t know about you guys, but I’m ready for ‘24 to be behind us, and I think ‘25 is going to be a great year,” Kate Jaspon, CFO of Dunkin’ parent company Inspire Brands, remarked at an industry conference in Las Vegas last month.

Her comments, reported by CNBC, reflect growing concerns over restaurant traffic. Black Box Intelligence data cited by CNBC revealed that traffic for restaurants open at least one year declined year over year in every month through September.

Even major players like McDonald’s and Starbucks are feeling the impact, with both companies reporting quarterly sales declines that fell short of investor expectations.

For smaller restaurants, the challenges are even greater, particularly when it comes to securing adequate funding.

“Most restaurants are undercapitalized to begin with, and it’s the No. 1 business that fails in the U.S.,” said Mitchell Hipp, divisional vice president at Rewards Network, in a recent interview with PYMNTS.

He added that most small-to-mid-sized restaurants only have enough capital to operate for six months, though ideally, they would need funding to sustain them for several years to weather industry turbulence.