In August alone, three notable restaurant chains sought bankruptcy protections. Mediterranean fast-casual chain Roti filed on Aug. 23, citing challenges from high operating costs and decreasing foot traffic in downtown areas. Earlier that month, Buca di Beppo and World of Beer also turned to Chapter 11 to restructure their businesses amid rising labor costs and inflationary pressures.

In June, Rubio’s, a fast-casual chain known for its fish tacos, filed for bankruptcy protection, citing the burdens of higher labor costs and dwindling lunchtime crowds due to the popularity of hybrid and remote work patterns cutting into sales. Melt Bar & Grilled, a Cleveland-based grilled cheese chain, also sought Chapter 11 protection after its restaurant count shrank to just four locations. Kuma Holdings, the parent company of burger chain Kuma’s Corner, also filed for bankruptcy protection that same month.

In May, Red Lobster, once a seafood giant, also filed for bankruptcy protection, citing its struggles with high leasing costs, increased competition and poor strategic decisions, like its ill-fated “endless shrimp” promo for $20 that cost the company millions. (Related: BANKRUPTCY BOOM: U.S. saw 70 major bankruptcies in just 4 months, the third worst start of year since 2000.)

In April, Tijuana Flats, a fast-casual Tex-Mex chain, also filed for Chapter 11 bankruptcy. At the time, the Tijuana Flats also announced new ownership under Flatheads LLC and the closure of 11 restaurants as part of its restructuring. Sticky’s Finger Joint, a chicken-tender chain, also declared bankruptcy that same month due to rising costs, lingering effects from the pandemic and legal issues from a trademark dispute with rival Sticky Fingers.

In February, Boxer Ramen, a Portland-based ramen chain, filed for bankruptcy and closed all four of its location by late April after more than a decade in business.

More restaurants and food chains are expected to follow before 2024 ends.

Bankruptcies nearly double in 2024 due to broader economic challenges

According to Jonathan Carson, co-CEO of bankruptcy services and technology firm Stretto, major restaurant companies have been filing for Chapter 11 bankruptcy due to rising labor costs, inflation and shifting consumer behavior. He explained that although these numbers remain lower than the peak of the pandemic, when nearly three dozen major franchises went bankrupt, the current economic environment is still presenting a unique set of challenges.

“In this situation, a challenging economic environment, post-pandemic recovery issues, rising labor costs, changing consumer habits and inflation have caused more restaurants to struggle in 2024,” Carson said in an interview with Fox Business, noting those issues have also impacted other sectors of the economy.

Carson also stated that the shift in consumer spending is a growing concern. With more consumers burdened by student loan debt, mortgage debt and credit card debt, spending patterns have changed. “The numbers are staggering and rising, and high interest rates don’t help when it comes to the health of the consumer,” Carson said. “The consumer is in a rough spot.”

Industry experts expect this trend to continue, with more restaurant chains likely to file for bankruptcy as they navigate an increasingly volatile market.

Watch this video about food conglomerates going bankrupt.

This video is from Thisisjohnwilliams channel on Brighteon.com.

More related stories:

• 127 Pizza Hut branches to close down as franchisee files for bankruptcy.
• Bankruptcy filings in U.S. surge at fastest pace since 2009 as Bidenflation continues to ravage Americans, businesses.
• Big Lots reportedly faces possible bankruptcy amid plummeting stock prices.
• Major U.S. flooring supplier files for BANKRUPTCY and plans to close 94 stores nationwide.
• Discount homeware chain Big Lots warns of BANKRUPTCY filing, triggering fears of mass closures.

Sources include:

• WSJ.com
• NBCNews.com
• MSN.com
• Brighteon.com

“Most restaurants lose money, and there’s a reason for that. It’s a hard business with low margins and trends that are hard to navigate,” Jonathan Carson, the co-CEO of market strategy company Stretto, told The Epoch Times.

“When you add higher prices and a continually and increasingly overburdened consumer balance sheet, I think it makes the industry prime for restructuring,” he said.

Carson, who handles business reorganizations, said his company is aware of at least 17 national restaurant chains that have filed for bankruptcy in 2024.

Among the higher profile restaurant casualties this year which have filed for Chapter 11 bankruptcy protection this year are Roti, Buca di Beppo, Tijuana Flats, Sticky’s finger Joint, and Red Lobster.

Consumer Habits Have Changed

Laura Adams, a money expert and award-winning author who also hosts the weekly Money Girl podcast, told The Epoch Times that changes in consumer habits such as cooking at home and ordering home delivery have especially plagued the fast-casual tier of the restaurant industry.

“Consumers who dine at lower-end restaurants are the ones who will stop dining out first, and they’ll be the last ones to return because of unaffordability,” she said. “I think people have become used to ordering out, eating casually at home, and wearing casual clothes while watching Netflix.”

One of the changes in the restaurant industry that exploded during the pandemic was home-delivery services like Uber Eats, Grubhub, and DoorDash. The delivery companies, though, take large commissions from restaurants already struggling to make a profit.

Doordash orders can take as much as a 30 percent commission from restaurants.

“Doordash is a double-edged sword. It gives you the opportunity to get more food to more people, but it takes a pretty sizeable chunk off the bottom line,” said Justin Winslow, president and CEO of the Michigan Restaurant and Lodging Association.

“In third-party delivery, you have a real prisoner’s dilemma. You either shun the opportunity and limit your top-line gross sales, or you accept it and realize your ability to profit from those customers is harder than those inside your restaurant,” he told The Epoch Times.

Doordash is now the top restaurant-delivery app in the United States. At the end of 2023, DoorDash had 550,000 partner restaurants and grocery stores using its platform. However, the company is still looking for its first quarter of profitability.

In a written response to The Epoch Times, DoorDash’s corporate communications group wrote: “Our mission at DoorDash is to grow and empower local economies, and we’ve built tools that help restaurants expand their business and reach more people in their community.”

A Variety of Issues

Adams said that to survive, restaurants must offer something unique to make consumers leave their homes to experience it.

“I think if companies can’t differentiate themselves, they’re going to have a hard time. Maybe a restaurant like Red Lobster gets transformed, but it’s sad to see such a well-known brand wither away. When you see folks cutting back on dining out, you need to offer something unique,” she said.

The reason behind many Chapter 11 restaurant-restructuring filings this year needs to be discussed more, according to Carson, who has more than 20 years of bankruptcy experience.

He believes many of the filings have much to do with getting out of rent agreements. “You can walk away from a lease with Chapter 11 bankruptcies. The company can take the liability off their PNL [profit and loss],” he said. “But you do still have some casualties along the way.”

As tough as the restaurant economic and consumer market is today, Winslow says the restaurants in his organization are still reeling from the response to the pandemic that ended two years ago.

“The long tail of COVID is still impacting this industry more than any others. We did a poll in June, and I wasn’t prepared for how severe the fallout has been, with 60 of our members losing foot traffic in the last year and only 25 seeing an increase in top-line sales,” Winslow said.

“Forty of them are currently not profitable, and two out of every five of our restaurants are at risk for closure in the near future.”

Asked if she would advise anyone to open a restaurant today in this economic environment, Adams said, “I would say it is one of the most difficult businesses you can choose to run, and I would make sure you have the expertise and a record of success before you do it.”

Most people have very little discretionary income to spend as a result of our cost of living crisis, and that is particularly true for our young adults.  Americans under the age of 40 love to eat out, but these days most of them are experiencing financial stress, and this is having an enormous impact on the restaurant industry.

In 2023, visits to sit-down restaurants dropped by about five percent compared to 2022…

Americans are eating out less as inflation weakens the dollars in their pocket, which is leading to some harsh consequences for restaurants across the country.

Visits to sit-down restaurants were down nearly five percent in 2023 from the year prior, according to location analytics firm Placer.ai.

So this is a trend that has stretched on for over a year. People just aren’t eating out as much as they once did.

As a result, we are seeing a wave of closures all over the country.  Even in the Big Apple, large numbers of restaurants are being shut down…

Even big metropolitan areas in the US known for their great dining spots are struggling to maintain an environment where it’s profitable to run a restaurant.

Eater NY reported that over 40 bars and restaurants closed in New York City from December 2023 to January 2024, with some of the owners saying business simply never picked up after the COVID lockdowns in 2020.

When times get tough, difficult decisions need to be made.

After closing 46 restaurants last year, Applebee’s has decided to close another 35 locations this year…

Applebee’s is to close another 35 further locations this year, after shutting 46 in 2023.

The restaurant chain has shut at least three locations so far this year and has plans to close even more, president Tony Moralejo said in an earnings call on Wednesday.

Closing restaurants was ‘an incredibly difficult decision’ and a ‘last resort’ for the company, Moralejo said.

And I am very saddened by what has happened to Boston Market.

At one time they had almost 1,000 locations all over the United States, but now the entire chain is about to go belly up…

In the case of Boston Market, a chain that once had nearly 1,000 locations nationwide, the company’s death has been slow, but the pace of its demise has picked up over the past few months.

Now, with its store count continuing to dip, the chain seems to have reached the end even if it won’t confirm that given that there no longer appears to be anyone around to make that decision.

Boston Market owner Jignesh “Jay” Pandya was recently denied Chapter 11 bankruptcy for the second time and has been barred from filing again for six months. That leaves his company, which faces massive financial obligations, unable to gain court protection from its creditors.

Our ongoing inflation crisis is the primary reason why this is happening.

Consumers simply have a lot less discretionary income now. Meanwhile, restaurants are facing much higher costs…

Jessica Dunker, the president and CEO of the Iowa Restaurant Association, said the reason restaurants are shuttering is because the cost of goods is up 30 percent and they are having to shell out higher wages to keep staff on.

Unfortunately, things aren’t going to get any better any time soon. For example, the cost of orange juice is expected to go up dramatically because of a very bad harvest in Brazil…

Breakfast lovers are in for another jolt as orange juice prices surge to near-record levels. A new report released on Friday indicates that Brazil, the leading global exporter of OJ, is facing its worst harvest in over three decades. This alarming development compounds existing issues in Florida’s citrus groves, which have been plagued by disease and are experiencing collapsing production levels to the lowest in decades.

Fundecitrus wrote in a note that Brazil will produce 232.4 million boxes—each weighing about 90 pounds—for the growing season this year. That’s a 24% collapse from a year earlier and the lowest production levels in 36 years.

We have reached a point where the vast majority of Americans just can’t afford to eat out on a regular basis.

Needless to say, that is really bad news for fast food chains like McDonald’s.

At one time, serving middle class families was their core business.

But now most middle class families just can’t afford to eat at McDonald’s very often.

In a desperate attempt to lure them back, McDonald’s will soon introduce a five dollar meal deal…

McDonald’s is looking to launch a $5 meal in the US in a move to bring back price-sensitive customers.

The meal includes four items, people familiar with the matter told Bloomberg and Restaurant Business. Customers would choose between two of the chain’s signature burgers — a McChicken or a McDouble — and get four-piece McNuggets, fries, and a drink. The $5 promotion would last for a month, Bloomberg reported.

So they are going to bring back affordable food for one month.

That’s just great.

Unless they make the five dollar meal deal permanent, I don’t expect that it will make much of a difference.

Consumers are really hurting right now.  In fact, consumer sentiment just fell to the lowest level in six months…

Consumer sentiment plunged to the lowest level in six months as price increases reaccelerated, according to the latest University of Michigan survey of consumers, released Friday.

Additionally, consumers are bracing for even higher price increases in the year ahead compared to readings from prior months, the survey found.

The gauge, which is closely tracked by the Biden administration, plunged 13% from April’s 77.2% reading, to 67.4%. That’s the biggest one-month drop since mid-2021. Economists polled by FactSet were expecting consumer expectations to fall to just 76.9%.

As I have discussed previously, the American people are deeply pessimistic about the economy at this stage.

And they have good reason to be pessimistic, because even though our politicians in Washington are engaging in an unprecedented spending spree in a desperate attempt to keep the economy propped up, the truth is that the wheels are starting to come off and tremendous chaos is ahead.

Ed Dowd agrees that big trouble is coming during the months ahead.  He just told Greg Hunter that he expects the U.S. economy “to take a nosedive sometime in the next 12 months”…

What happens to the Biden economy? Dowd says, “The economy is going to take a nosedive sometime in the next 12 months. The real economy is not doing well. . . . The only thing that has been holding up the GDP growth is government spending. We are spending $1 trillion every 100 days. That’s adding $1 trillion to the deficit. The only job creation is government jobs, and they don’t actually add to the economy. . . . Reports are coming out now that the low-income consumer is getting absolutely hammered. McDonald’s talked about it in their most recent earnings call. . . . So, low-income and the middle-class are getting squeezed while the rich continue to plug along.”

I agree.

Of course we don’t have to wait for the economy to come apart at the seams, because that is already happening.

At one time, the entire world marveled at the greatness of the mighty U.S. economy, but our leaders have completely wrecked it.

There is no way that we are going to be able to avoid disaster, and so I would encourage you to prepare for very hard times while you still can.

Michael’s new book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.