Restaurant bankruptcies have been on the rise in 2024, reflecting the broader increase in corporate bankruptcies across various sectors. So far, at least 10 restaurant chains have filed for bankruptcy this year, excluding multi-unit franchisees. The surge in bankruptcies can be attributed to several factors, including a decline in consumer spending, rising labor costs, and the reduction of government assistance related to the COVID-19 pandemic.
Notable restaurant chains that have recently filed for Chapter 11 bankruptcy protection include Roti, Buca di Beppo, World of Beer, Rubio’s, Melt Bar & Grilled, Kuma’s Corner, Red Lobster, Tijuana Flats, Sticky’s Finger Joint, and Boxer Ramen. These chains have faced various challenges that have contributed to their financial difficulties.
Roti, a Mediterranean fast-casual chain, filed for bankruptcy in August. The company’s struggle began during the pandemic, as many of its locations were situated in downtown business districts that experienced a decline in foot traffic. Despite raising $58 million as of June, the recent downturn in consumer spending led to insolvency. Roti is currently working with landlords and suppliers to keep its 22 locations open while searching for new buyers or investors.
Buca di Beppo, an Italian American chain, declared bankruptcy in August, citing rising costs and labor challenges. The company plans to restructure and continue operating 44 of its locations, with plans to open another restaurant. Founded in 1993, Buca di Beppo faced financial difficulties following an accounting scandal in 2008.
World of Beer, a tavern chain, also filed for bankruptcy protection in August. The company attributed its financial struggles to high interest rates, inflation, and a slow return to pre-pandemic dining habits. As part of its restructuring efforts, World of Beer plans to end leases at underperforming locations. The chain was founded in 2007 during the peak of craft beer popularity, but has since faced a decline in sales as consumer preferences have shifted.
Rubio’s Restaurants, known for its fish tacos, filed for Chapter 11 bankruptcy protection in June. The chain had 86 locations across California, Nevada, and Arizona at the time. Rising food and utility costs, reduced lunchtime traffic due to the shift to hybrid work, and minimum wage hikes in California contributed to the financial pressure on Rubio’s. The company closed 48 underperforming restaurants in California before agreeing to a sale to an affiliate of TREW Capital in August.
Melt Bar & Grilled, a Cleveland-based chain famous for its grilled cheese sandwiches and craft beer, sought Chapter 11 bankruptcy protection in June. The company cited difficulties in paying vendors and landlords as the reason for the filing. Founded in 2006, Melt Bar & Grilled had seen a significant reduction in its number of locations before the bankruptcy.
Kuma Holdings, the parent company of Kuma’s Corner, filed for bankruptcy protection in June. The midwestern burger chain was established in 2005 and embraced a metal- and punk-themed menu. However, financial challenges led to the decision to seek bankruptcy protection.
Red Lobster, a seafood giant, filed for bankruptcy protection in May. The company attributed its insolvency to a combination of factors, including a difficult macroeconomic environment, an underperforming restaurant footprint, failed strategic initiatives, and increased competition. One notable contributor to Red Lobster’s financial troubles was a lease-back agreement made under a prior owner, which made the company’s leases too expensive. Damola Adamolekun, former CEO of P.F. Chang’s, has been tapped as the next leader of Red Lobster if the company successfully exits Chapter 11.
Tijuana Flats, a fast-casual Tex-Mex chain, announced new ownership, a Chapter 11 bankruptcy filing, and the closure of 11 restaurants in April. The chain was sold to Flatheads LLC as part of its restructuring efforts. Founded in 1995, Tijuana Flats has faced financial challenges due to various reasons, including changing consumer preferences.
Sticky’s Finger Joint, a chicken-tender chain, also declared bankruptcy in April. Factors contributing to its financial difficulties included rising commodity costs, the aftermath of the pandemic, and legal expenses from a trademark case brought by rival Sticky Fingers. Despite generating annual sales of $22 million in 2023, Sticky’s Finger Joint had to restructure to stay afloat.
Boxer Ramen, a Portland-based ramen chain, filed for Chapter 11 bankruptcy protection in February and abruptly closed all four of its locations in late April. The closure occurred more than a decade after the chain’s founding, indicating the challenges faced by smaller businesses in the restaurant industry.
The increase in restaurant bankruptcies is part of a broader trend of rising Chapter 11 filings across various sectors. As of August 20, Chapter 11 filings have climbed by 49% this year. Other companies, such as mall retailer Express, nursing home chain LaVie Care Centers, and Joann Fabrics and Crafts, have also sought bankruptcy protection due to high interest rates impacting their businesses.
The challenges faced by the restaurant industry, including declining consumer spending, rising labor costs, and the withdrawal of government assistance, have created a difficult environment for many chains. However, bankruptcy filings also present an opportunity for restructuring and potential buyouts, as seen with some of the aforementioned restaurant chains. The future of these chains will depend on their ability to adapt to changing consumer preferences and navigate the ongoing economic challenges.
