Restaurant Chains Falter Amid Rising Costs, Underperformance

Multiple industry sectors are experiencing bankruptcies at an unprecedented rate this year, and the restaurant sector is one that is facing a notable surge in Chapter 11 filings.

Key Details: This year, about a dozen restaurant chains, not including franchisees, have filed for bankruptcy, and several more closures are expected by the end of 2024. Reasons for this include lower consumer spending, higher labor costs, and less government funding in an industry that was heavily affected by COVID-19 lockdowns, when government-subsidized loans and grants became less available.

Key Quote: Roti, a fast-casual restaurant chain that offers Mediterranean cuisine, said the following in a statement: "After careful consideration, filing for bankruptcy protection was the best way to address our challenges—including financial performance, rising costs, mixed location performance, and tough market conditions—while staying open and focused on delivering Food For A Full Life to each and every guest.”

For Context: Last month, three establishments filed for bankruptcy: Italian dining brand Buca di Beppo, Tavern chain World of Beer, and Mediterranean food chain Roti. Red Lobster filed for Chapter 11 bankruptcy in May.

How the Media Covered it: NTD (Lean Right bias) noted that bankruptcy filings have increased almost 50% as of last month at nursing homes and retailers, according to Bankruptcy Watch. At the same time, Fast Company (Lean Left bias) noted that some restaurant chains are actually thriving, such as Cava and Chipotle.