Restaurants generally did not have a very good 2024. Some forecasts suggest 2025 could be just as bad, or worse.
Red Lobster and TGI Fridays are just a couple of the chains that struggled last year. When TGI Friday’s declared bankruptcy, it was just the latest restaurant chain to run up the white flag in 2024.
Red Lobster filed Chapter 11 before that and Denny’s, while not declaring bankruptcy, announced it would close 150 restaurants to shore up its finances.
Alfred Goldberg, chief brand strategist at Absolute Marketing Solutions, says the last few years have been a unique time in the industry.
“The recent wave of restaurant chain bankruptcies, including TGI Fridays, reflects a combination of economic pressures and evolving consumer preferences rather than a single cause,” Goldberg told ConsumerAffairs. “While the economy has stabilized somewhat since the pandemic, restaurant chains are still grappling with several unique challenges.”
Inflation
Inflation has been a big challenge. According to the Consumer Price Index, “food consumed away from home,” which is the category for restaurants, has increased each month this year. Menu prices were up 0.3% in November and have risen 3.6% during the last 12 months. That’s not great for business.
The National Restaurant Association reports food costs for the average restaurant have increased by 29% since the pandemic struck in 2020. During those five years, labor costs have also surged. With the start of 2025, the minimum wage increased in 21 states.
Demographic trends may also be working against some chains. Older chains, such as TGIF, started out gearing their appeal to young baby boomers, who are no longer young and more likely to eat at home.
National chains are out of favor
According to Food & Wine, a food industry publication, property developers are now less interested in national chains, preferring to lease space to smaller, regional restaurants.
“People in this day and age seem to be trending toward local favorites,” R.J. Hottovy, head of analytical research at Placer.ai, a software platform that provides insight into customer foot traffic, told the publication,
“There’s an element of chains doing well in their home markets, but struggling when they get too far outside them.”