Benny Bontempo, MBA’s Post

This Wall Street Journal article discusses the growing number of restaurant bankruptcies in 2024, driven by rising costs, decreased customer spending, and lingering effects from the COVID-19 pandemic. Among the notable casualties is Rubio’s Coastal Grill, a California-based chain known for its fish tacos. Despite sales improving post-pandemic, the chain could not recover fully and filed for bankruptcy protection in June. Jeff Crivello, president of Trew Capital Management, which acquired Rubio’s out of bankruptcy in August, highlights several challenges: unprofitable locations, high labor costs, and what he terms a “Covid hangover.” These issues reflect broader struggles across the restaurant industry, with rising expenses and consumer dissatisfaction with dining costs squeezing profitability. The trend of restaurant bankruptcies is expected to reach its highest point in decades, second only to the wave of closures in 2020 during the pandemic. The analysis, based on BankruptcyData.com, points out that both large chains and smaller operators are increasingly resorting to Chapter 11 filings. Even iconic names like Red Lobster and other chains are scaling back operations by closing underperforming locations. The article warns that the economic pressures affecting the restaurant industry may persist, suggesting more closures and financial distress lie ahead.

Why Are More Restaurants Filing For Bankruptcy? Restaurant Bankruptcy It’s not just you… Restaurants have been filing for bankruptcy left and right this year… But what exactly is pushing these chains to closure? The answer is actually more complicated than it may seem at first… What’s Driving Restaurant Bankruptcy? Many chains that have become staples for nights out have joined this year’s wave of rampant restaurant bankruptcy. Some giant restaurant chains that filed for bankruptcy protection include Red Lobster and TGI Fridays. Even brands that have not filed for bankruptcy are struggling… McDonald’s revenue has been slipping this year and, more recently, Denny’s announced the closure of hundreds of locations. IN FACT, RESTAURANT CHAINS ARE CURRENTLY EXPERIENCING THE MOST BANKRUPTCY IN DECADES (OUTSIDE OF 2020, OF COURSE) Many experts are calling this phenomenon a “covid-hangover.” Thanks to high interest rates and hesitant consumers, restaurants on the verge of bankruptcy are bleeding money. Chains with less than 50 locations are especially at risk of failure. Due to the current difficulty of the sector, private equity companies are less likely to take a risk on saving eateries. However, private equity companies that have already obtained failing chains, as in the case of Red Lobster… They believe that through cost-cutting and closing locations they can create a massive comeback. The Future Of The Industry Industry experts don’t know how long this wave of restaurant bankruptcy will last… With many more potentially coming next year… It seems like this issue is just one that the hospitality sector will have to ride out…

Another restaurant chain is filing for Chapter 11. BurgerFi’s product, in my opinion, is very good, the problem is the pricing. Burger, fries and a drink cost over $20, for many, this is more than what they are willing to spend on casual dining (remember the supply and demand chart from ECON 101?) Restaurants will have to be more efficient, probably use more automation, to offset the rising costs of ingredients, labor and rent. Until then, unfortunately, BurgerFi is probably not the last to file for Chapter 11.

Navigating the Challenging Waters of the Restaurant Industry: Lessons from Recent Bankruptcies The recent wave of bankruptcies among well-known restaurant chains, as highlighted in a CNBC article, serves as a stark reminder of the volatile nature of the industry. The financial struggles of these brands underscore the importance of adaptability, financial management, and a strong customer connection in the face of evolving market demands. In today’s rapidly changing economic landscape, it’s not enough for restaurant chains to rely solely on brand recognition or legacy status. The challenges these chains face are multifaceted: rising operational costs, shifts in consumer preferences toward healthier and more sustainable options, and the increasing competition from smaller, more agile players. One of the critical takeaways for industry professionals is the need for continuous innovation. Whether through menu diversification, investment in technology, or exploring new revenue streams, such as delivery and ghost kitchens, restaurants must evolve to stay relevant. Additionally, maintaining a strong balance sheet and being prepared for economic downturns is essential. As these bankruptcies illustrate, even established brands are not immune to financial difficulties. For stakeholders in the restaurant industry, the lesson is clear: adaptability and financial prudence are crucial for long-term success. While the landscape may be challenging, those who can pivot and meet the demands of modern consumers will continue to thrive. The recent bankruptcies are a call to action for all industry players to reassess their strategies and ensure they are aligned with current and future market realities. Interestingly, this topic was also discussed in Episode 12 of the Flavor Forecast Podcast, titled “It Was Unthinkable that this Fish was Sinkable.” This episode dives deeper into the unexpected struggles faced by established restaurant brands, providing valuable insights for anyone looking to understand the complexities of the industry. You can listen to the episode https://lnkd.in/gRMYmuGT As we reflect on these developments, it’s essential to remember that the restaurant industry is resilient. By learning from the challenges faced by these chains, other businesses can better navigate the complexities of the market and position themselves for sustained success. #RestaurantIndustry #BusinessStrategy #Innovation #FinancialManagement

I honestly think our qsr and restaurant industry in general is in trouble as costs are too high and value can't keep up. Experiential dining may not be affected like high end restaurants that offer a great celebration location or the standard value restaurants like Taco Bell will always fit a need for those looking for super affordable. But the chains that are idle and not changing the customer experience are slowing losing market share and growth capabilities to the new fresh concepts. The other part is locations. We have had a stall in retail development which has driven prices up and foot traffic down. As an example look at the retail space west of 31 on SR 32. Most of those concepts were developed and created on high density markets and not completely reliant on drive through business. As an owner of a couple of pizzeria's I can first hand tell you that the business model for regular old food is not really there any more.

Darden Restaurants, owner of Olive Garden, has agreed to acquire Chuy's Restaurants Holdings, a full-service restaurant operator, in an all-cash deal valued at $605 million. This acquisition will add Chuy's 101 restaurants across 15 U.S. states to Darden's portfolio, which includes brands like LongHorn Steakhouse and Yard House Restaurants. The deal, priced at $37.50 per share, represents a 48.4% premium to Chuy's closing stock price. The transaction, expected to close in Darden's fiscal second quarter, is projected to be neutral to Darden's earnings per share for fiscal 2025. Read More Here: https://lnkd.in/gkjT-ab7 The Wall Street Journal Connor Hart Branded Hospitality Ventures Hospitality Hangout Podcast #hospitality #sales #marketing #finance Eric Belsky Cindy Busi Wayne Covey Dan Kiernan Jaime Bunker Sarah Kingsley Rollman

Darden Restaurants, owner of Olive Garden, has agreed to acquire Chuy's Restaurants Holdings, a full-service restaurant operator, in an all-cash deal valued at $605 million. This acquisition will add Chuy's 101 restaurants across 15 U.S. states to Darden's portfolio, which includes brands like LongHorn Steakhouse and Yard House Restaurants. The deal, priced at $37.50 per share, represents a 48.4% premium to Chuy's closing stock price. The transaction, expected to close in Darden's fiscal second quarter, is projected to be neutral to Darden's earnings per share for fiscal 2025. Read More Here: https://lnkd.in/gKU69s2C The Wall Street Journal Connor Hart Branded Hospitality Ventures Hospitality Hangout Podcast #hospitality #sales #marketing #finance Eric Belsky Cindy Busi Wayne Covey Dan Kiernan Jaime Bunker Sarah Kingsley Rollman

Two more restaurant bankruptcies, per reports by Restaurant Business Online and Nation's Restaurant News. Buca di Beppo, owned by Earl Enterprises, and World of Beer join the fray of BK filings. The dominoes appear to be falling. Will we see more BK filings as restaurants face major economic headwinds including slowing traffic? Stories by RB and NRN: https://lnkd.in/gwZVwfTn https://lnkd.in/gsR2fqCp

Big news in the Orlando Restaurant sector, Darden is making another acquisition. Despite the recent wave of Chapter 11 bankruptcy filings by several restaurant chains, the major players in the restaurant industry remain highly active in Florida. National brands and well-established franchises are continuing to expand, taking advantage of prime real estate opportunities and leveraging Florida’s favorable economic climate. These players are strategically investing in areas with strong consumer demand, such as vibrant downtowns, upscale shopping districts, and high-growth suburban markets. Many are also adapting to changing market dynamics by enhancing delivery services, incorporating drive-thru concepts, and focusing on experiential dining to attract a resilient customer base. This ongoing activity underscores their confidence in Florida’s long-term potential as a thriving hub for the food and beverage industry. #restaurant #CRE #Development #Darden #landlordrep https://lnkd.in/eivNmPHj