Restaurant bankruptcies at the highest level since the pandemic

Chain restaurant bankruptcies are reportedly at their highest level since the pandemic.

Recent examples include casual dining franchise TGI Friday’s, one of more than a dozen high-profile restaurants that filed for bankruptcy protection between January and October this year, Bloomberg News reported Thursday (Dec. 5), citing BankruptcyData.

According to the report, this is the longest period to this date since 2020, and there could be more unrest next year as restaurant prices rise due to increased labor costs, supply chain issues and higher interest expenses, and consumer demand for meals away from home falls.

Bloomberg cited data from Black Box Intelligence showing that restaurant prices rose 44% between 2015 and March of this year, compared with a 26% increase in food prices over the same period.

“It’s really hard for someone to go to a restaurant at the same pace as before,” said Victor Fernandez, vice president of insights at Black Box Intelligence. “This puts a lot of pressure on brands.”

In addition to TGI Friday’s, the Italian chain Buca di Beppo, the fish taco restaurant Rubio’s Coastal Grill, the owner of the burger and pizza chains BurgerFi and Anthony’s Coal Fired Pizza, and Red Lobster are among the companies in a year when this was not the case, seeking restructuring through bankruptcy was gentle on the restaurant industry.

“I don’t know about you, but I’m ready for 24 to be behind us, and I think 25 is going to be a great year,” Kate Jaspon, chief financial officer of Dunkin’ parent company Inspire Brands, said at an industry conference last month in Las Vegas.

Her comments were reported by CNBC, which included its own statistic from Black Box Intelligence: Restaurant traffic at restaurants open at least a year had declined year-over-year in every month through September.

Meanwhile, well-known chains such as McDonald’s and Starbucks reported declining quarterly sales, disappointing their investors.

And while global names like these are seeing sales decline, smaller restaurants are struggling with their own challenges, such as raising capital, said Mitchell Hipp, divisional vice president at Rewards Network, in an interview with PYMNTS published earlier this week.

“Most restaurants are undercapitalized to begin with and it is the No. 1 business failing in the U.S.,” he said.

Most small to medium-sized restaurants only have enough funding to stay open for six months, although – ideally – they should have the capital to keep going for a few years.

“Six months goes by quickly when you open a smaller restaurant. If people don’t flow through the doors, it almost immediately creates a situation where (owners) are after them from day one,” Hipp said.