A mix of underperformance issues, financial pressures from inflation, strategic realignments, changing consumer trends and overall cost-cutting objectives have all contributed to the recent wave of location closures across several restaurant chains in 2024.
Major chains including TGI Fridays, MOD Pizza, Outback Steakhouse and Applebee’s cited “underperformance” as the main reason for closing certain restaurant locations. They are strategically shuttering stores that are not meeting sales and profit expectations.
Other chains, like Boston Market, Red Lobster and Tijuana Flats, have closed locations due to severe financial troubles, unpaid bills, landlord disputes and even bankruptcy filings. Their closures are directly tied to efforts to cut costs and restructure amid money problems. Denny’s specifically cited inflation-related challenges, like higher costs, as a factor forcing it to close 57 locations in 2023 and planning 10 to 20 more closures in 2024, according to a February earnings call.
Some restaurant closures have been driven by shifts in customer preferences and dining behaviors that have made certain locations less viable. For chains facing financial headwinds, closing underutilized locations is a way to reduce costs and shore up their finances through restructuring.
List Of Fast-Casual Restaurants Shuttering Eateries
1. Cracker Barrel
Cracker Barrel, the southern-country-themed restaurant chain, will close four locations this year, including two in California, one in Oregon and another in South Carolina.
“As a standard course of business, we continually evaluate the performance of our stores, using various criteria to ensure we are meeting the needs of our guests and our business,” Cracker Barrel said in a statement to food outlet Eat This, Not That. “The decision to close a store is never one we take lightly, and our focus right now is on assisting our impacted employees during this transition.”
For over a year, the chain has experienced a downward trend in the number of customers visiting their establishments. The leadership at Cracker Barrel has cited several potential reasons behind this decline: weak marketing, a guest experience gap and cost-conscious consumers.
2. Applebee’s
Dine Brands Global, parent company to Applebee’s, announced in a fourth quarter earnings call that the restaurant chain would be shuttering 25 to 35 locations across the United States this year, after closing 33 restaurants in 2023.
“These closures aren’t a sign of struggling franchisees,” Applebee’s president Tony Moralejo told investors. “They’re offering a sign of struggling trade areas. And I can assure you that our leadership team, we’re pulling every lever we have to offset the downside of closings.”
3. TGI Fridays
TGI Fridays announced in a company statement in January that it would close “36 underperforming locations in select markets across the U.S.” The restaurant chain offered more than 1,000 transfer opportunities, which represented over 80% of the “total impacted employees.”
“Our top priority has always been delivering a superior experience for each and every TGI Fridays guest, and we’ve identified opportunities to optimize and streamline our operations to ensure we are best positioned to meet—and exceed—on that brand promise,” Ray Risley, U.S. president and COO at TGI Fridays, said in the statement. “By strengthening our franchise model and closing underperforming stores, we are creating an unprecedented opportunity for Fridays to drive forward its vision for the future.”
4. Denny’s
In addition to shutting down 57 locations last year, Denny’s anticipates 10 to 20 net unit closures in 2024, according to Restaurant Dive.
CFO Robert Verostek said in its Q4 earnings call in February, “We are continuing to work through some additional closures,” as a result of “inflationary pressures.” While acknowledging that inflation rates decelerated in 2023, Verostek emphasized that the preceding surge in costs still exacted a substantial toll on the company’s restaurant operations. For a location to break even, the CFO said it must now generate $1.2 million, up from $1 million due to inflation.
5. Boston Market
Boston Market began last year with 300 locations, and it is reported that the number is now down to 27, according to Restaurant Business, due to alleged evictions, lawsuits and unpaid bills.
In March, a federal judge nullified Boston Market owner Jay Pandya’s personal bankruptcy bid due to a technical issue in his filing. The court imposed a six-month ban prohibiting Pandya from filing for bankruptcy protection.
6. Red Lobster
Red Lobster filed for bankruptcy in May, disclosing outstanding debt obligations exceeding $1 billion. Its cash reserves dwindled to less than $30 million.
Ahead of its bankruptcy, the restaurant began shuttering 93 locations. With waning financial resources, Red Lobster halted payments to vendors last year, CNN reported.
Rapper Flavor Flav of Public Enemy fame posted to his Instagram on Monday an elaborate Red Lobster spread, alleging to have ordered every item on the restaurant’s menu, in a last-ditch effort to save the franchise.
“Ya boy said he wuz gonna do everything to help Red Lobster and save the Cheddar Bay Biscuits,,, ordered the whole menu,” he captioned on the photo.
7. MOD Pizza
MOD Pizza confirmed 26 restaurant closures of underperforming locations in its first quarter, Restaurant Business reported.
“Despite the best efforts of the squads and managers of those restaurants, they had not performed well for some time, and that’s just part of the business,” said MOD Pizza spokesperson Rick Van Warner. “Sometimes you have to evaluate the performance of your assets.”
Although five of the cullings took place in California, Van Warner made clear that the state’s new minimum-wage law was not responsible for the shutdowns. He stated that employees were presented with the option to relocate to other operational units within the company. For those employees who were unable to transfer or chose not to accept a transfer, the restaurant offered a severance package.
8. PDQ
Regional fast-food chicken eatery PDQ has closed eight of its locations in South Carolina and North Carolina.
“This difficult decision comes after careful consideration and evaluation of market conditions,” PDQ said in a statement to CBS 17, a local media outlet in North Carolina.
Impacted employees were offered severances and assistance in finding new jobs.
“PDQ’s team members have been an integral part of the PDQ family, and the team is committed to supporting them during this transition,” the company said.
9. Outback Steakhouse
Bloomin’ Brands shuttered 41 “underperforming” restaurants across its brands, including Carrabba’s Italian Grill, Bonefish Grill, Fleming’s and Outback Steakhouse.
The parent company closed Outback locations due to a “variety of factors,” including poor sales, customer traffic and financial investments that were too expensive to revamp the stores. Bloomin’ CEO David Deno revealed in its February earnings call that a “majority of these restaurants were older assets with leases from the ’90s and early 2000s.”
“Closing restaurants is never easy,” a company representative said in a statement to CNN. “This was a business decision that has no reflection on the staff or their service. Many team members will have the opportunity to transfer to open positions at another restaurant. Employees who do not will receive severance.”
10. Hardee’s
Hardee’s shut down 39 stores in 2023, diminishing its footprint in eight states across the country. The closures are still ongoing in Illinois, Tennessee and Missouri, according to Taste of Country.
11. Tijuana Flats
Regional restaurant chain Tijuana Flats revealed in a company statement in April that it had filed for Chapter 11 bankruptcy protection and closed 11 locations the same week—10 restaurants in Florida and one in Virginia. “The decision to close restaurants, though difficult, was a result of a unit-by-unit analysis of financial performance, occupancy costs and market conditions,” the company said.
Tijuana Flats was recently acquired by a new ownership group, Flatheads LLC.
“Our new partners share a desire to continue the corporate culture and vision of Tijuana Flats, protecting and supporting our team members and franchisees so they can best serve their customers,” CEO Joe Christina shared in the statement. “With this new ownership structure, and a robust strategic plan, we are well-positioned for an emergence in the fast casual space.”
What Happens To The Workers?
Restaurant closures place workers in a precarious situation. Employees immediately lose their source of income and employment benefits, including health insurance. This can create significant financial hardship, especially without severance pay.
Some workers or their family members may require medical leave or accommodations under laws like the Family and Medical Leave Act and Americans with Disabilities Act after a crisis closure.
Companies that properly provide notice are often required to extend benefits for some period and may offer severance packages to laid-off workers. It is essential for employers to communicate closure plans and offer available support during this challenging time.
Source: Forbes
