Why are so many restaurant chains filing for bankruptcy this year?

foxbusiness.com:

Apple-Metro Chairman and CEO Zane Tankel says consumer brands need to be more creative in an inflationary environment.

The year has not even reached its fourth quarter and bankruptcies among restaurant chains, operating companies and large franchisees are already nearly double what they were in 2023.

Jonathan Carson, co-CEO of bankruptcy services and technology firm Stretto, says there have been 17 such Chapter 11 filings in the sector so far in 2024, and there were only nine at this point last year. He expects the trend to continue.

Chapter 11 bankruptcies among major restaurant chains are nearly double this year compared to the same time in 2023. (iStock / iStock)

The numbers this year are low compared to the pandemic era, when nearly three dozen major franchises folded over a 12-month period, but there are different dynamics at play with the new surge, he says.

«In this situation, a challenging economic environment, post-pandemic recovery issues, rising labor costs, changing consumer habits and inflation have caused more restaurants to struggle in 2024,» Carson told FOX Business in an interview, noting those issues have also impacted other sectors of the economy.  

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But he does not think those are the sole reasons for this year's rise in bankruptcies in the industry, in particular.

Carson noted that just because a company files for Chapter 11 does not mean it is going out of business or going away, it just means that there is a challenge facing that business that the stakeholders believe can be addressed by that form of bankruptcy. 

Seafood restaurant chain Red Lobster is one of several major chains that filed for Chapter 11 bankruptcy this year. (Ting