In 2024, the restaurant industry faced an onslaught of challenges that compelled many chains to reassess their business models and decide on drastic measures, including the closure of numerous underperforming locations. Inflation has significantly influenced consumer behavior, leading diners to prioritize value and discounts when they choose to eat out. As a result, the first ten months saw a marked decline in restaurant visits across the United States, as documented by Black Box Intelligence, an industry tracking firm. Diminished spending led to subdued sales, prompting a worrying number of bankruptcies among restaurant establishments.
The year proved particularly detrimental, with a staggering 26 restaurant companies filing for Chapter 11 bankruptcy protection—a nearly threefold increase from 2020, which itself was marked by pandemic-induced closings. Unlike previous years dominated by the pandemic, this upswing in bankruptcies reflects deeper, systemic problems exacerbated by the shifting culinary landscape. One major factor behind these closures is the ongoing struggle of casual dining chains, which have increasingly fallen out of favor with consumers, many of whom have opted for fast-casual chains promising superior quality and convenience.
The fight for customer loyalty has never been fiercer, as established casual dining chains like Applebee’s and Denny’s see their market share dwindling. Fast-casual competitors such as Chipotle and Sweetgreen have capitalized on evolving consumer preferences, offering quicker service and perceived higher quality at competitive prices. Sadly, this paradigm shift has highlighted the difficulties traditional chains face in modernizing their offerings and atmospheric experiences to retain relevance in an increasingly choices-rich environment.
Major players in the industry have embarked on a path of strategic closures to optimize their overall operational efficiency. For instance, Wendy’s announced a significant reduction, closing 140 underperforming locations by year-end 2024, adding to an already noticeable trend. These adjustments are aimed at revitalizing the brand’s overall footprint and long-term viability. CEO Kirk Tanner assured investors during an earnings conference that, despite the closures, new restaurant openings would keep their overall count stable.
Applebee’s, under the ownership of Dine Brands, also took steps to shrink its presence, planning the closure of 25 to 35 U.S. locations as reports indicated a consistent decline in same-store sales over multiple quarters. In fact, the overall trajectory of Dine Brands has resembled a slow decline since 2016, with only a temporary reprieve in openings in 2022. The company’s strategy seems focused on consolidating resources to rejuvenate its identical casual dining brand, but the jury is still out on its ultimate efficacy.
The closures were not limited to a select few; Denny’s, another established name in 24-hour dining, closed 50 locations in 2024 and targets an additional hundred by 2025. Despite an extensive footprint of around 1,300 locations, the chain faces mounting pressure to elevate its same-store sales, which have remained largely stagnant. Executives indicated these closures would improve their financial metrics while aiming for growth in the future with plans for new openings.
The bankruptcy wave extended to TGI Fridays, which filed for Chapter 11 after shuttering 86 of its restaurants earlier in the year. The future remains uncertain as the bankruptcy court will ultimately decide the chain’s fate. Red Lobster also navigated precarious waters, closing over 120 locations, with perhaps the most traumatic closures occurring just days before entering bankruptcy in May.
Fast-casual chains such as Noodles & Co. have also found themselves in a challenging environment, closing around 20 locations to better align operational strategies. Their management is focused on revitalizing their menu and improving financial performance, although same-store sales still showed a decline. Similarly, Bloomin’ Brands, parent to Outback Steakhouse and other legacy restaurants, shut down 41 underperforming establishments, seeking to enhance operations by evaluating the profitability of their older locations.
As the industry collectively reflects on its tried-and-true practices, a clear trend emerges: adaptability and resilience will be crucial for survival in this evolving landscape. The closures mark not just a reduction of physical spaces but a significant shift in how restaurants conceptualize their roles in modern dining culture. Whether these closures enable chains to realign and build stronger foundations remains to be seen.