7 Restaurant Chains That Are Struggling in 2024
The restaurant business is a notoriously difficult one. Amid inflationary challenges and shifting consumer preferences, many restaurants have struggled to stay afloat. Meanwhile, others have been forced to completely shut down.
Within the restaurant industry, several major chains have faced their fair share of financial issues. For some, this has led to numerous closures. For others, this has prompted the creation of new business initiatives that include elements like like operational changes, menu updates, and restaurant redesign.
With this in mind, your favorite restaurant chain may look a little bit different in the coming months—or it could be gone for good. From sit-down restaurants to fast-casual eateries, here are seven chains that have been recently struggling.
Cracker Barrel
Customer traffic has been a persistent issue for this southern country-themed restaurant chain. In the company's recent second-quarter earnings call, Craig Pommells, Cracker Barrel's chief financial officer, shared that customer traffic decreased by 4% during the quarter, which ended on Jan. 26. The chain also reported a 1.2% rise in same-store restaurant sales, a 4.8% increase in menu prices, and a 5% drop in retail sales.
Before its latest quarter, Cracker Barrel experienced declining foot traffic for four straight quarters. The chain reported a 7.1% decrease during its first quarter, which ended on Oct. 27.
Cracker Barrel didn't share any details about what drove the traffic decline during its recent earnings call. However, the chain previously attributed this to multiple factors, such as ineffective marketing, fewer people dining out due to inflation, and needed improvements in the guest experience.
Going forward, Cracker Barrel is shifting its brand positioning by updating its menu and restaurant design. The chain is also focusing on its new loyalty program that it launched in September.
Red Lobster
In January, Thai Union Group, a minority stakeholder in Red Lobster, announced plans to divest from the seafood chain, citing a loss of $22 million.
"The combination of COVID-19 pandemic, sustained industry headwinds, higher interest rates and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders," Thai Union wrote in a news release.
Thai Union's exit from the seafood chain isn't the only hit Red Lobster took over the last year. The chain also made headlines when it raised the price of its Ultimate Endless Shrimp deal. Red Lobster first raised the price from $20 to $22 before increasing it to $25 in November because of an $11 million operating loss Simply put, more people ordered the Ultimate Endless Shrimp than the company expected.
Then, at the end of its fourth quarter, Red Lobster reported a $12.5 million operating loss—its largest one of the year. In addition to these financial woes, Red Lobster shared in 2023 that it closed at least eight locations, deeming them "no longer viable" to the restaurant chain.
Boston Market
The fast-casual chain known for its rotisserie chicken and other comfort food staples has experienced a tumultuous few years, facing mass store closures, numerous lawsuits, and other financial issues. According to Restaurant Business Magazine, the restaurant chain has shrunk from about 300 locations down to just 27 since the start of 2023, with evictions over unpaid leases being the impetus behind many of these shutterings.
Additionally, the states of Massachusetts and New Jersey fined Boston Market over unpaid wages, with the New Jersey Department of Labor temporarily shutting down 27 locations in August as a result. The U.S. Department of Labor is currently investigating the restaurant chain because of complaints over wage and hour violations.
In January, a U.S. District Judge ordered Boston Market to pay $15 million to US Foods, an American food service distributor, in a lawsuit surrounding unpaid bills. The restaurant chain has filed an appeal to this ruling.
Denny's
This breakfast chain got a little bit smaller in 2023, closing 57 locations because of inflation-related challenges. Specifically, a Denny's location previously needed $1 million to break even and stay open. Now, it requires $1.2 million, as noted by Robert Verostek, Denny's CFO, during the chain's recent fourth-quarter earnings call. Verostek also said that customer traffic declined by about 6% during the quarter as compared to the same time in 2022.
The closures don't stop at the 57 that were announced. Verostek revealed that that chain is working through some additional closures "as a result of those inflationary pressures." However, he didn't specify how many locations it plans to close. Denny's now has 1,573 locations worldwide, with the shutterings partially offset by 28 restaurant openings in 2024.
Going forward, the breakfast chain aims to open about 30 new restaurants in 2024.
Applebee's
Since 2017, Applebee's has closed around 300 restaurants. And most recently, Dine Brands Global, the restaurant chain's parent company, announced the closure of 46 locations in 2023 during a fourth-quarter earnings call.
The company also opened 10 new restaurants during the year and said the closures "aren't a sign of struggling franchisees," but rather, "a sign of struggling trade areas." Looking ahead, Dine Brands plans to close 25 to 35 restaurants in 2024.
Additionally, Applebee's domestic same-store sales have decreased for three consecutive quarters, according to Restaurant Dive. These dropped by 0.5% in the fourth quarter, with this decrease tied to declining traffic.
To promote the chain's growth, Dine Brands announced plans to open dual-branded restaurants with IHOP. The company currently operates eight of these prototypes internationally. John Peyton, the company's CEO, said these restaurants make twice as much money as standalone Applebee's and IHOP restaurants.
According to Nation's Restaurant News, customers could see an IHOP/Applebee's location as early as the first quarter of 2025, as Dine Brands said it plans to introduce the dual-branded restaurant concept in the next 12 to 24 months.
Noodles & Company
The fast-casual restaurant chain best known for its noodle dishes recently reported a decline in performance during its fourth-quarter earnings call. During Q4, the chain experienced a 9% decrease in traffic at company-owned stores, an 8.9% drop in total revenue, and a 4.2% decrease in same-store sales systemwide. Meanwhile, revenue was down by 1.2% for the entire year, while same-store sales dropped by 1.9%.
Going forward, Noodles & Co. plans to find success by focusing on several different areas of its business, most notably the menu.
"While Noodles has consistently introduced new limited time offering menus in recent years, it has been a long time since we updated our core menu," Drew Madsen, the restaurant chain's interim CEO said during the earnings call. "As a result, our menu looks dated compared to newer fast-casual competitors."
Some changes include adding new menu items and recipes, renaming dishes, and updating the menu layout.
Outback Steakhouse
Bloomin' Brands, the parent company of Outback Steakhouse, Carrabba's Italian Grill, and Bonefish Grill, recently announced the closure of 41 locations.
"This decision considered a variety of factors, including sales and traffic, trade areas, and the investments that would have to be made to improve the restaurants," Dave Deno, Bloomin' Brands' CEO, said during the company's latest earnings call.
Most of the 41 closures were Outback locations, according to Chris Meyer, Bloomin' Brands' CFO. During the chain's most recent quarter, domestic same-store sales decreased by 0.3% while traffic fell by 4.3%. Customer visits are down 6.3% since 2022, according to the company.
Outback opened six locations in 2023 and intends to triple that in 2024, which would bring 18 new restaurants this year. Opening new buildings and renovating older restaurants is "a big part of improving our traffic trends," Deno said on the call.
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