Red Lobster, Buca di Beppo, Roti, BurgerFi, now TGI Fridays and more: 2024 was a year full of bankruptcies of once-popular casual dining chains, and industry experts point to two main trends that caused the doors to close .

“There’s been a lot of speculation about the heyday of fast-casual, the heyday of casual dining, and all the different restaurant concepts. It really comes down to the specific brand value equation. Qu ‘does the customer get compared to what he gains?’ Brandon Coleman, CEO of Cotton Patch Cafe – formerly of TGI Fridays, Dave & Buster’s, Macaroni Grill – told Fox News Digital.

“When we talk about the end of the fast-casual dining era, it’s actually a certain type of restaurant that’s been around for 20, 30, 40 years that a lot of us grew up with. And it’s normal than a lot of these channels,” John Bringardner, editor-in-chief of Debtwire, told Digital.

“Tastes change. And if a chain doesn’t evolve with its customer base,” Bringardner continued, “it’s not uncommon for it to withdraw.”

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More than a dozen restaurant chains have filed for Chapter 11 bankruptcy since the start of the year at the fastest rate in decades. According to experts, emerging from the COVID pandemic has led to increased costs (for operators and customers) and influenced different eating habits. Debtwire analysts also predict that the next brands to fall could be Hooters or Denny’s.

It will be harder for diners to get their loaded potato skins and $5 happy hour at dwindling TGI Fridays locations, and Debtwire predicts Hooters and Denny’s will be the next brands to go bankrupt. (Getty Images)

“They have a similar level of debt to Friday. It’s a similar structure and they suffer from many of the same problems. It’s a legacy brand that everyone knows, but they were hit hard during the pandemic,” Bringardner said. “They have new competitors and they haven’t refreshed the brand in a way that will keep people coming back to restaurants.”

“We’ve had accelerated costs for our supply chains and for our workforce, as well as for a lot of other things that serve the restaurant. Faced with that, many brands have had to choose different paths,” began Coleman, who left TGI Fridays last November. to explain.

“Some have chosen to absorb short-term costs and better position themselves in the long term. Some brands have chosen to innovate around these costs, and others have chosen to pass these costs on to the consumer,” he said. he added. “And when you start putting that pressure on the consumer, they choose with their feet, they vote on which restaurant they’re going to go to based on their perception of the price-value equation.”

The head of Debtwire expanded on this “barbell” question, noting the confluence of these two indicators.

“First, the pandemic has forced restaurants to take on huge amounts of debt out of the blue just to survive, especially sit-down restaurants that have lost most or all of their business for months… This is a huge blow to any type of business,” Bringardner says.

“But on top of that, the chains that you see disappearing are the ones that never really recovered. Secondly, there seem to be particular problems in the family restaurant or casual dining sector, and that’s due to the change in eating habits of Americans.

The type of debt these companies take on is typically bonds, loans and asset-backed securities that are used to finance growth, Bringardner noted. Chapter 11 bankruptcy is a unique tool in the U.S. legal system that gives businesses the flexibility they need to restructure their debts and emerge as a profitable business.

He estimated that Red Lobster was about $1 billion in debt and that TGI Fridays, which declared bankruptcy earlier this month, was more than $300 million in debt.

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“The problem with this type of debt is that it’s a bit like a mortgage on your house. The mortgage payments may be okay if you still have your job, if everyone is healthy, but… everything suddenly, you can fall back on your debt repayments and risk losing your house. It’s exactly the same thing at the business level.

“It’s a very difficult decision for any brand,” Coleman added. “Obviously, it has a lot of impact on the guests, on the team and on the shareholders as well. And so it’s never a decision that’s taken lightly, whatever the situation.”

“But I think it depends on each individual brand and the decisions that are going to be made to maybe eliminate some poor locations, kind of clean up the business. I think that’s what you have to look at when you chooses bankruptcy. Is there anything on the other side? ” the CEO further asserted “Is there a core concept or brand that could thrive if freed from certain. investment decisions of previous years?

Coleman provided insight into the conversations that might take place in a boardroom during bankruptcy: “You’re going to have to question… every preconceived notion or untouchable belief within this restaurant concept, and challenge them in order to create a great future for this brand Now the other thing you’ll need to do is really understand what your customer wants from your brand.

“More often than not, when there’s a turnaround, we want to stay with our core customer and look at concentric circles and how to grow with customers that are similar to our current customer, or very close to our current customer… That creates “This can be achieved in combination with cost reductions and new customer value, to create a sustainable and revitalized proposition for some of these brands that are struggling,” Coleman said.

But some companies continue to evolve the casual dining sector, according to Coleman and Bringardner. These include Chili’s, ChipotleTexas Roadhouse, Wingstop, Cava and Sweetgreen.

Customers seem to be turning to quick service options which focus on fresh ingredients and fast turnover. Giving his best advice to other struggling restaurant CEOs, Coleman reminded them that “it’s all about the people.”

“If you really understand what your customers are looking for, then you can create value for them, and that value will translate into foot traffic,” Coleman said. “The people who run restaurants every day are the people and support centers we serve every day. And if you put people first…and invest in coaching, training, mentoring and in yourself ensuring they have a strong quality of life in restaurants, your guests will benefit.”

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“It may seem like a chicken-or-the-egg question: Are these restaurants not meeting expectations, or is it simply that customers are no longer coming to their doors?” »Emphasized Bringardner.

“But if restaurants were able to meet expectations, the customers would be there.”

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