News

Report reveals record wave of restaurant chain failings

October 17, 2016

An industry "over-expansion" is the culprit behind a wave of bankruptcy declarations by restaurant chains. 

"The U.S. is having one of its biggest restaurant shakeouts in years, as an oversupply of eateries and new rivals offering prepared meals-to-go, claim what is expected to be a growing number of casualties," states a Wall Street Journal report.

The report notes three major chains filed for chapter 11 protection in one week— including Cosi Inc., as well as Don Pablo parent, Rita Restaurant Corp., and Souplantation and Sweet Tomatoes chains' parent, Garden Fresh Corp. — all of which are part of a group of at least five food service companies to file for similar protection in the past year. 

The WSJ report cites examples of struggling chains, noting CEO turnover and closing restaurants at the Famous Dave’s brand, as well as announcements of mass closures at Ruby Tuesday and Bob Evans Farms. Reasons include: 

• Oversupply:An eight-year restaurant unit growth spurt, ending in 2014, that added 7.3 percent more restaurants to the U.S. supply, outstripping the population growth here of 6.9 percent over the same period.
• More options for eating out and in: Meal delivery businesses, grocery store prepared meals and even convenience store meal options have siphoned off customers.
• Millennials cut back on eating out:On average, members of the 18-to-35 age group are dining out about 50 fewer times a year than previously. 
• Home workers eat out less:An overall increase in people working from home has reduced the number of lunchtime restaurant visits. 
• Election uncertainty: The presidential race is fueling an overall uneasiness about spending money eating out or investing in future restaurant growth.