Bankruptcies took a big bite out of the full-service restaurant supply in 2024.
Sit-down chains that filed for bankruptcy, either in 2024 or this year, closed a total of 348 locations last year, according to Technomic data. That accounted for about 1.3% of all full-service locations on Techomic’s Top 500 ranking of the largest U.S. restaurant concepts.
The bulk of those closures came from TGI Fridays, which closed 134 restaurants, and Red Lobster, which closed 131. Both filed for Chapter 11 bankruptcy last year.
Hooters, which filed for bankruptcy this March, closed 41 locations last year, and has closed about 30 more this year.
On the Border and Buca di Beppo closed 22 and 20 restaurants last year, respectively, before filing for bankruptcy.
All of the closures helped to end what had been a three-year streak of unit growth among Top 500 full-service chains coming out of the pandemic.
Bankruptcies became an unfortunate trend in the restaurant industry last year as rising costs, falling traffic and heavy pandemic-era debt loads combined to create financial trouble for a lot of chains.
More than 16 restaurant companies went bankrupt last year, and while every segment of the industry was affected, full service was home to the two biggest bankruptcies: Red Lobster and TGI Fridays. Bankruptcies often lead to mass closures as companies look to cut costs ahead of a restructuring.
The rash of full-service bankruptcies is not all that surprising. Full-service restaurants have been struggling for years as more consumers shift to fast-casual brands or get more of their food to go. As of January, nearly three-fourths of all restaurant occasions were for takeout, according to the National Restaurant Association.
Though 2024 was a particularly bad year for full-service chains, the total number of full-service locations in the U.S. has shrunk for two consecutive years, and four out of the last five, according to Technomic. At the end of 2024, the overall full-service segment was nearly 18% smaller than it was in 2019, when Technomic reported nearly 349,000 FSRs in the U.S.
The pandemic had a lot to do with that, of course. But the segment was probably in need of a pruning. As customers continue to consume more food off-premise, there are simply not enough visits to support the number of full-service restaurants that existed a decade ago.
Bankrupt chains were not the only ones to close locations last year. Denny’s closed 73 stores, and Frisch’s Big Boy closed 57, or 60% of its footprint. Applebee’s closed 35, continuing a nine-year streak of negative unit growth for the bar-and-grill franchise.
Even Chili’s, the current toast of the casual-dining segment, closed 21 units last year.
However, there are signs that the paring back may already be contributing to a rebound at full-service restaurants. Some of the best performing chains so far this year have been casual diners like Chili’s, Texas Roadhouse and Olive Garden. Same-store sales among publicly traded casual-dining chains rose 0.6% in the first quarter, outdoing the industry average of negative 0.17%.
“What’s happening right now is that consumers are figuring out that casual dining is a great value and so they’re coming to casual dining more,” said Rick Cardenas, CEO of Olive Garden parent Darden Restaurants, during an earnings call last month. “Consumers want to go out and spend their hard-earned money, and we think we’re taking some wallet share from fast food and fast casual.”
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