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With traffic weak, closures and bankruptcies take hold

Thirty-three chains closed at least 10% of their locations in 2018.
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top 500

Last year was not a good one for Tilted Kilt Pub & Eatery. The Tempe, Ariz.-based breastaurant chain lost nearly 40% of its locations, and 40% of its sales, making it the worst-performing chain on Technomic’s Top 500 ranking. The casual-dining concept, No. 323 on the list, finished 2018 with 30 locations, down from 51 a year earlier, and $89 million in system sales, down from $143 million.

The company was then sold at the end of the year for the paltry sum of $10, plus the assumption of $1.5 million in debt. “They had severe challenges the last few years,” Seenu Kasturi, CEO of Arc Group, which bought Tilted Kilt, told Restaurant Business last year. “They didn’t have the right infrastructure and support. We hope to fix that and change things.”

Tilted Kilt was hardly alone. According to Technomic data, 33 restaurant chains closed at least 10% of their locations last year. Sales at those chains declined nearly $700 million last year.

After years of intense growth, much of the restaurant industry has hit a point of saturation. Chains that relied on new locations for growth had to find success elsewhere. And that left the Top 500 with a healthy dose of chains on the decline. 

Numerous chains filed for bankruptcy protection last year, and reported numbers reflect it, including the parent company of D’Angelo Grilled Sandwiches (No. 452) and Papa Gino’s Pizzeria (No. 304) and Real Mex Restaurants, which operates El Torito (No. 333) and Chevy’s Fresh Mex (No. 365).

But many others were like Tilted Kilt: They’ve struggled and seen declines, but found a buyer willing to take them on for a low price. Consider family-dining chains Coco’s and Carrows. Coco’s fell to No. 401 after sales dropped 10.8% and unit count fell 12%, to 44 locations. The parent of the California-based chains, Food Management Partners (FMP), also owns chains such as Ryan’s and Old Country Buffet.

FMP sold Coco’s and Carrows to Shari’s Pies, but would not let the buyer speak about the deal for several months. The two brands were “somewhat on their own for a couple of years,” said Sam Borgese, CEO of Shari’s. “I believe there’s a real path to grow the brand,” he added.

Most deals were not nearly that quiet. Last year, High Bluff Capital Partners acquired free-falling sandwich chain Quiznos (No. 229) and Taco Del Mar (No. 447) and combined them into Rego Restaurant Group. It then hired former Qdoba and Rusty Taco executive Tim Casey as CEO.

Quiznos has been in a steep decline since peaking at 4,700 units in 2007: More than 90% of its locations have closed. The chain, which once had more than $1 billion in system sales, had just $139.5 million in sales in 2018.

Other chains were sold, too. The steak buffet chains Ponderosa/Bonanza (No. 289), for example, were sold to Fatburger owner Fat Brands. The chains’ unit count fell by 17.1%, and sales declined 13.6%, to $106 million.  

To be sure, just being acquired is not necessarily a brand savior. A trio of brands that were sold coming out of the recession to brand consolidator Landry’s struggled last year. Sales at No. 222 Rainforest Cafe declined 8.9%, to $144 million. Sales at No. 176 Claim Jumper declined 7.6%, to $197.5 million, as unit count declined 12%, to 37. And sales fell 13.6% at McCormick & Schmick’s to $180 million; unit count declined 14.6%, to 41.

And in some cases, buyers of struggling restaurant chains were struggling themselves not long ago. No. 160 Macaroni Grill, which filed for bankruptcy in 2017 and has been struggling for years, bought No. 463 Sullivan’s Steakhouse, where sales declined 17.2%, to $56 million. Sullivan’s previous owner, Del Frisco’s Restaurant Group, was trying to unload the chain to concentrate on a pair of growth concepts it just bought: Bartaco (No. 339, sales up 24.6%) and No. 406 Barcelona Wine Bar & Restaurant, where sales rose 10.1%.

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