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More Popular Restaurants and Major Chains Could File For Bankruptcy in 2025

Higher costs for food and rent has been a recipe for disaster for the restaurant industry.

It's possible we could see more major chains go bankrupt this year after a few notable establishments went under in 2024. Red Lobster may have been the most notable when it filed for Chapter 11 bankruptcy in the spring. The chain had about 650 locations in the United States and Canada and 36,000 employees. TGI Fridays closed 50 locations in the fall before filing for Chapter 11 bankruptcy in November.

Rising costs for ingredients, rent and transportation have rocked restaurants across the country. Economics Professor at Lone Star College in Houston Hank Lewis said local eateries have been suffering lately too.

"Restaurants have to start scaling back locations, scaling back portion size and cutting costs wherever they can," Lewis said.

Restaurants are already notorious for operating on razor-thin profit margins. Lewis said intense competition in a fiercely competitive industry also did some places in.

"I have seen a number of the national chains close locations around town that were underperforming," he said. "Some of the issues there were not just the higher costs but also the intense competition and on the local level, some of it has been bad finances."

Lewis mentioned multiple restaurants and breweries in the greater Houston area that have been forced to shut down in recent years because of the multitude of factors mentioned.

President of Houston Hospitality Alliance and Founder & CEO of Convive Hospitality Consulting Jonathan Horowitz said the industry is still trying to recover after three difficult years during the pandemic.

“The costs of doing business have risen sharply across the board and many concepts are still just hanging on in survival mode," Horowitz explained.

Plus, more people are deciding to eat at home because their pockets are hurting.

"Consumer habits have shifted and inflation has cut more deeply into the restaurant industry’s notoriously low profit margins," Horowitz added. "Unfortunately, nearly all restaurants already have raised their menu prices as high as they can go - raising them any higher risks driving customers away - so there’s not much more that owners and operators do."

As a result, we’re likely to see additional closures and bankruptcies in the coming year or two.


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