Bankruptcies across multiple industry sectors are taking place at an unprecedented rate this year, with the restaurant sector being one of those experiencing a notable surge in bankruptcy filings.
The reason for this can be attributed to higher labor costs, lower consumer spending, and less government funding in an industry that was heavily affected by pandemic lockdowns, as grants and government-subsidized loans become less available.
So far this year, around a dozen restaurant chains, not including multi-unit franchisees, have filed for bankruptcy, with several more closures on the horizon by the of the year.
Three notable establishments submitted Chapter 11 filings just last month, including popular Italian dining brand Buca di Beppo, Mediterranean fast-casual chain Roti, and Tavern chain World of Beer.
Roti said it is working with its landlords and suppliers to keep its 22 locations open while it searches for a new buyer or investors. The company started facing financial issues during the pandemic, as most of their restaurants are located in downtown business districts.
World of Beer attributed its bankruptcy filing to high interest rates, inflation, and a slow return to pre-pandemic dining habits. While the company announced restructuring plans, it also intends to end leases at underperforming locations through bankruptcy.
The company also cited a heavy decline in craft beer sales as a reason for its financial troubles. Buca di Beppo said it is keeping 44 of its locations open while it restructures, and plans to open another restaurant, too.
Court filings attribute the company’s reasons for its financial difficulties to rising costs and labor challenges. The company was sold to Planet Hollywood following an accounting scandal involving the company’s governance. The business was first founded in 1993.
Among the other affected restaurant chains are Rubio’s Restaurants, which filed for Chapter 11 in June, Cleveland-based grilled sandwich chain Melt Bar & Grilled, and burger chain Kuma’s Corner, both of which filed for Chapter 11 in the same month.
Seafood chain Red Lobster filed for bankruptcy protection in May, citing a “difficult macroeconomic environment, a bloated and underperforming restaurant footprint, failed or ill-advised strategic initiatives, and increased competition.”
In April, Tijuana Flats announced a Chapter 11 bankruptcy filing, new ownership, and the closure of 11 restaurants in a single press release.
Earlier this year, Oregon-based ramen noodle chain Boxer Ramen also filed for Chapter 11 bankruptcy protection. Following the initial announcement in February, the company abruptly closed all four of its locations after more than a decade of operations.
Sticky’s Finger Joint, which had been operating since 2012, also declared bankruptcy in April, citing rising commodity costs and a slow recovery from the pandemic as reasons.
The company also encountered a setback from legal expenses from a trademark case brought by rival Sticky Fingers, which forced restructuring procedures by the company.
Meanwhile, other companies such as Burger Fi, which also owns Anthony’s Coal Fired Pizza & Wings, expressed “substantial doubt” about the company’s financial future, in a regulatory filing last month, while another, Mod Pizza, narrowly avoided bankruptcy through a last-minute sale.
Other sectors, including nursing homes and retailers, are experiencing similar issues as Chapter 11 filings have climbed by almost 50 percent as of last month, according to Bankruptcy Watch.
Mall retailer Express as well as nursing home chain LaVie Care Centers and Joann Fabrics and Crafts are just a few of the companies that have filed for bankruptcy protection this year.
Reuters contributed to this article