Restaurant companies grew accustomed to bankruptcy court in 2024.
More than 30 restaurant chains and large franchisees ended up seeking debt protection this year, ranging from small local brands to arguably the biggest industry bankruptcy filing of all time, Red Lobster.
Filings were so common that it’s become almost a surprise when struggling chains don’t take that step. This year, for instance, the fast-casual pizza chain MOD Pizza was widely reported to be considering such a filing but was ultimately sold without that step. Uncle Julio’s, the full-service Mexican chain, likewise has avoided that even though it was sold to an investor that holds the corporate debt. Multiple observers familiar with both concepts have told us they fully expected them to file. Some still do.
In most cases, brands filed because they had too much debt, or they agreed to expensive leases for bad locations.
The operating environment over the past couple of years has been unfriendly to a host of restaurant chains, as the cost of labor and food soared and then consumers soured on high prices, leading to sales declines. In many cases, executives desperate to fix their problems made mistakes that worsened problems.
Companies with excessive leverage struggled in this environment. And with high interest rates and low profitability, there weren’t enough buyers around to save them.
Lenders then sold off the debt, which has proven to be a boon for a group of investors that see opportunity in the low end of the market.
Many of these chains—and some of the aforementioned concepts that avoided bankruptcy—were sold to investors that bought that debt at steep discounts and used it to ultimately buy the brands.
All of which is to say that a lot of struggling companies changed hands, closed stores and reconfigured their balance sheets, hoping to enter the next year with a better outlook. The result helped shed a light on the brutal operating environment for restaurants coming out of the pandemic.
Here are the biggest bankruptcy filings of 2024.
Red Lobster
This is the undisputed biggest bankruptcy filing of the year, and certainly one of the biggest of all time. The venerable seafood chain proved to be one giant lesson in what not to do when running a struggling, full-service restaurant brand.
Darden Restaurants sold Red Lobster to the private-equity firm Golden Gate Capital a decade ago. Golden Gate did fine generally with the brand but it also financed its acquisition with a big sale-leaseback that saddled the brand with unfavorable leases.
Red Lobster was ultimately sold to one of its shrimp suppliers. Thai Union in 2023 steered the entire shrimp supply to itself and then its CEO ran an aggressively-priced “Endless Shrimp” deal that is blamed for speeding the chain’s path to a bankruptcy filing.
The chain has closed more than 100 locations and has been sold to Fortress Investment Group and hired Damola Adamolekun to be CEO.
He would later call Endless Shrimp “the final nail in the coffin” for the venerable chain.
TGI Fridays
In any other year the bankruptcy of TGI Fridays, once a leader in the bar-and-grill segment, would be at the top of this list. But its filing was every bit as notable. It was also unique.
The casual-dining chain was set to be sold to Hostmore, its UK-based operator. That deal began to sour, and the companies mutually decided to sell all their corporate stores and proceed as a pure-play franchisor.
But just before that could happen, the trustee overseeing Fridays’ whole business securitization took control of the company’s assets, apparently after the company overpaid itself a management fee and then used that to pay some overdue vendor bills.
It was the first time that a manager of a securitization lost its assets in 15 years and the first time it had ever happened in a restaurant franchise securitization.
In any event, Fridays’ sale to Hostmore was called off, and then Hostmore filed for the UK equivalent of a bankruptcy while what was not taken over of Fridays operation was placed into bankruptcy.
BurgerFi International
The first sign that BurgerFi might have some deep-seated issues came when it faced a delisting notice from Nasdaq shortly after it went public in a reverse merger.
The company later bought Anthony’s Coal Fired Pizza for $161 million.
It was all downhill after that. The company struggled with losses while its flagship brand floundered. It then changed CEOs in 2023 and promised a comeback that never materialized. Somewhere in there, Martha Stewart quietly left the board.
With problems mounting, BurgerFi said it was exploring strategic alternatives. Then the former CEO of Famous Dave’s bought its debt. The company filed for bankruptcy in September, and franchisees said the whole thing was a problem from the get-go. BurgerFi and Anthony’s have been sold to separate buyers, ending its infamous tenure as a multi-brand public company.
Tijuana Flats
The Maitland, Florida-based chain of Tex-Mex restaurants wasn’t necessarily the first bankruptcy of the year, but it was the first in what would be a flurry of filings through the spring and summer that signaled a problem.
And it was one of numerous filings by fast-casual chains, many of which had been growth brands a decade ago. Many of those brands, including chains like BurgerFi and Anthony’s, along with MOD and others, drove excessive growth, often agreeing to expensive leases that would prove problematic. Quite a few fast-casual chains ended up in Chapter 11.
In any event, Tijuana Flats has been sold and has hired turnaround specialist Jim Greco to be CEO.
Rubio’s
TREW Capital Management, the investment firm that bought BurgerFi’s debt and is run by former Famous Dave’s CEO Jeff Crivello, bought the debt of Rubio’s Coastal Grill.
The fast-casual Mexican chain in June closed 48 restaurants in California, just a couple of months after California started making chains pay $20 per hour. It then filed for bankruptcy, its second since the pandemic. It is now owned by Crivello’s investment firm.
We are now past the “major bankruptcies” portion of this exercise, but let’s point out a few more.
The Italian chain Buca di Beppo filed for bankruptcy and was sold to its lender Main Street Capital. Roti, the fast-casual Mediterranean chain, also sought bankruptcy protection. A few franchisees, including EYM Pizza and Louisiana Apple, sought credit protection. And a whole host of small, local chains found themselves in bankruptcy court.
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