It’s safe to say that 2024 was not a great year for restaurants. Sure, some companies did quite well. Jersey Mike’s was sold for billions. Chili’s had a nice comeback. It’s good to be Cava or Wingstop.
Yet for the most part, restaurant chains struggled. Executive after executive talked about a “challenged environment.” Bankruptcies came fast and furious and included both former growth brands and once-massive stalwarts. The regulatory environment and a looming presidential election didn’t make matters any better.
A list of this year’s top stories is largely dominated by such news. Things were difficult, and the pages of Restaurant Business reflected that. So here’s a look at the year’s 10 biggest stories.
The restaurant recession
We were tempted to simply say “bankruptcies” here, but not all the struggling companies landed in bankruptcy court (yet) and there were plenty of other issues, too. Also we wanted to highlight two such bankruptcy filings in our list of 10 so … recession it is.
The restaurant industry is loaded with companies that either took on too much debt or costly leases or both. And some brands in certain sectors are copycat chains with little differentiation. Restaurants ran into a problem when a post-pandemic labor shortage drove up inflation to rates unseen in 40 years, which led many to raise prices, which led customers to get angry and cut back on dining.
The result was a difficult year. More than 30 companies filed for bankruptcy. Many others were sold out of bankruptcy at steep discounts, such as MOD Pizza—which not long ago planned an IPO. Big chains like, oh, McDonald’s struggled with weak traffic. Many restaurant chains closed locations, including big concepts like Wendy’s and Denny’s.
Many operators will likely welcome the end of 2024 with open arms.
The Red Lobster bankruptcy
You might have heard about this story. Red Lobster, the seafood chain, was sold to Golden Gate Capital a decade ago. The private-equity firm funded much of that acquisition with a sale-leaseback that provided favorable rates for the real estate buyer.
The company’s next owner, the Bangkok-based seafood supplier Thai Union, steered much of Red Lobster’s shrimp supply to itself and its CEO then attached a low price to an “Endless Shrimp” promotion, which hammered already weak profitability. The result: One of the biggest bankruptcies the restaurant industry has ever seen, with more than 100 closures, or about one-sixth of the chain. Oh, and the CEO of Thai Union swore off lobster.
TGI Fridays’ manager termination
We’ve never quite seen a chain have the year that TGI Fridays has had.
Fridays had a deal to sell itself to its UK operator, Hostmore. And then Fridays started having some problems, which put the deal in question.
Then it was revealed that the trustee overseeing TGI Fridays’ 2017 whole business securitization terminated the company as the manager of the assets used to repay that debt—which includes the brand and the franchise organization, including royalties paid by franchisees. It was the first time in 15 years that a manager was terminated. And as far as we know, it’s never happened to a restaurant.
The subsequent issues were all inevitable. The Hostmore deal was called off. Then Hostmore, which has struggles of its own, filed for the UK equivalent of a bankruptcy. And then TGI Fridays put what was left of its organization into bankruptcy. One problem, two bankruptcies.
The Starbucks saga
Not sure we would have predicted the year Starbucks had. The Seattle-based coffee giant, which generally performs well even in its off years, had a 2024 to forget. The company, which had just spent a year and a half with a public examination of its business and the hiring of Laxman Narasimhan, who spent six months training to be CEO.
And then in January, it admitted its sales started falling the previous November. In April it missed its earnings expectations, badly. Sales were bad both in the U.S. and in China, its two biggest markets, and the company largely didn’t expect either problem.
The sales problems persisted all year, eventually leading Starbucks to hire Brian Niccol away from Chipotle. Starbucks had never hired someone from another restaurant chain to be its CEO, and it certainly never did anything like that. Niccol has embarked on yet another fix-it program, this time of the world’s second-biggest restaurant chain.
The Jersey Mike’s sale
Oh, hey, finally some good news. Well, it’s good news depending on your perspective. But in November, the private-equity firm Blackstone agreed to buy a majority stake in the sandwich chain Jersey Mike’s at a valuation of $8 billion.
It would prove to be the year’s biggest deal, and one of the biggest industry deals of all time. Jersey Mike’s is one of the most consistent, strongest-performing restaurant chains in the U.S., one that has taken considerable share away from the much larger Subway (which itself was recently sold for $9.6 billion). Company founder and longtime CEO Peter Cancro will remain with the company.
But it’s also a sign of just how low the reputation of private-equity groups has become, as the overall reaction from consumers to the deal was soundly negative.
California’s $20 fast-food wage
What would happen if the state’s biggest restaurant market placed the responsibility for regulating fast-food chain restaurants to a council featuring employees, union members and operators? We’re finding out right now in California.
AB 1228 established the Fast Food Council. The most immediate impact of this law, which took effect in April, was a $20 minimum wage, but only for fast-food chain restaurants in the state. The result led to higher prices at such restaurants, and traffic declines. At least one restaurant chain, Rubio’s Coastal Grill, blamed the law for a wide swath of restaurant closures.
It’s worth noting that, in November, voters in the state defeated a proposal that would have established $18 as a minimum wage.
McDonald’s E. coli outbreak
Years ago, as news emerged of an E. coli outbreak at Chipotle, McDonald’s executives privately said they were looking at their own processes. Imagine what would happen if that happened at one of their restaurants, they said, with all their daily traffic.
We found out in October, when more than 100 people were sickened in 14 states from an outbreak traced to fresh onions used for Quarter Pounders. The outbreak was quickly contained and is now over, but the result hurt sales and traffic. McDonald’s is investing $100 million into franchisee assistance and marketing to overcome the issue.
Chains coming back from the dead
Is there some long-dead restaurant chain you wish would come back? Wait long enough and some entrepreneur is bound to revive it.
In 2024, both Steak & Ale, which died in 2008, and Sweet Tomatoes, which closed all its doors in 2020, opened new restaurants. And then entrepreneurs bought the rights to open Ground Round, which is not quite dead but has a location in North Dakota. Now the son of the founder of Chi-Chi’s, which closed its last location more than 20 years ago, is plotting a return of that chain.
As one emailer said to me, “What’s next? Mr. Steak?”
Fast Food Value Wars
One of the stranger parts of 2024 was the chains that struggled the most, at least when it comes to sales. Traditional fast-food chains like McDonald’s, Burger King and Wendy’s, which typically get more customers when consumers are cutting back because of prices, all watched traffic plunge this year. Consumers were annoyed at their prices and demonstrated this by not visiting the restaurants as often.
McDonald’s in particular was at the center of this frustration, with social media decrying “$18 Big Mac meals” and saying its prices doubled. At one point, the company issued a rare release featuring average prices for some menu items to combat misinformation.
It all led to a value war, largely ignited by McDonald’s, which started selling a meal for $5. Several other brands, including Burger King, Subway, Jack in the Box, Del Taco and many others, focused more on price to get customers in the door.
Chili’s!
One brand that took advantage of this all was none other than Chili’s, the venerable bar-and-grill concept that was the beneficiary of some social media attention for its “3 for Me” deal, featuring a beverage, starter and a main course starting at $10.99. Many of the items on that menu are burgers, and some social media users insisted it was cheaper than McDonald’s.
Chili’s took full advantage, marketing the offer directly at fast-food customers. The result was surprising: The chain generated 14%-plus same-store sales in the second and third quarters. It outperformed rival Applebee’s by 20 percentage points in the third period.
The chain had not generated sales that strong in at least 20 years.
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