Chain Restaurant Bankruptcies May be the Next Big Trend

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Some trends are unstoppable, and it seems that restaurant chain bankruptcies are the latest.

Last month, Cosí Così Inc., the long-struggling fast-casual operator, filed for bankruptcy, closed 40% of company-owned restaurants, and is up for sale. Just before the filing, Così closed 29 of 74 company-owned locations. Così also has 31 franchisee-owned units that are unaffected by the action. And just last week, San Diego-based Garden Fresh Restaurant Corp. filed for Chapter 11 protection.

Garden Fresh, which operates 123 Soulplantation and Sweet Tomatoes restaurants in 15 states, is the latest restaurant chain company to file for bankruptcy in the last year. At least 12 chains - Logan’s Roadhouse, Fox & Hound, Champps, Bailey’s, Old Country Buffet, HomeTown Buffet, Ryan’s, Johnny Carino’s, Quaker Steak & Lube, Zio’s Italian Kitchen, and Black-eyed Pea - have sought legal protection while they sort out their difficulties.

It’s a troubling trend not seen since the Great Recession, and with traffic still sluggish, the chances are more will follow soon.

Perhaps it’s just a shake-out, one that is growingly anticipated in other food and beverage realms, like the one that many are predicting for the booming craft beer business. Or maybe it’s being driven by too many players seeking the same customers. Chains have a difficult time differentiating themselves as more and more players create smaller niches, although one of the major consumer complaints unearthed by researchers, many of whom present at the VIBE Conference each year, is that there isn’t enough different and new being offered at a number of chain operations to attract repeat visits by Millennials.

Beverages play a part as well; the continued sagging of soda sales on- and off-premise hits operators hard, so long have they been relying on the pure profit they provide. Plus in all realms - beer, wine, spirits, cocktails and non-alcohol - the bar has been raised and consumers now have greater expectations of inventiveness, quality and value.

It’s a tough time to run a chain restaurant, as all of this indicates, but it could be mostly down to a business model that no longer has the same appeal that it did a few years ago. Trends move fast, and disruption is as often caused by changing consumer preferences as it is by the Ubers of the world. Whether this current wave of bankruptcies is a fluke or a sign of things to come remains to be seen.


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