11 Restaurant Chains That Are Struggling in 2024
The restaurant business is a notoriously difficult one. Amid inflationary challenges and shifting consumer preferences, many restaurants have struggled to stay afloat. Meanwhile, others have been forced to completely shut down.
Within the restaurant industry, several major chains have faced their fair share of financial issues. For some, this has led to numerous closures. For others, this has prompted the creation of new business initiatives that include elements like operational changes, menu updates, and restaurant redesigns.
With this in mind, your favorite restaurant chain may look a little bit different in the coming months—or it could be gone for good. From sit-down restaurants to fast-casual eateries, here are 11 chains that have been struggling recently.
Kona Grill
Kona Grill has faced its fair share of financial struggles in recent years, including a bankruptcy filing in 2019 and a significant number of restaurant closures. Unfortunately, it hasn't been able to reverse the negative trend in 2024.
Kona saw a 14% drop in customer traffic and a 9.7% drop in same-store sales during the first few months of the year, according to its latest earnings report. The chain is also facing some issues with its profits.
The chain had just 24 locations in operation when its current owner—ONE Group Hospitality—bought it out of bankruptcy in 2019. About a quarter of those restaurants had "underperforming" profit margins at the end of 2023, ONE Group CEO Manny Hilario said during a May 8 earnings call. Margins have continued to lag at some Kona restaurants in 2024, he added.
The company said it hopes to improve Kona's fortunes by promoting value food and drink options to entice price-weary customers, better managing the mix of menu items available, maximizing productivity, and expanding the chain's footprint. ONE Group plans to open a couple of new Kona restaurants in 2024 and sees potential for the brand to reach 200 locations in the long term.
"We are clearly in the early innings of a robust growth strategy," Hilario said.
Starbucks
Starbucks' performance during the first few months of 2024 was "disappointing," in the words of CEO Laxman Narasimhan. The coffee chain saw a rare drop in customer traffic and sales during the period, reporting a 4% decline in global same-store sales and a 6% decline in global transactions.
Same-store sales and transactions declined by 3% and 7% in North America, respectively. Starbucks stock fell 12% in after-hours trading following the release of the iffy earnings results on April 30.
Narasimhan said during an April 30 earnings call that severe weather in the United States at the start of the year, "economic volatility" in the Middle East, and more hesitant spending from consumers negatively impacted its performance. Additionally, the chain is facing ongoing boycotts in connection to the Israeli-Palestinian conflict.
Moving forward, Starbucks hopes to improve its performance by continuing to launch innovative new items like its popular lavender beverages, adding new in-app value offers, and investing more in its supply chain to make sure it can keep up with demand for popular foods and drinks.
KFC
KFC has been flourishing in China lately, reporting an impressive 8% increase in same-store sales in the country during the first quarter of 2024. However, the chicken chain's American restaurants didn't perform nearly as well.
KFC's same-store sales dropped by 7% in the United States and fell by 2% worldwide during the quarter. David Gibbs, CEO of KFC parent company Yum Brands, admitted during a May 1 earnings call that the chain "has been struggling" in the United States.
He blamed the declines on fierce competition from rival chicken chains and rough weather that racked the country earlier in the year. Yum is currently working to "boldly reset" the KFC brand in the United States and improve its performance using what it has learned from its successful international business.
"We know how to bring that brand to life to connect with consumers around the world, and we have to do a better job of that in the U.S.," Gibbs said.
McDonald's
McDonald's isn't facing major sales declines like some of the other chains on this list. However, the burger giant has been falling out of favor with its lower-income customers.
During a February earnings call, CEO Chris Kempczinski said that consumers who make $45,000 or less annually have been visiting the chain less often because eating at home is more affordable. And when lower-income customers do stop at McDonald's for a meal, they're ordering fewer items or opting for less expensive options, he added.
The pullback from lower-income customers is only one aspect of McDonald's recent struggles. After raising prices by about 10% in 2023, the chain has faced a mountain of social media backlash over the cost of Egg McMuffins, Hash Browns, and other menu items. McDonald's also reported lower-than-anticipated profits and sales in the latest quarter.
While McDonald's already offers plenty of local value deals, the chain announced during an April 30 earnings call that they're working on more national value deals to entice price-conscious customers. It has yet to reveal when these promotions will roll out, but Kempczinski said that they may include meal bundles, breakfast deals, and "entry-level" menu items at affordable price points.
Cracker Barrel
Customer traffic has been a persistent issue for this southern country-themed restaurant chain. In the company's recent second-quarter earnings call, Craig Pommells, Cracker Barrel's chief financial officer, shared that customer traffic decreased by 4% during the quarter, which ended on Jan. 26. The chain also reported a 1.2% rise in same-store restaurant sales, a 4.8% increase in menu prices, and a 5% drop in retail sales.
Before its latest quarter, Cracker Barrel experienced declining foot traffic for four straight quarters. The chain reported a 7.1% decrease during its first quarter, which ended on Oct. 27.
Cracker Barrel didn't share any details about what drove the traffic decline during its recent earnings call. However, the chain previously attributed this to multiple factors, such as ineffective marketing, fewer people dining out due to inflation, and needed improvements in the guest experience.
Going forward, Cracker Barrel is shifting its brand positioning by updating its menu and restaurant design. The chain is also focusing on its new loyalty program that it launched in September.
Red Lobster
One of America's most famous seafood chains has officially filed for bankruptcy. In a May 19 press release announcing the bankruptcy filing, CEO Jonathan Tibus said the move "allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth."
Bloomberg, citing anonymous sources, previously reported in mid-April that Red Lobster was considering filing for Chapter 11 bankruptcy after struggling with high food and labor costs and significant operating losses. Though the chain is closing more than 50 restaurants, nearly 580 of its locations will remain open through the restructuring process.
The bankruptcy filing was only the latest sign of trouble for Red Lobster. Owner Thai Union Group announced plans to divest from the chain in January, citing its "prolonged negative financial contributions." Thai Union President and CEO Thiraphong Chansir admitted in an earnings call soon after that they're "not expecting to get anything much from the sale."
Red Lobster also made headlines last fall when it raised the price of its Ultimate Endless Shrimp deal from $20 to $25. More customers ordered the all-you-can-eat deal than the company anticipated, resulting in $11 million in operating losses.
Boston Market
The fast-casual chain known for its rotisserie chicken and other comfort food staples has experienced a tumultuous few years, facing mass store closures, numerous lawsuits, and other financial issues. According to Restaurant Business Magazine, the restaurant chain has shrunk from about 300 locations down to just 27 since the start of 2023, with evictions over unpaid leases being the impetus behind many of these shutterings.
Additionally, the states of Massachusetts and New Jersey fined Boston Market over unpaid wages, with the New Jersey Department of Labor temporarily shutting down 27 locations in August as a result. The U.S. Department of Labor is currently investigating the restaurant chain because of complaints over wage and hour violations.
In January, a U.S. District Judge ordered Boston Market to pay $15 million to US Foods, an American food service distributor, in a lawsuit surrounding unpaid bills. The restaurant chain has filed an appeal to this ruling.
Denny's
This breakfast chain got a little bit smaller in 2023, closing 57 locations because of inflation-related challenges. Specifically, a Denny's location previously needed $1 million to break even and stay open. Now, it requires $1.2 million, as noted by Robert Verostek, Denny's CFO, during the chain's fourth-quarter earnings call in February. Verostek also said that customer traffic declined by about 6% during the quarter as compared to the same time in 2022.
The closures don't stop at the 57 that were announced. Verostek said in February that the chain was working through some additional closures "as a result of those inflationary pressures." New earnings results released on April show that Denny's shuttered 25 restaurants and opened five during the first quarter of 2024, adding up to a net decline of 20 locations. Traffic also declined again by about 6%, Restaurant Business Magazine reported.
Denny's was operating 1,553 locations worldwide as of March 27 this year. Looking ahead, the breakfast chain aims to open about 30 new restaurants in 2024.
Applebee's
Since 2017, Applebee's has closed around 300 restaurants. And most recently, parent company Dine Brands Global shuttered a net total of 36 Applebee's locations throughout 2023
The company also opened 10 new restaurants during the year and said the closures "aren't a sign of struggling franchisees," but rather, "a sign of struggling trade areas." Looking ahead, Dine Brands plans to close 25 to 35 restaurants in 2024.
Additionally, Applebee's domestic same-store sales have decreased for three consecutive quarters, according to Restaurant Dive. These dropped by 0.5% in the fourth quarter, with this decrease tied to declining traffic.
To promote the chain's growth, Dine Brands announced plans to open dual-branded restaurants with IHOP. The company currently operates eight of these prototypes internationally. John Peyton, the company's CEO, said these restaurants make twice as much money as standalone Applebee's and IHOP restaurants.
According to Nation's Restaurant News, customers could see an IHOP/Applebee's location as early as the first quarter of 2025, as Dine Brands said it plans to introduce the dual-branded restaurant concept in the next 12 to 24 months.
Noodles & Company
The fast-casual restaurant chain best known for its noodle dishes reported a decline in performance during its fourth-quarter earnings call in March. During Q4, the chain experienced a 9% decrease in traffic at company-owned stores, an 8.9% drop in total revenue, and a 4.2% decrease in same-store sales systemwide. Meanwhile, revenue was down by 1.2% for the entire year, while same-store sales dropped by 1.9%.
Going forward, Noodles & Co. plans to find success by focusing on several different areas of its business, most notably the menu.
"While Noodles has consistently introduced new limited time offering menus in recent years, it has been a long time since we updated our core menu," Drew Madsen, the restaurant chain's interim CEO said during the earnings call. "As a result, our menu looks dated compared to newer fast-casual competitors."
Some changes include adding new menu items and recipes, renaming dishes, and updating the menu layout.
Outback Steakhouse
Bloomin' Brands, the parent company of Outback Steakhouse, Carrabba's Italian Grill, and Bonefish Grill, recently announced the closure of 41 locations.
"This decision considered a variety of factors, including sales and traffic, trade areas, and the investments that would have to be made to improve the restaurants," Dave Deno, Bloomin' Brands' CEO, said during the company's latest earnings call.
Most of the 41 closures were Outback locations, according to Chris Meyer, Bloomin' Brands' CFO. During the fourth quarter of 2023, the chain's domestic same-store sales decreased by 0.3% while traffic fell by 4.3%. Outback's financial woes have continued in 2024, with the chain reporting a 4.2% drop in traffic at American restaurants and a 1.2% drop in domestic same-store sales.
Outback opened six locations in the United States in 2023 and intends to nearly triple that in 2024, which would bring around 18 new restaurants this year. Opening new buildings and renovating older restaurants is "a big part of improving our traffic trends," Deno said on the call.
This story has been updated to include new information, additional entries, fact-checking, and copyedits.
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