Why are so many restaurants filing for bankruptcy?

It has not been a great year for the dining industry, and part of the trouble can be seen through the unusually high number of bankruptcy filings among restaurant chains.

According to Jonathan Carson, the co-CEO of Stretto, a bankruptcy services and technology firm, there have been 17 Chapter 11 filings in the sector this year.

Carson shared with Fox Business that last year the number was nine.

Still, compared to the pandemic, the numbers this year are still low, as nearly three dozen major franchises folded over a 12-month period while the COVID-19 virus shut the world down.

As for the reasoning behind the latest trend in bankruptcies, Carson shared in an interview with Fox Business that a lot is at play.

“In this situation, a challenging economic environment, post-pandemic recovery issues, rising labor costs, changing consumer habits, and inflation have caused more restaurants to struggle in 2024,” Carson said.

However, Carson stressed that these aren’t the sole reasons for this year’s bankruptcies, sharing that when a company files for Chapter 11, it doesn’t mean they are going away. Instead, it means they are facing a struggle that stakeholders believe can be addressed.

According to the US Courts , Chapter 11 is often used when a company needs to restructure its debt or reorganize.

Among the restaurant chains facing bankruptcy this year is Red Lobster, which is using its bankruptcy filing to help get out of long-term leases with landlords in locations that aren’t doing well.

Still, Carson says that other factors are playing a role among chains that are struggling, such as high interest rates tightening up budgets, consumer behaviors resulting in more inflation-weary Americans eating at home instead of dining out, and the costs for goods rising.

Among the other restaurant chains to file for Chapter 11 bankruptcy are BurgerFi, Mod Pizza, Roti, Buca di Beppo, World of Beer, Rubio’s, Kuma’s Corner, Melt Bar & Grilled, Sticky’s Finger Joint, Tijuana Flats, and Boxer Raman.