Key Facts on Restaurant Bankruptcies:
- Restaurant bankruptcies peaked in 2024, reaching the highest levels since 2020.
- Chains earning over $20 million per year were among the most affected.
- The services sector made up 28% of all large corporate bankruptcy filings in the first half of 2024.
- Main bankruptcy drivers: inflation, labor shortages, pandemic debt and declining dine-in demand.
- Sit-down and bar-centric chains were hit hardest by consumer behavior shifts.
- Chapter 11 lets restaurants restructure debt, exit bad leases and stay open.
The restaurant industry has long been known for its fierce competition, narrow margins and high failure rates, but the COVID-19 pandemic pushed these challenges to new extremes.
Many businesses turned to loans and government subsidies to survive the lockdown periods — adding debt that would haunt them in the years to come.
This article explores the state of restaurant bankruptcies in the U.S., drawing on data from 2020 through 2025. We’ll examine the key drivers of financial distress, which segments are most affected and what the trends signal for the industry’s future.
Restaurant Bankruptcy Trends Overview
COVID-19 didn’t just disrupt the restaurant industry — it reshaped it.
Lockdowns forced restaurants to close or limit operations, pushing many to adopt digital tools, shift to takeout and delivery and redesign their menus and spaces.
Consumer habits changed as more people cooked at home or ordered online, and many never fully returned to regular dine-in routines.
Labor shortages worsened as workers left the industry, leading to higher wages and reduced operating hours. To survive, operators made urgent decisions: cutting hours, deferring payments or taking on emergency debt.
But reopening didn’t resolve the damage. The years after the pandemic stayed unstable. Rising costs and changing consumer habits made it hard for many restaurants to keep customers coming in.
Businesses with high debt or overhead — especially casual dining chains and bar-centric venues — were hit hardest.
According to Bloomberg, restaurant bankruptcies in 2024 reached their highest levels since the start of the pandemic, with chains earning more than $20 million annually among the hardest hit.
Cornerstone Research also found that the services sector, which includes restaurants, accounted for 28% of all large corporate bankruptcy filings in the first half of 2024 — signaling deep financial strain across the industry.
What Is Chapter 11 Bankruptcy?
Many operators facing overwhelming debt have turned to Chapter 11 bankruptcy as a way to reorganize rather than shut down.
This legal process under U.S. law allows businesses to continue operating while they work out a plan to repay creditors, reduce liabilities or shed unprofitable parts of the business.
For restaurants, Chapter 11 often means the ability to:
- Renegotiate leases or terminate those that are unsustainable.
- Restructure outstanding debt to free up cash flow.
- Sell off underperforming locations.
- Keep daily operations running under court oversight.
Unlike Chapter 7 bankruptcy, which results in liquidation and permanent closure, Chapter 11 gives struggling restaurants a second chance to stabilize — particularly those with brand value, loyal customer bases or multiple units.
In 2024, a growing number of mid-size and large restaurant chains took this route, hoping to survive by adapting to new financial and operational realities.
High-Profile Restaurant Bankruptcies in 2024–2025
These high-profile cases underscore the ongoing challenges faced by the sector, including rising operational costs, shifting consumer preferences and the lingering impacts of the COVID-19 pandemic.
Red Lobster
Red Lobster filed for Chapter 11 on May 19, 2024, closing over 120 locations while continuing operations at approximately 545 sites. The company struggled with rising operational costs, internal mismanagement, and a changing consumer landscape.
TGI Friday’s
TGI Friday’s filed for Chapter 11 on November 2, 2024, after a proposed sale to U.K. franchisee Hostmore collapsed. The company closed around 80 locations throughout the year. The filing affected 39 U.S. corporate-owned locations, while 122 domestic and 316 international franchised units remained operational.
Buca di Beppo
Buca di Beppo filed for Chapter 11 on August 4, 2024, and later sold its 44 corporate-owned restaurants to Main Street Capital for $27 million as part of its court-approved reorganization plan.
Bar Louie
Bar Louie filed for Chapter 11 on March 26, 2025, listing $1 million to $10 million in assets and $50 million to $100 million in liabilities. It closed 13 corporate-owned locations during the process and now operates 48 locations, down from a peak of 134 in 2020.
Rubio’s Coastal Grill
Rubio’s filed for Chapter 11 in June 2024, citing unsustainable lease costs and consumer behavior shifts. The chain closed 48 California locations and was sold to its lenders for approximately $40 million.
Melt Bar and Grilled
This Ohio-based chain filed for Chapter 11 in June 2024, citing inflation and operational costs. It closed all remaining locations by January 2025.
Little Big Burger
Little Big Burger, owned by Amergent Hospitality Group, filed for Chapter 11 in July 2024 following a $316,500 settlement involving withheld tips at 14 locations.
DMD Ventures (Twin Peaks Franchisee)
DMD Ventures, which operated six Twin Peaks franchise locations in Florida, filed for Chapter 11 on January 6, 2025, amid a $12 million lawsuit by a creditor. The affiliated entities owned and managed separate Twin Peaks sites in the state.
Pandemic-Era Restaurant Bankruptcies: A Precursor to Today’s Restructurings
The wave of restaurant bankruptcies seen in 2024–2025 has roots in the COVID-19 pandemic. Between 2020 and 2021, dine-in restrictions, shifting consumer habits and ongoing debt obligations drove many well-known chains into bankruptcy.
Notable pandemic-era filings included:
- CEC Entertainment (Chuck E. Cheese, Peter Piper Pizza), filed in June 2020 and restructured by January 2021.
- California Pizza Kitchen, filed in July 2020 and emerged from bankruptcy in November.
- NPC International, a major franchisee of Pizza Hut and Wendy’s, filed in July 2020 and later sold its units to Flynn Restaurant Group.
- Sustainable Restaurant Holdings (Bamboo Sushi, QuickFish), TooJay’s, Le Pain Quotidien (U.S.), and Twisted Root Burger Co.
- Golden Corral and Souplantation/Sweet Tomatoes, with the latter closing all locations permanently.
- Wisconsin Apple LLC (Applebee’s) and 1069 Restaurant Group LLC (Golden Corral), both filed as franchise operators.
These early filings set the stage for continued financial instability, especially for brands already struggling with high debt loads or overexpansion.
Why Are Restaurants Filing for Bankruptcy?
Rising costs, changing consumer habits and pandemic-era debt have made it harder for restaurants to stay profitable, pushing many toward bankruptcy and restructuring.
1. Rising Operational Costs
Restaurants are facing higher labor costs, insurance and inflation-driven increases in food and supplies. Many relied on subsidies during the pandemic and took on loans they now struggle to repay.
Costs have gone up across categories like beef, poultry, seafood and produce. Energy bills and supply chain delays have also raised day-to-day expenses. These increases haven’t been fully passed on to customers, as many operators fear losing price-sensitive diners.
2. Consumer Behavior Shifts
Many consumers now eat at home more and dine out less — dropping from several times a week to only occasionally.
They also prioritize convenience and value, favoring fast-casual, takeout or delivery options. Brand loyalty has weakened and diners are more selective.
3. Disposable Income Pressures
Inflation has hit lower-income households the most, affecting quick-service and casual chains. Higher food and rent costs have led many to cut back on dining out.
Weekday traffic, especially at lunch, has slowed as more people work from home or limit spending. These drops in non-peak hours strain already thin margins.
4. Failed Deals and Overexpansion
TGI Friday’s and others were affected by failed acquisition deals. Some chains closed locations to cut debt tied to leases that no longer make sense.
Many brands expanded too quickly before the pandemic and are now stuck with underperforming stores. Bankruptcy offers a way to exit bad leases, reduce debt and attempt a leaner comeback.
Conclusion on Restaurant Bankruptcy
The slowdown in major filings in early 2025 doesn't mean the pressure is off. Restaurants continue to face high interest rates, inflation, labor shortages and the end of temporary pandemic relief.
Many mid-size chains and franchisees remain especially vulnerable due to tight margins and lingering debt.
Chapter 11 — and its streamlined version, Subchapter V — has become a key tool for both large and small operators to reduce liabilities, exit unprofitable leases and stay operational.
While some brands have used bankruptcy to restructure and continue, others have permanently closed, unable to adapt to shifts in consumer demand, income pressures and rising costs.
The rise in ghost kitchens, automation and AI may support leaner business models but these solutions don’t guarantee survival. Operators still need access to capital, relevant offerings and the ability to meet changing customer expectations.
The recent wave of restaurant bankruptcy filings — from Red Lobster to regional players — signals an industry still in transition.
Whether more brands collapse or reinvent themselves will depend on how they respond to long-term structural changes — not just short-term recovery efforts. In this climate, restructuring isn’t a fallback; it’s a strategy.
