The End Of Casual Dining? Chain Restaurants Shutter By The Hundreds As Prices Increase By 34%

CNN reports that casual dining chains are in crisis, as evidenced by a 0.9% drop in sales over 2024
One contributing factor to the decline is rising prices, which have gone up by 34% over the last five years
Meanwhile, fast-casual restaurants have seen a 0.6% increase in sales, and fast food restaurants have seen a 1% increase in sales

Casual dining chains, a staple of the American restaurant industry, are facing a crisis, according to CNN. Four well-known establishments—TGI Fridays, Red Lobster, Hooters and Buca di Beppo— have iled for bankruptcy in the last few months. And several others, like Applebee's, Denny's DENN, Outback Steakhouse, Bonefish Grill, Red Robin Gourmet Burger.RRGB, and Cracker Barrel Old Country Store Inc. CBRL, have seen a sharp drop in sales.

This downturn, CNN reports, is due to a number of factors, including hiking prices, shrinking incomes, and general mismanagement.

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Chains like Red Robin and TGI Fridays have long been favorites among lower and middle-income families who want a sit-down dinner without a several-hundred-dollar price tag. But as disposable incomes shrink and the threat of a recession increases, CNN says, these diners find themselves less willing to spring for a full meal out. Instead, they're opting to cook at home or visit fast food and fast casual chains like McDonald’s MCD and Chipotle Mexican Grill CMG.

Data from the US Bureau of Labor Statistics also shows that restaurant prices have increased 34% since 2019, outpacing the overall growth of inflation. This has undoubtedly played a role in the 0.9% drop in sales at casual dining chains in 2024, that CNN reports, as well as the 0.6% and 1% increases at fast casual and fast food chains, respectively, where prices are already more affordable.

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But shrinking incomes and rising prices aren't the only reasons these dining institutions are struggling. Strategy mistakes and a reluctance to invest in location and service updates have also marred the chains' once-bright futures. For example, Hooters' racy atmosphere and reputation have become less appealing to diners over the few years, contributing to decreased sales. One of its prospective buyers recently told Bloomberg it intends to give the establishment a family-friendly makeover. Only time will tell if the revamp will be enough or too little, too late.

Clarence Otis Jr., a former CEO of Darden Restaurants DRI, told CNN the struggling chains "got dated in terms of their menu offering, the look and feel of the restaurants, and how they reach consumers."

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While many chain restaurants are struggling, a few have managed to find the right recipe. Chili's, Olive Garden, and Texas Roadhouse TXRH are all seeing rising profits, thanks to their investments in labor and facilities and their dedication to keeping prices low, according to CNN.

Chili's, CNN says, has invested $400 million into their restaurants, simplifying the menu, adding more staff, and renovating existing locations. As a result, it's gone viral on social media apps like TikTok and has increased sales by 31% over the last quarter, its third consecutive quarter of double-digit sales growth.

"There's a widening gap between winners and losers in the casual dining category," and "brands that are investing in labor and the quality of guest experience are winning," Raymond James analyst Brian Voccaro told CNN.

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