2024 has brought significant changes to the restaurant industry, with eateries across the nation facing shut downs. Economic challenges, changing consumer preferences, and increased competition are causing some of America’s most renowned chains to close numerous locations this year. 

Economic Challenges  

The pandemic has caused inflation rates to soar, which in turn, has increased the cost of ingredients, labor, and operational expenses. To balance these rising costs, restaurants must maintain affordable menu prices, which is much easier said than done. Though lower prices can allow chains to gain market share by attracting new customers, this is not sufficient to offset lower profit margins. Essentially, if these companies lower prices too much, then they will hemorrhage money and lose their profitability.

For instance, Denny’s, which has shut down 57 restaurants in 2023 and is expecting to close an additional 10 to 20 locations in 2024, cited inflation-related challenges as the reason. “The level for a Denny’s to stay open has elevated from about $1 million to about $1.2 million,” CFO Robert Verostek explained. With these rising costs to keep locations afloat and falling sales, many of the luncheonettes are not able to keep up and are now filing for Chapter 11 bankruptcy as a result. This has caused the chain’s total operating revenue to plummet by $20 million in just this year’s first quarter. 

Changing Consumer Preferences

Today’s customers are steering away from casual diners, not only because of the recession and inflation, but also due to a generational shift in opinions. Business Insider has noted that millennial consumers would now rather cook at home or have food delivered than go to an establishment for food. 

Quality control has gone down, creating an alarming decline in food quality and nutritional ingredients. Consequently, the texture, flavor, and appearance of these meals do not match consumer expectations based on the material that is marketed. This has influenced many to believe that it is neither worth the hassle nor the financial strain to go to a restaurant for sub-par food that can be prepared more inexpensively at home. 

Cracker Barrel has suffered at the hands of this trend. Following more than a year of declining customer traffic, with a 4% decrease reported in its most recent quarter, this chain closed numerous locations this year. California now only has five Cracker Barrel stores left and Oregon no longer has any. 

Increased Competition

The restaurant industry has become more competitive than ever with the rise of food delivery apps and delivery-only “ghost kitchens.” Because of the convenience of Uber Eats, DoorDash, and Grubhub, 57% of American consumers prefer ordering takeout or delivery in comparison to going to a traditional sit-down chain. “I’m a horrible cook and I’m usually too lazy to go to a restaurant too, so ordering from Uber Eats is by far the best option,” Danielle Rodriguez, Olympic Heights senior, expressed. 

While this allowed other chains appealing to this demographic, such as Chipotle and Panera Bread, to gain market share, it has left chains like Applebee’s and TGI Fridays struggling. Both of these franchises are attempting to return to growth mode, so they have decided to weed out underperforming locations. In 2024, Applebee’s will close about 30 locations nationwide, and Fridays is set to terminate 36 underperforming restaurants in select markets that are struggling to perform. Their goal is “to return to net unit growth in the coming years,” Applebee’s President Tony Moralejo optimistically reported. 

So, whether it’s because of economic challenges, changing consumer preferences, or the rise of delivery apps reshaping the food industry, 2024 will prove to be a critical turning point for many chains. Some remain hopeful for a rebound, but recovering is uncertain in such a ruthless market.