When TGI Friday’s Inc. filed for bankruptcy last month, the casual dining chain blamed declining sales and shrinking revenue as strained customers pulled back from spending.

The nearly 60-year-old eatery is one of more than a dozen large restaurants or franchisees to seek court protection from creditors from January through October, according to BankruptcyData. That’s the most through that date since 2020. Next year could see more strife as restaurant prices have surged thanks to rising labor costs, supply chain disruptions and higher interest expenses, weighing on consumer demand for dining out.

Restaurant prices increased about 44% from 2015 to March 2024, according to data firm Black Box Intelligence, compared to a 26% increase for grocery items over the same period.

An employee gives utensils to customers at a restaurant in New York on Aug. 22. Yuki Iwamura/Bloomberg

“It’s really hard for somebody to go to a restaurant at the same pace as we did before,” Victor Fernandez, vice president of insights at Black Box Intelligence, said. “That’s putting a lot of pressure on brands.”

Seafood giant Red Lobster, Italian chain Buca di Beppo, fish taco eatery Rubio’s Coastal Grill and the owner of burger and pizza chains BurgerFi and Anthony’s Coal Fired Pizza are among those that have sought to reorganize through bankruptcy this year. Hooters of America is also huddling with lenders and advisers amid revenue declines, Bloomberg reported.

Shares of Dine Brands Global Inc., the parent of Applebee’s and IHOP, are down about 30% year-to-date, while shares of Bloomin’ Brands Inc., which owns Outback Steakhouse, dropped to near 2020 lows last month after it reported a decline in US same-store sales.

But value promotions and marketing pushes could improve sales and traffic next year. Casual restaurants have seen more pronounced difficulties because they depend on customers with lower incomes and have to compete with fast food chains employing the same tactics.

McDonald’s Corp., for example, is planning to release a value menu in January, with $5 meals and a deal to buy one item and add on another for $1. Fast-food chicken chains Wingstop Inc. and Raising Cane’s Restaurants have both seen double-digit revenue growth this year, thanks to influencer marketing efforts and sports-game advertising.

To improve growth, TGI Friday’s has launched $9.99 meals, tried to boost its online presence and partnered with third-party delivery services, according to bankruptcy court filings.

Bloomin’ Brands chain Bonefish Grill is trying to capitalize on the blockbuster musical Wicked with two $7 martinis inspired by the movie. Savvy TikTok advertising and influencers helped fuel a 14% same-store sales rise at Brinker International Inc.-owned casual chain Chili’s between the second and third quarter of this year, according to Bloomberg Intelligence.

Those strategies appear to be working: November marked the third consecutive month of same-store sales growth across the industry, according to Black Box Intelligence.

NEW OWNERS

Through bankruptcy, some large chains have been able to close poorly performing locations and find new owners, betting that fewer stores and new investment can help turn around their brands.

Restaurants also frequently tap the junk-bond market, making up about $17.8 billion of the high-yield universe, according to data compiled by Bloomberg. Any pain in the industry could translate to losses for at least some bondholders.

Buca di Beppo closed more than a dozen locations before filing bankruptcy in August. Last month, the Italian eatery was sold to lender Main Street Capital Corp., an investment firm with roughly $5 billion in total assets as of June 30, according to court documents. BurgerFi’s operator was also sold last month to an affiliate of TREW Capital Management.

TGI Friday’s is also working to sell its corporate-owned stores in Chapter 11. An affiliate of Sugarloaf Hospitality agreed to acquire its locations in the Dallas Fort Worth International Airport and a handful of company owned locations in Maryland for $30.5 million plus the assumption of certain liabilities, lawyers said during a Wednesday hearing.

Red Lobster, the largest restaurant to file for Chapter 11 so far this year, has closed dozens of locations and used bankruptcy to sever ties with its previous owner, Thai Union Group Plc.

The seafood chain was taken over by an investor consortium led by Fortress Investment Group in September, exiting Chapter 11 reorganization with roughly 545 locations in the US and Canada. Red Lobster also brought in a new management team to guide the business out of bankruptcy and did away with its costly “Ultimate Endless Shrimp” promotion.

Fortress Managing Director Morgan McClure said restaurants like Red Lobster offer customers a strong niche and have an advantage over their competitors, one allure justifying the firm’s investment.

“It’s got great positioning,” McClure said. “In a lot of places it’s located, it’s the main seafood option.”