Many sit-down chains struggled. There were bankruptcies, closures and plenty of soul-searching. But there were some clear winners, too.

Bankruptcies. Mass closures. Activist investors.

These were a few of the unfortunate trends that defined the full-service restaurant sector in 2024 as operators battled shifting consumer habits and pandemic aftershocks.

Three large full-service chains—Red Lobster, TGI Fridays and Buca di Beppo—filed for Chapter 11 bankruptcy during the year. All said some combination of the pandemic and inflation left them unable to pay their debts.

Those three became poster children for full service’s woes in 2024. But many others were struggling to stay above water. For sit-down restaurants, growth was the exception rather than the rule.

Consider this: For just the fourth time since 2014, the number of full-service chain restaurants in the U.S. was smaller than it was the year before. Unit count among the 600 largest FSRs was on pace to shrink by 0.5% in 2024, the largest decline since 2020, according to Technomic.

The closures tended to come in waves. Red Lobster, TGI Fridays, Hooters and Shari’s all closed dozens of restaurants in one fell swoop. Denny’s and Applebee’s also shuttered a significant number of stores throughout the year, per Technomic.

What happened? Most of the immediate challenges were tied to recent changes in consumer behavior. Fed up with years of inflation, customers became more choosy with where they spent their dining-out dollars. That gave restaurants little margin for error: If a brand’s operations, prices or menu weren’t quite hitting the mark with customers, chances are it paid the price.

Add that to full-service’s existing issues, such as customers’ growing preference for limited service and takeout and an oversaturated market for sit-down dining, and you had a recipe for a down year.

The numbers reflected that. Through the first half of 2024, average year-over-year same-store sales growth among 22 publicly traded FSRs was negative 0.5%.

The difficult environment also produced some clear winners. Two chains—Texas Roadhouse and Chili’s Grill & Bar—lapped the competition in 2024. Through three quarters, their same-store sales growth for the year averaged 8.7% and 10.8%, respectively.

After making adjustments to its operations and menu, Chili’s broke out with a series of marketing wins: A $10.99 3 for Me meal starring the Big Mac-like Big Smasher burger, and the Triple Dipper appetizer platter, which went viral on TikTok.

Texas Roadhouse, meanwhile, did what it has been doing for years: serving good food at affordable prices in a fun atmosphere—a tried-and-true formula that is easier said than done.

Those standout performances left a lot of brands doing some soul-searching. Some of the less fortunate, such as Red Lobster and Cracker Barrel, are embarking on comprehensive transformations. The seafood chain plans to reimagine itself post-bankruptcy as a fresher, hipper concept, with a new menu and marketing geared toward a younger audience. And Cracker Barrel is investing $700 million over the next three years to revamp its menu, prices and the design of its stores.

In a number of cases, change has come at the behest of disgruntled shareholders. Under pressure from activist investors, Bloomin’ Brands and BJ’s Restaurants named new CEOs in 2024. Red Robin, The Cheesecake Factory and Cracker Barrel also faced shareholder provocation.

All of those but Cheesecake are in the midst of some sort of turnaround effort. And most of their playbooks can be summed up in one word: simplification. That can apply to a chain’s menu, its operations or even the profile of the brand itself.

Bloomin’, for instance, wants to get its largest chain, Outback Steakhouse, back to its “Aussie spirit” by refocusing the menu on steak and seafood. Red Robin has overhauled its signature burgers with a new cooking process and fresher ingredients. BJ’s plans to shrink its menu and streamline how things are prepared—right down to its popular Pizookie dessert.

“We have three different ways to scoop ice cream onto a Pizookie,” said Lyle Tick, new president and chief concept officer, in October. “We might be better off with one way of doing that.”

Many sit-down chains also resolved to do a better job of communicating value to inflation-weary customers. Red Robin played up its bottomless fries and other sides, Applebee’s launched a meal deal, and Red Lobster planned to promote more affordable menu items—though Endless Shrimp is out.

Ironically, value happens to be one of the things full service excelled at in 2024. According to research published in October by data firm YouGov, casual dining’s value perception climbed over the past year while fast food’s plummeted. As of Sept. 26, casual dining had a value rating of 7.8, while fast food had fallen to 5.2.

That came as restaurants of all kinds flooded the market with deals and discounts in hopes of catching the attention of price-conscious consumers.

Full-service restaurants generally haven’t raised prices as much as their limited-service counterparts, which could explain why they are winning on value. It could also be a sign that consumers are noticing the other forms of value sit-down restaurants provide, such as atmosphere, table service and alcohol.

Full service brands may need to lean into those advantages to have a better year in 2025.

Source https://www.restaurantbusinessonline.com/operations/2024-was-painful-year-full-service-restaurants

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