Dive Brief:
- Independent restaurants’ rental delinquencies reached their highest level all year in November, with 46% of owners unable to pay rent, according to a report from Alignable. Many cited rising operating costs and limited cash flow.
- Delinquencies are up 3% compared to October and about 11% compared to November 2023.
- In November, several small restaurants filed for bankruptcy in one week, suggesting financial difficulties continue to plague smaller operations despite some major chains making headway in sales growth this year.
Dive Insight:
This year, restaurants continued to struggle with traffic, which Black Box Intelligence (BBI) said is down 3.3% year-to-date. Comparable sales are also down 0.5% year-to-date. BBI predicts 2025 comparable traffic will likely decline by about 2.9%, with comparable sales roughly flat.
It is likely many of the challenges from 2024 — like consumer price sensitivity and rising food costs — will persist into 2025.
A majority of restaurant operators, 88%, surveyed by Restaurant 365 said labor costs increased this year, according to Restaurant 365’s 2025 State of the Restaurant Industry Report. Of those who said their labor costs rose, 51% reported an increase between 1% and 5%, while 41% said labor costs were up 6% to 14%. Bureau of Labor statistics data indicates that labor costs are fairly steady at the aggregate level.
“These financial pressures are often insurmountable for businesses with limited cash reserves, and many of these establishments will need to see an upturn in the coming months,” wrote Chuck Casto, Alignable’s head of research and news.
Independent restaurants aren’t alone in struggling to stay open: Major chains have been facing bankruptcies and unit closures, including Red Lobster, TGI Fridays, Buca Di Beppo and Rubio’s. Casual chains like Denny’s, Bloomin’ Brands and Hooters have closed scores of underperforming locations.
