How Is the Restaurant Industry Changing as Red Lobster, Denny’s, and TGI Fridays Close Locations?

The future could be looking quite grim for restaurant chains such as Red Lobster, TGI Fridays, and Denny’s. All three franchises are facing a significant downsizing effort in the post-pandemic era, according to CNN, with Denny’s closing 150 restaurants and Red Lobster and TGI Fridays shuttering a combined 175 locations.

What were some of the factors contributing to these closures of once-popular restaurant chains, and how is the broader restaurant business set to change?

Family Dining Suffers as Low- and Middle-Income Households Eat Out Less

There’s little debate as to whether or not the COVID-19 pandemic damaged the restaurant industry (and the service industry at large), with innumerable businesses having to exit the market as a result of decreased foot traffic and revenues.

The outlook post-pandemic hasn’t been all that sunny for sit-down restaurants either, according to Denny’s CEO Kelli Valade.

“Family dining has had it the worst post-pandemic,” Valade said during an October earnings call, per CNN. The news outlet attributed much of the downturn in business to cash-strapped low- and middle-income households, which had previously served as an anchor customer base for family dining establishments.

Both Red Lobster and TGI Fridays filed for bankruptcy earlier this year, while Denny’s has severely curtailed operating hours at many locations in addition to outright closures.

Fast-Food Drive-Thru and Pop-Ups Thriving

While some established casual dining operations have seen a downward trend in their sales and market position, the same cannot necessarily be said for fast-food drive-thru businesses, pop-up restaurants, and newer entrants that are targeting a more globally focused palate.

CNN reported that Chipotle is building 4,000 new locations to fill the gap — most of which will have drive-thru lanes — as Chick-fil-A begins construction on locations boasting four-lane drive-thru service. Drive-thru service is not only more convenient for an increasingly time-hampered consumer but also less expensive to operate due to lower staffing levels and maintenance demands.

In previous years, locations vacated by one sit-down restaurant would frequently be replaced by a similar business — and it looks like that’s no longer necessarily the case.

“A lot of former casual dining operators who go out are being taken by In-N-Out, Whataburger, Chick-fil-A and Raising Cane’s that really weren’t competing for that real estate 10 years ago,” Matt Mandel, a senior vice president at CBRE, told CNN.

According to Yelp data, breakfast chains and pop-ups (which benefit from a similar expense case as a drive-thru might from a logistics standpoint) are also booming. Pop-up openings saw a massive 155% increase in growth between May 2023 and April 2024, per Yelp, “as restaurateurs debuted new temporary concepts with limited menus to test diners’ interest.” Massive gains in review terms such as “iPad checkout,” “counter service,” and “self checkout” spelled further trouble for traditional casual dining operations, Yelp data suggested.

Global Flavors on the Upswing as American Tastes Change

Finally, Americans may be expanding their taste palates as the nation becomes more demographically diverse and well-traveled. As Anjee Solanki wrote for Colliers Knowledge Leaders, “[It is] likely that most Americans will identify as multicultural by 2050 contributing to the evolution of the American palate.” Solanki further pointed out that U.S. travel to Asia as well as Oceania and Central America had surged between March 2023 and March 2024, suggesting that continued interest in international travel would spur more interest in international dishes domestically.

While Solanki largely focused on the impact that a diversified palate might have on the grocery or food-at-home industry, the repercussions for the restaurant business are apparent. CNN indicated that Brazilian steakhouse chain Fogo De Chao was expanding, for example, while Solanki gestured toward a taste change in American food preferences across the nation.

Solanki noted, “The growing popularity of global flavors is permeating smaller markets who have also experienced a percentage increase in Asian populations: Pittsburgh, PA (23%) recently welcomed the Novo Food Hall, an Asian-inspired food canteen located inside The Terminal in the Strip District featuring cuisine from seven specific Asian countries. Shoo Loong Kan, a famous Sichuan-style hot pot restaurant from China, opened its first West Coast location in Bellevue, WA (18%). Boston, MA (~6.5%) hosted its first ever Asian Restaurant Week in 2024, highlighting dozens of the region’s leading Asian-owned restaurants from fast-casual concept Bon Me to upscale dining options like Lê Madeline, Pagu, and Sumiao Hunan Kitchen.”