Restaurants Are Closing Across America, Signaling Bad News for the Economy

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The restaurant industry in the U.S. is in a big crisis, which began with the Covid-19 pandemic and continued due to fewer people eating out. This created a perfect storm that already resulted in hundreds of closings, signaling bad news for the economy. 

From Covid to increased prices


Many food companies struggle to pay back loans they took out during the pandemic. The inflation raised the cost of certain goods up to 30 percent, and with fewer people visiting restaurants, everyone’s affected. Last year was bad, but the beginning of 2024 went from bad to worse. 

Cost of living 

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Dining out dropped by 5 percent in 2023, and this trend continues. Most young adults used to going out are struggling with inflation and cutting unnecessary costs. Restaurants are among those costs, and with less traffic and obligations toward staffers, popular chains and small businesses are facing a gloomy future.

Situation in NYC


Between December 2023 and January 2024, Eater reported that over 40 bars and restaurants had closed their doors in NYC. Despite surviving the pandemic, things never returned to how they were in 2019, so maintaining a business is unsustainable. For New Yorkers, remote work, which is slowly shifting toward becoming the new normal, also represents a challenge for eateries.

Big chains are struggling 


Significant sales declines, rent increases, and elevated costs hit some of the best-known restaurant chains, and they are closing their doors en masse. Red Lobster already closed around 100 locations abruptly. One of the Strip’s most renowned restaurants, Picasso, is also closing 26 years after it opened its doors. Appleebe’s is also closing some of its locations. 

KFC, McDonald’s, and Starbucks are also performing poorly

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McDonald’s infamously raised prices at the beginning of 2024, resulting in customer backlash. KFC sales dropped 7% in the first quarter of 2024, while Starbucks also saw a drop in customer traffic and sales. Starbucks CEO Laxman Narasimhan spoke about the first quarter and suggested it was disappointing. 

Boston Market’s downfall

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Boston Market (formerly known as Boston Chicken) was already in financial trouble before the pandemic. Things picked up in 2021, but by 2022, 41 restaurants were closed. The popular chain, which once had around 1000 locations, was hit by a lawsuit worth $11.9 million over unpaid bills. Now, there are only around two dozen locations in the U.S. 

The situation is dire across all states


A Boston diner that has been around since the 1940s, the Wheelhouse Diner, is reportedly closing, NBC Boston reported. According to social media posts, a dispute between a landlord and a restaurant owner was behind the decision to close an 80-year-old eatery. Iowa’s Gusto Pizza, a well-known spot for locals and visitors of Des Moines, is also closing its doors due to financial struggles. 

Legendary Florida restaurant closed after 40 years

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Palm Bay Wagon Wheel Pizza has been everyone’s favorite spot for 40 years. However, the owner opted to close the family business and wanted to try something with fewer taxes. There are numerous similar examples, but the burning question is how many people will be left without work and what will happen to the U.S. economy. California wage hike might have sped up the process, but the restaurant industry has been in shambles for years. 

Post-Covid world of restaurant business 

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Jessica Dunker, president and CEO of the Iowa Restaurant Association, told KCII that the pandemic created a challenging landscape for restaurants. She noted that small businesses cannot see the future due to increased costs and fewer customers, so choosing to fold is the only option. 

Rising costs and raised prices 


The pandemic, inflation, war in Europe, labor costs, and the supply chain are just some of the issues restaurants face. Some reports claim a 30 percent increase in the cost of goods, which led to increased prices. People cook more at home than ever because going out is too expensive for most. 

Negative economic outlook 


Numerous surveys confirmed that people feel the economy is not doing well. Many are preparing for further financial struggles, creating a growing disconnect between economic sentiment and data. Some retirees still fear a repeat of 2008, while most Americans still feel the effects of a pandemic that suddenly shut down the economy. 

What’s next? 

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The fate of approximately 6 million small businesses across the U.S. is up in the air. Economist Michael Walden believes challenges will remain for the next year or two. He, however, added that the restaurant business was always tricky, yet new spots are constantly opening up. Chef David Burke said that controlling labor prices is the biggest issue for restaurant owners.  

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Kate Smith, a self-proclaimed word nerd who relishes the power of language to inform, entertain, and inspire. Kate's passion for sharing knowledge and sparking meaningful conversations fuels her every word.