Restaurant chains going under as expert said consumers are starting to ‘push back’ against high cost of eating out
MANY restaurant chains have faced the chopping block as part of a wave of closures this year.
These chain restaurants have shuttered numerous locations due to underperformance, financial strain, and shifting consumer trends, among other reasons.
GettyThe chain restaurant industry is struggling to stay afloat as many close their doors[/caption]
GettyRestaurants such as Red Lobster, TGI Friday’s, Outback Steakhouse, and Applebee’s have closed several locations this year[/caption]
Kaity Fuja, OMG PhotographyThe U.S. Sun spoke with retail expert Mitchell Olsen regarding the trend of closing restaurant chains[/caption]
In 2024 so far, Red Lobster, Tijuana Flats, Pizza Hut, TGI Friday’s, and several other restaurant chains have closed multiple locations.
To shed light on the reasons behind these restaurant industry closures, The U.S. Sun interviewed Mitchell Olsen, a marketing professor specializing in retail at the University of Notre Dame in South Bend, Indiana.
SHUTTERED EATERIES
Food prices are on the rise, with diners paying 4% more than they did in May last year.
Olsen explained that hiked costs have heavily impacted fast-casual restaurants, with these inflationary pressures driving closures in two ways, from “both sides of the menu.”
“On one hand, it’s more expensive to operate restaurants due to higher wages and food costs. On the other hand, it’s becoming increasingly difficult to pass those higher operating expenses on to diners with ever-increasing menu prices,” he explained.
The high costs have diners reining in their spending habits.
“Consumers are starting to push back against the high cost of dining out by thinking twice about that appetizer or going to a restaurant in the first place,” said Olsen.
Inflation’s multifaceted impact is triggering closures across the restaurant industry, driven by a variety of factors.
For example, chains such as TGI Fridays, Outback Steakhouse, and Applebee’s have listed underperformance as the main factor driving the closures of select locations, per Forbes.
These chains are closing stores that fail to meet sales and profit expectations.
Other restaurants such as Boston Market, Red Lobster, and Tijuana Flats, have shuttered because of financial struggles, inability to pay bills, disputes with landlords, and bankruptcy.
These chains are closing down shop in an attempt to reduce costs and restructure.
PRICEY PANTRIES
The cost of food rose 2.1% from May 2023 to May 2024, and consumers’ wallets are taking a hit not only while dining out, but also at the grocery store.
This change is especially noticeable after the pandemic, according to Olsen.
“Although inflation is decelerating, it remains stubbornly high compared to the pre-pandemic prices that remain a reference point for many consumers,” he explained.
Inflation of grocery prices
Although inflation remained unchanged from April to May this year, the cost of certain grocery products is rising.
Food prices rose 2.1% over the past year and certain categories are being affected more than others.
For example, cereal and bakery products cost 0.7% more than they did last year.
Meat, eggs, poultry, and fish cost 2.4% more than in May 2023.
Additionally, fruits, vegetables, and beverages are priced higher.
The retail expert noted that many shoppers have changed their spending habits due to rising costs, including making the switch from name brands to private labels.
Consumers are allocating more of their money toward housing and less on groceries and discretionary spending like eating out.
Olsen also pointed out that consumers are not spending money because they want to, but because they have to.
“While yes, [consumers] are spending money, it’s not because they feel as confident in their finances – it’s because they are begrudgingly opening up their wallets due to persistently high prices for everyday items,” he said.
The U.S. Sun previously spoke to Olsen about how Walmart is the world’s most dominant retailer.
Plus, The U.S. Sun interviewed a money expert on her seven tips to pay off student loans.
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