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We’ve been watching over the last six months or so as various department stores and other retail chains have filed bankruptcy.
Now, it’s the restaurants’ turn.
The coronavirus pandemic has drastically changed the way restaurants have had to operate. Many were closed for months. Others had to rely on food delivery services and takeout but haven’t been able to generate the kind of revenue they had before.
Yelp has said that 60% of independent restaurants will close forever as a result of COVID-19. As for national chain restaurants, S&P Global Market Intelligence has identified some that are expected to default on their debt payments in the coming months.
Note: Defaulting on debt doesn’t mean a company will close forever or even go bankrupt, but it’s a big step in that direction.
Sizzler, 14 locations
The 62-year-old steakhouse restaurant is just the latest casualty of COVID-19, filing voluntary bankruptcy in mid-September.
Sizzler has about 90 franchised restaurants throughout the U.S., but will only be filing bankruptcy for its 14 company-owned restaurants (mostly on the West Coast). The restaurant plans to restructure its finances and reduce debt.
Dave & Buster’s, 137 locations
S&P gives Dave & Buster’s the highest probability of defaulting within the next year, at 16.1%.
Chuck E. Cheese filed for bankruptcy and closed 34 stores earlier this year, and the “grown-up version” — Dave & Buster’s — is facing similar problems related to coronavirus: prolonged closures, reduced foot traffic, and a business plan that’s not super friendly to social distancing.
Outback Steakhouse, 711 locations
Bloomin’ Brands, the parent company of Outback Steakhouse and several other restaurant chains, is given a 13.2% chance of defaulting in the next year.
Restaurants were closed for more than two months during the pandemic, and although they’ve pivoted to delivery and to-go options, the company saw a 43% decrease in revenue for the second quarter of 2020.
Carrabba’s Italian Grill, 204 locations
Another Bloomin’ Brands-owned restaurant, Carrabbas’s announced the closure of 43 locations back in December — BEFORE COVID. Now, as their parent company struggles, expect to see more of these locations shuttered.
Bonefish Grill, 189 locations
Bonefish Grill has seen restaurants closed over the past several years as Bloomin’ Brands identified underperforming locations. The seafood joint has suffered from reduced foot traffic. One bright spot? Seafood prices have been dropping, reducing the chain’s material costs.
Denny’s, 1,700 locations
The casual diner closed 15 stores in New York in the spring, and they’ve been hurt by California’s decision to halt in-restaurant dining (25% of U.S. locations are in California).
S&P gives Denny’s an 11.9% chance of defaulting in the next 12 months, as sales continue to decline compared to a year ago.
The Cheesecake Factory, 211 locations
S&P says The Cheesecake Factory has an 11.7% chance of default — influenced by the fact the dining and dessert chain didn’t make rent payments on time this spring.
Companywide, The Cheesecake Factory is only getting 68% of the sales they had a year ago.
IHOP, 1,841 locations
Dine Brands Global — which owns IHOP — was given an 11.3% chance of default by S&P.
IHOP saw a sales decline of 37.6% this July compared to July 2019, and they recently announced they will close up to 99 restaurants by mid-2021. That comes on the heels of 16 closures in the third quarter of 2020.
And one of IHOP’s major franchisee’s, CFRA Holdings, filed for bankruptcy in mid-May, closing 49 restaurants in the South.
Applebee’s, 1,781 locations
Dine Brands Global — which owns Applebee’s — was given an 11.3% chance of default by S&P.
Applebee’s was down 18.4% this July over July 2019, and shut down 20 locations in the third quarter of 2020. Dine Brands said they expect to close 15 more.
BJ’s Restaurants, 208 locations
With a 9.2% chance of defaulting this year, BJ’s Restaurants are on bankruptcy watch. The restaurants rely heavily on in-restaurant dining, and like Denny’s, has a lot of locations in California, where dining rooms are closed statewide.
Just as the chain seemed to be picking up momentum with reopenings, rising coronavirus cases saw new closures across the country — and same-store sales were down 57.2% in the second quarter of 2020.
Chuck E. Cheese, 541 locations
We wrote a whole article about why it appears Chuck E. Cheese is going to close forever. Bankruptcy, ill-advised attempts at reinvention, and dozens of closures make the case. Not to mention the fact that Chuck’s entire business model doesn’t jibe with social distancing.
California Pizza Kitchen, 179 locations
California Pizza Kitchen wasn’t part of S&P’s analysis, since they already declared bankruptcy earlier this summer. As part of the company’s restructuring plan, CPK will be closing an unspecified number of “unprofitable” locations.
The company plans to emerge from bankruptcy by October, but if sales don’t turn around, things could get much worse.
S&P released some restaurants that aren’t in trouble.
The report pointed out that Chipotle, McDonald’s, Wingstop and Papa John’s are among those companies least likely to default.