National Chain Restaurants Expected to Close in 2022

Media reports are claiming several perennial restaurant chains are facing barely surmountable obstacles during the Omicron phase of Covid-19. One has closed permanently, while others are reported as being on the way.

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Author’s Note

This article is fully-attributed in name to several financial publications and websites, including MoneyWise, Bloomberg, Fortune Magazine, Forbes, and Mashed.com. Direct links to all listed and attributed sources are included below.

Introduction

According to MoneyWise, long-term national chains such as Starbucks, Burger King, Subway, Pizza Hut, Applebees and more have strategically closed doors in a higher than typical percentage in 2019, and during the advent of Covid-19 in 2020 have shuttered in proportionally larger numbers. As the article states pre-pandemic closures were primarily due to rent increases or competition, the issues within this current period of the pandemic era have tended to relate to matters involving a still-volatile economy. See here for MoneyWise staff writer Caitlin Cochrane’s article, entitled “These Chains are Closing the Most Restaurants.”

As discussed in the article, to date the only long-term restaurant chain that has permanently closed as a direct result of the pandemic is Souplantation/Sweet Tomato. Excerpted from the article: That's because federal guidelines for stopping the spread of COVID-19 recommend that customers not be allowed to serve themselves, which is a big part of the basic business model for buffets.

Interestingly, several frozen yogurt chains such as Menchie’s where serving oneself is the draw made adjustments during Covid and have now largely returned to self-service business as usual. During their adjustment phase, however, several franchise locations nearly went out of business. As one example, see here for an open letter from a franchise owner, which punctuates particular difficulties faced by such self-service entities.

Regardless, the news is not entirely grim. A May, 2021 Bloomberg report reminded us of the following: A year ago experts predicted that one-third of the restaurants in America might close in 2020 as a result of the pandemic. Chef and activist Tom Colicchio said the number of casualties could go as high as 75%. New data from the National Restaurant Association, a Washington-based industry group, found that 90,000 restaurants across the U.S. have closed permanently or long-term. That’s less than 14% of the country’s restaurants. It’s lower than the 110,000 figure reported by the association in December, when the executive vice president for public affairs, Sean Kennedy, described the industry’s status as “an economic free fall.” See here for “Restaurant Closures Now at 14% Despite Apocalyptic Predictions.”

Still, there are certain Covid-era realities of which food and beverage businesses specifically are paying attention. This January, 2021 article from Fortune Magazine, “More Than 110,000 Eating and Drinking Establishments Closed in 2020,” was released four months earlier at the onset of the year and relayed the above National Restaurant Association information with the addition of the following statistics: Nearly 2.5 million jobs were erased from pre-pandemic levels, and restaurant and food service industry sales fell by $240 billion in 2020 from an expected level of $899 billion.

Regarding national restaurant chains and predictions for 2022, the news is similarly mixed.

2022 Predictions

I recently posted the following article on NewsBreak: “Is Your Neighborhood Walmart Planning to Permanently Shut Its Doors?” See here. I include the link here to illustrate general myths and realities of pandemic-era business, which also impact restaurant-related industries.

As to those myths and realities, Forbes reports the following in their article, “2022 Predictions for the Restaurant Industry Include Sustained Off-Premise Business, Increased Menu Innovation”: A shrinking labor pool and unpredictable supply chain have eroded optimism, and as the Omicron variant proliferates and winter looms, that’s not likely to change anytime soon. Jack Li, founder and CEO of restaurant insights company Datassential, is especially concerned about that supply chain piece. The shortage has driven inflation to nearly 40-year highs, while operators are paying nearly 60% more for beef and grains than they were just a year ago.

This information is, of course, barely sustainable for cash-strapped restaurants. However, for those top national chains discussed in this piece, few media outlets are predicting complete closure for any of the restaurants in this group, only major adjustments to continue profitability.

Some outlets, though, disagree. See here for Mashed.com piece, “Beloved Chain Restaurants We Might Sadly Lose in 2022.” Among those Mashed predicts to disappear this year are IHOP and Pizza Hut, and several smaller chains such as Brio and Ryans.

Time will tell.

Conclusion

At the onset of this article, I had mentioned reports of imminent restaurant chain closures based on media reports. Prediction, though, is not a perfect science. As most respected outlets report a lack of closures for major chains in 2022, some disagree.

The ever-changing nature of Covid-19, notably its mutations and current Omicron variant, will continue to impact the food and beverage industry. The one thing most media outlets seem to agree on is current chain restaurant volatility will only subside once the pandemic becomes more manageable.

Thank you for reading.