These American Restaurants Are Failing to Attract Customers
With declining sales and customers opting for delivery, it’s no wonder many restaurants are hitting the skids. When customers do sit down to a meal, many prefer local spots. Some franchises, such as Red Lobster, are winning the battle, while the following American restaurants are on the brink of collapse. One once-popular burger chain faces declining sales and massive closures (No. 10).
- Year founded: 1958
- Sign of the end: IHOP will close 30-40 locations in 2018.
Did you hear IHOP is changing its name to IHOb? If so, the restaurant’s fake-news marketing campaign worked, as it announced its switch from a “P” to “B” in honor of its new menu item: burgers. In an effort to expand beyond breakfast, IHOP offers nearly 10 burgers, but it hasn’t helped actual profits so far. It faces 10 straight quarters of declining customer traffic, according to Business Insider.
Next: The all-you-can-eat concept isn’t appealing anymore.
2. Hometown and Old Country Buffets
- Year founded: 1983
- Sign of the end: Sales at Old Country Buffet were down 37.5% in 2017.
The owner of Hometown Buffet, Old Country Buffet, and other all-you-can-eat spots has declared bankruptcy three times in the last decade. It also had to pay a Nebraska man more than $11 million when he got salmonella poisoning. Between the lawsuit and a poor strategy of selling a lot of food for little money, Ovation Brands is in trouble. They face another lawsuit from former employees who allege Ovation gave no notice before closing many locations and eliminating jobs.
Next: Profits aren’t bloomin’ at this restaurant.
3. Outback Steakhouse
- Year founded: 1988
- Sign of the end: 9 Outback restaurants closed
Bloomin’ Brands owns Outback Steakhouse, Carrabba’s Italian Grill, and Bonefish Grill. All three restaurants reported negative 2016 sales, but Outback’s 4.8% decline hit hardest. Bloomin’ management experienced a flat 2017 as customers flocked to take-out and delivery services. The company plans to close 43 of its 1,500 restaurants nationwide (including Outback, Carrabba’s, and Bonefish Grill locations). At last count, nine were Outback Steakhouses specifically.
Next: Racism won’t get you anywhere in the food industry.
4. Papa John’s
- Year founded: 1984
- Sign of the end: The company’s stock is down 33% since November 2017.
In 2017, Papa John’s CEO John Schnatter blamed NFL protests for a drop in business. Then, a July 2018 Forbes article revealed he’d used the N-word in a conference call. Schnatter gave up his CEO position after the first incident; the second cost him his chairman role. Soon after, reports surfaced of a toxic company culture where sexual harassment was common. Same-store sales have plunged, and some predict the company won’t survive the crisis.
Next: A food poisoning outbreak sickened this burrito chain.
- Year founded: 1993
- Sign of the end: 55 locations closing in 2018
Chipotle is still fighting to regain customers’ trust after many food scares, including an E. coli outbreak. The fast-casual restaurant is introducing new menu items like avocado tostadas; chorizo and queso as toppings; and “free burrito” coupons. A massive restructuring (costing up to $135 million) may help as Chipotle moves its headquarters from Denver to Southern California. Chipotle is also optimizing its digital ordering system so diners can easily pick up preordered food.
Next: Beer and wings won’t save this restaurant.
6. Buffalo Wild Wings
- Year founded: 1982
- Sign of the end: A private equity firm bought the chain in early 2018.
As food costs increase and diners develop new standards for eating out, BWW must raise its wing prices by as much as 10% — not a good combination. Roark Capital bought BWW, merging it with Arby’s to create a new company, Inspire Brands. David Burke, Roark’s CEO, told Restaurant Business the firm is reevaluating everything about BWW, including its menu, marketing, positioning, and plate presentations.
Next: “Eat fresh” no more?
- Year founded: 1965
- Sign of the end: 500 locations closing in 2018
In response to a 25% drop in traffic, the footlong pioneer closed 909 restaurants in 2017. Sadly, after adding healthier sandwiches and hiring new management to soften PR blows, Subway is closing another 500 North American locations throughout 2018. It’s remodeling stores and rolling out a $5 footlong deal. But more than 400 franchise owners petitioned to stop the latter promotion, claiming the sales tactic has decimated their profits.
Next: Major retailers aren’t the only ones hurt by data breaches.
8. Noodles & Company
- Year founded: 1995
- Sign of the end: 55 locations closed
Noodles & Company shuttered roughly 10% of its total locations in 2017. But the chain needs extra cash flow after a data breach cost the company $11 million. Noodles introduced an order-ahead option as well as new menu items like Buffalo Mac & Cheese, zucchini noodles, and customizable vegan options. So far, it seems like it’s dodged a bullet; in Q2 2018, the restaurant brand had its best performance since 2015.
Next: Who knew a single fruit could hurt a massive company?
- Year founded: 1995
- Sign of the end: 2.1% drop in overall same-store sales
In 2017, this fast-casual Mexican joint faced a bleak future. Wage increases and a 50% hike in avocados hurt profits. Then, Jack in the Box sold Qdoba to Apollo Global Management for $305 million. (Apollo also owns GNC, Hostress, and Samsonite.) Along with a major sales slump, the chain failed to capitalize on its competitor’s damaged reputation as Chipotle sickened diners with food-borne illnesses over the past few years.
Next: Diners don’t want to “eat good in the neighborhood.”
- Year founded: 1980
- Sign of the end: It plans to close 60-80 more locations in 2018.
Applebee’s closed 99 locations in 2017. “The brand’s set out to reposition or reinvent Applebee’s as a modern bar and grill in overt pursuit of a more youthful and affluent demographic,” according to Brand President John Cywinski. The company offers promotions like $1 margaritas and “handcrafted burgers” for $7.99. But Cywinski stated he felt the rebranding led to “confusion among core guests.” With plans to close up to 80 more locations this year, the confusion will likely carry on.
Next: This restaurant is drowning in competition.
11. TGI Fridays
- Year founded: 1965
- Sign of the end: $16.5 million sales loss in 2016
TGI Fridays competes with casual dining chains like Chili’s and Applebee’s — all are struggling to attract diners. CEO John Antioco told Business Insider, “When you look at the alternatives out there in the marketplace today and who’s creating buzz and creating excitement, it’s gone away from chain casual dining.” Nonetheless, Fridays is attempting to rebrand by catering to a younger generation with a pub-like atmosphere and ordering options via Twitter. The chain also plans to completely overhaul its menu by the end of 2018.
Next: The only chain heavily affected by weather
- Year founded: 1953
- Sign of the end: Eight straight quarters of sales declines
“America’s favorite drive-in” isn’t safe. Quarterly reports shared that Sonic’s sales shrunk in 2018. CEO Cliff Hudson blamed “unfavorable weather” and “continued aggressive discounting by the competition.” However, the chain hopes new items for price-sensitive customers can revive the franchise.
Sonic is trying to appeal to younger diners with an order-ahead smartphone app and half-price drinks and shakes during certain times of the day. It also updated its marketing campaign by adding actresses Ellie Kemper and Jane Krakowski to their popular “Two Guys” commercials in an effort to appeal to more women.
Next: This once-popular burger chain faces massive closures.
13. Ruby Tuesday
- Year founded: 1972
- Sign of the end: 109 locations closed
Ruby Tuesday saw way less business in 2017. The national chain reported an 18% profit loss in 2016 and closed 109 locations nationwide. In addition to seeking a new CEO, the company is attempting to win back business with healthier menu items. Ruby Tuesday revamped their “Garden Bar,” a bottomless salad bar with more than 55 ingredients, eight new salad dressings, and more fruit, vegetable, and cheese options.
Next: Healthy diners avoid this restaurant famous for massive calories.
14. Cheesecake Factory
- Year founded: 1978
- Sign of the end: Stock was down 29.5% in 2017.
This restaurant is famous for food comas thanks to its sinful, high-calorie dishes. This makes Cheesecake Factory unimpressive to many demographics, including millennials and families. Throw in the restaurant location issue — in malls and suburbs — and you’ve got a recipe for declining sales. Cheesecake Factory’s stock is struggling as a result.
Next: This burger chain is struggling to compete.
- Year founded: 1979
- Sign of the end: Guest traffic is down nearly 10%
Burger chain Fuddrucker’s is struggling to get diners to choose its hamburgers. Guest traffic fell 9.6% from 2017 to 2018, QSR reported, while revenue was down 13% in the third quarter. Its parent company, which also owns the Luby’s Cafeterias and Cheeseburger and Paradise chains, plans to close more restaurants after previously announcing it would shutter 14 stores.
Next: This restaurant’s “license to grill” may get revoked.
- Year founded: 1975
- Sign of the end: Store traffic declined 4.4% in Q2 2018.
Chili’s hoped new advertising campaigns would attract new customers after Brinker International (owner of Chili’s and Maggiano’s Little Italy) reported falling profits. But the new menu and ad campaign haven’t been enough to turn things around for the chain, Bloomberg reported.
Next: A fast food joint blames Uncle Sam.
17. Jack in the Box
- Year founded: 1951
- Sign of the end: just 3.1% sales growth as of early 2017
Jack in the Box had a rough 2017, but apparently, taxes are to blame. CEO Lenny Comma said in a press release, “We believe some of this slowdown may be attributable to delayed tax refunds, as well as record rainfall and flooding in California over the past few weeks which have impacted our Jack in the Box results.”
Next: This trendy burger joint isn’t growing as fast as predicted.
18. Shake Shack
- Year founded: 2004
- Sign of the end (or not): More than 40 new locations added from 2017 to 2018.
Despite attracting younger customers, Shake Shack failed to beat industry expectations in 2016. Growth was slower than expected. The restaurant hopes to attract diners with a new than 40 new stores added from 2017 to 2018. Chicken Shack sandwich and expanding to over 450 stores nationwide. The CEO noted that lower 2016 earnings resulted from higher starting wages for employees. They offered staff between $10.50 and $12 per hour and team leaders between $12 to $15 per hour. Some are predicting growing pains as the chain trries to expand beyond its New York base.
Follow Lauren on Twitter @la_hamer.
Additional reporting by Ali Harrison and Megan Elliott.