Chain restaurants are a cornerstone of popular food culture, bringing customers consistent, beloved meals on the road, late at night, and whenever a craving hits. The restaurant industry can be cutthroat, however, even for chains that enjoy broad-based success. Below are 10 fast food chains struggling to stay in business.
10. Pizza Hut
The underdog chain was recently labelled one of the worst pizza chains in America, and they have the numbers to back it up. Yum Brands, which also owns fried chicken staple KFC and Mexican standby Taco Bell, has found that the pizza chain struggles to distinguish itself from competitors and attract a new crop of customers. Yum Brands invested $130 million in 2017 in an attempt to revitalize the stagnating chain by upgrading equipment, improving technology, and boosting advertising. The Hut has also added more inexpensive deals, such as large two-topping pizzas for $7.99 and $5 menu deals. It’s also spending more of its budget on marketing, as it became the official pizza sponsor of the NFL in early 2018. Like many other chains on this list, Pizza Hut has put significant effort into improving online ordering, as they recognize the importance of online ordering in an increasingly delivery and takeout-based food landscape. According to Artie Starrs, the president of Pizza Hut US, one of the chain’s major issues is that many customers don’t associate Pizza Hut with delivery. “When you drive by the [Pizza Hut] location, it doesn’t scream ‘we deliver,’” Starrs said. As a response, Pizza Hut aims to put delivery and mobile-ordering options front and center through delivery-focused ads and by remodeling existing stores. These proposed remodels would modernize store design and transition some dine-in locations to pared down fast-casual ones.
9. Noodles and Co.
Noodles and Co.’s lagging numbers are likely due in part to the low-carb eating trend sweeping North America. The pasta giant attempted to respond to changing millennial eating habits by offering a shrimp scampi dish with zucchini noodles in 2018. This new addition was a direct response to the trendiness of ‘zoodles’ on social media, ushered in by food bloggers and buzzed-about consumer products like the Spiralizer which fueled the low-carb craze. This led to some growth for the brand as they captured a previously noodle-avoidant segment of the market. There’s still hope for the chain—upper management aims to foster a great company culture, and the brand is lucky to have few direct competitors, meaning they set and dictate the norms for chain restaurant noodles. Noodles had more difficulties, however, after a 2018 data breach cost them $11 million and forced them to close 10% of its total locations. The data breach affected customers that paid with credit and debit cards at US Noodles & Company locations—malware led to these customers’ credit card information being compromised. An Oregon credit union sued the noodle chain over the data breach, in a suit that sought class action status for all US financial institutions whose customers made purchases at Noodles locations. The company was ultimately forced to pay up, putting a damper on their already stagnating profits.
8. Burger King
Burger King’s parent company, Restaurant Brands International, announced plans in 2018 to modernize Burger King locations through implementation of a plan it’s calling “Burger King of Tomorrow.” The updated restaurants would include self-ordering kiosks and a generally sleeker design. In an attempt to attract more customers, the chain has put out gimmick menu items and weighed in on hot-button political issues. In a 2018 ad campaign, the burger giant drew attention to the pink tax on women’s products with a pink-packaged version of their chicken fries (complete with eyelashes) labelled ‘chick fries,’ which would retail for $1.40 more than the regular version. In reality, ‘chick fries’ were a limited-time publicity stunt meant to illustrate the chain’s stance on the pink tax, and to demonstrate its real-life impact. Similarly, the chain’s Whopper Neutrality ad was meant to parody and illustrate the projected effects of repealing net neutrality with burgers. Though these campaigns were intended to target an increasingly socially aware millennial audience, they came off as empty marketing ploys to many. They were also largely unsuccessful at increasing traffic—Restaurant Brands International was reportedly satisfied with the brand’s momentum in the first quarter of 2018, but that momentum has since significantly slowed in comparison with competitors Wendy’s and McDonalds. McDonald’s recently announced a $6 billion investment to modernize the bulk of its US locations by 2020, mirroring Burger King’s plans for digital menu boards and self-ordering kiosks. Wendy’s is projected to make similar improvements. Both competitors will likely continue to squeeze Burger King’s margins, and to compete it will need to increase customer traffic and customer spending on the average order.
Milennials are undeniably changing the food industry, and that’s bad news for casual dining chains like Applebee’s. The casual dining staple had its heyday in the 1990s, and early 2000s, as it opened an impressive 1000 locations by 1998 (an impressive feat considering they had only 250 locations in 1992) and expanding to international markets. However, their format is losing ground with younger customers, leading to sweeping closings. According to Business Insider, yearly closings of Applebee’s locations have been rising since 2016, and sales continue to decline at the remaining locations. In an attempt to remedy the situation and attract more business, the chain has introduced online ordering within their new mobile app. They also plan to offer wi-fi and tablets on the tables in their restaurants. These repeated attempts to capture the customer base born between 1980 and 2005 have reportedly alienated some older customers. Speaking with Applebee’s investors, president John Cywinski said, “This pursuit [of attracting younger customers] led to decisions that created confusion among core guests, as Applebee’s intentionally drifted from what I’ll call its ‘Middle America’ roots and its abundant value position. While we certainly hope to extend our reach, we can’t alienate Boomers or Gen-Xers in the process.” According to Restaurant Business, the chain is still doing well in terms of takeout orders and bar service, but 189 locations are still projected to close in the coming year.
6. Hometown Buffet
Ovation Brands, the owner of buffet giants Hometown Buffet and Old Country Buffet (along with Ryan’s and Fire Mountain) has reportedly declared bankruptcy three times in the last ten years. In 2016, bankruptcy led to the abrupt closing of more than half of the company’s restaurants. Workers at the time showed up to work to discover that their jobs had been liquidated, as they’d been given no notice of the closures. Ovation Brands also encountered difficulty in 2015 trouble when they were forced to compensate a Nebraska man $11 million after food from Old Country Buffet gave him salmonella poisoning. Buffet-style restaurants have been struggling in general as of late, thanks to trends toward healthier eating and smaller portions. There are several other reasons behind the decline of the buffet business: Instagram-able food is becoming more of a necessity in the restaurant industry as millennial foodies share their meals on social media, and highly publicized food safety issues in buffets have gained traction and continue to dissuade the average consumer from choosing a buffet for their meals. Food Safety News reported that even if buffets follow all food safety regulations (which is not always the case), serving utensils present a large safety issue—when buffet patrons use the same tongs and forks to serve up their food as other patrons, cold and flu germs can spread quickly. Regulations require serving utensils be swapped out every four hours, but that still leaves plenty of time for bacteria to accumulate.
Hooters is now far from its heyday, when it was the first and only ‘breastaurant’ of its kind. The chain closed a significant seven percent of their locations in the years between 2012 and 2016, and sales have continued to stagnate. Though Hooters has a unique business model based on a combination of bar food and sexualized servers, it suffers from a lot of the same hurdles as other restaurants on this list—the general decline and increased competition in the sit-down casual dining market. The company has also tried going in another direction with similarly named Hoots, a new quick-service restaurant with a pared-down menu of only Hooters’ takeout bestsellers. Hoots employees are clad in v-necks and polos paired with khakis, a far cry from the skimpy attire expected from Hooters servers. Hoots attempts to capture the ‘fast-casual’ vibe of Chipotle and Panera, inspired by the volume of to-go traffic in existing Hooters restaurants. Its also a part of an effort on the part of the company to appeal more to women and families. Culture has changed significantly since Hooters’ founding, and the blatant objectification of its female servers is no longer as acceptable. The provocatively dressed ‘Hooters Girl’ may soon become an artifact of the bygone era of sit-down casual dining as the company moves toward a fast-casual business model.
Qdoba continues to lag behind Chipotle in the fast-casual Mexican food scene. Owner Jack in the Box sold the chain for $305 million in early 2018 due to slowing sales. The sale was in keeping with a string of similar burger chains selling their fast-casual burrito chain acquisitions, according to Restaurant Business—after Wendy’s selling Baja Fresh in 2006 and McDonald’s selling Chipotle. Jack in the Box acquired Qdoba in 2003 and went on to grow the small Mexican chain to a major national brand, but it began to lag in 2017. Qdoba’s downturn was reportedly blamed to some extent on a 50% jump in avocado prices, which squeezed the company’s margins. Apollo Global Management now owns the Mexican chain, but it continues to suffer from a long sales slump. It also struggles with competition from similar fast-casual Mexican chains like Chipotle and Taco Bell, as well as higher labor expenses. At the same time, Qdoba largely failed to capitalize on chief competitor Chipotle’s e. coli scares, which may have allowed it to recapture a larger share of the market. However, Apollo remains optimistic about Qdoba’s future prospects. Apollo Senior Partner Lance Milken said “We are firmly committed to Qdoba’s continued growth as a leading fast-casual restaurant operator.”
3. Papa John’s
The pizza delivery chain Papa John’s has been lagging behind industry leader Domino’s ever since it became embroiled in the controversy surrounding past CEO John Schnatter. Schnatter, who was featured on Papa John’s pizza boxes and commercials, came under fire into 2017 for blaming the company’s declining sales on ‘polarizing’ NFL demonstrations. He claimed that players kneeling during the anthem to protest and raise awareness of police brutality and injustice hurt the NFL’s TV, which in turn hurt sales of Papa John’s pizza, since the company was a highly recognized sponsor and occupied several commercial spots. In 2018, evidence surfaced that Schnatter had used a racial slur in a conference call. Since then, Schnatter has stepped down as CEO of the company, but Papa John’s remains plagued by bad press after reports of a chronically toxic company culture emerged, including allegations of frequent sexual harassment. According to Business Insider, the company’s North American same-store sales declined by almost 10% in the third quarter of 2018. The pizza giant has also closed a number of locations based on this decline in same-store sales as a result of the highly publicized controversy. Steve Ritchie, the CEO that replaced Schnatter, is attempting to pull the company out of its slump through the “Voices of Papa John’s” campaign, which aims to take the chain’s marketing in a more modern and inclusive marketing direction. Even so, it has been difficult to shake the negative media attention that Schnatter attracted, and the chain plans to close 85 restaurants in the next year.
Fast sandwich chain Subway enjoyed broad success in the early 2000’s, as its simple sandwiches were seen as a healthier alternative to fast food burgers. The iconic sandwich chain’s success was buoyed by its $5 footlong promotion, which began in 2008 as a response to the Great Recession. This promotion proved very successful, attracting hordes of customers and leading competitors to adopt similar deals. It also reportedly started a trend of round price points for consumer goods ($5.00 rather than $4.99, for example). The $5 footlong fell by the wayside with the recession, however, and in 2014 the price of a Subway footlong was increased to $6. By 2017, the price was raised again to $7, a 40% increase from the original $5 deal. Subway has also suffered from mounting competition from other health-focused chains as of late. Consumers now gravitate toward trendier health food, and the simplicity that originally made Subway great has become a detriment. In an attempt to attract and retain business, the sandwich giant is implementing wi-fi, self-service kiosks and more comfortable seating. They also brought back their $5 footlong deal in January 2018 with a $4.99 footlong menu of five subs at participating locations. However, these efforts haven’t prevented ongoing store closures—500 Subways are projected to close in the next year.
IHOP (or the International House of Pancakes), sister brand to Applebee’s, is another victim of consumers’ shifting preferences toward healthier food and takeout. The company’s 2018 publicity stunt, in which it temporarily changed its name from IHOP to IHOb to advertise its ten new burger offerings, did little to get people eating at the chain again, though it did generate lots of media attention. The shocking name change garnered national media attention and a flood of IHOb-inspired memes. The stunt was intended to get customers excited about the pancake chain’s new line of Ultimate Steakburgers, part of a broader attempt to attract business outside breakfast. This proved to be a confusing move—customers weren’t sure whether the chain would continue serving the pancakes it was known for. However, this plea for attention was a response to a broader trend wherein diners are less attracted to casual-dining, full-service chain restaurants, increasingly opting to order delivery or takeout. This trend has put restaurants like IHOP and sister restaurant Applebee’s at a significant disadvantage. At the same time, hipper and more modern fast-casual chains increasingly offer healthy and ‘natural’ food options, which squeeze the margins of comfort food, carb-heavy chains like IHOP. According to Business Insider, traffic at the pancake chain has been going down for 10 consecutive quarters, and it plans to close 30-40 locations in the upcoming year.