6 Biggest Lessons From Recent Restaurant Chain Closures

The restaurant industry faces another wave of shake‑outs in 2025 which continues the trend from 2024 of large restaurant chain cutting locations and filing bankruptcies. Applebee’s, Denny’s, Wendy’s, Rubio’s, Outback Steakhouse, and Hooters have all closed locations this year or plan to do so in 2025. More recently, Tex‑Mex chain On The Border filed Chapter 11 in March 2025 and immediately shut dozens of locations.

Fast‐casual Noodles & Company announced plans to close 13–17 company-owned and 4 franchised stores (17–21 total) in 2025, even as same‐store sales were rising. Jack in the Box said it would close 150–200 restaurants deemed “underperforming” and often decades old. These high‑profile cuts, driven by weak traffic, high costs and legacy leases, underscore that shutting down low‑performing locations and adapting strategy is essential. The lessons below distill what independent and franchise owners can learn from these cases.

Focus on Unit Economics: Cut Losses Early

Chains overwhelmingly shut stores that aren’t pulling their weight. Denny’s CEO noted that many of the 88 closures in 2024 (and the 70–90 planned in 2025) had average unit volumes below $1.1 million. Jack in the Box called out “decades old” sites with weak sales in its block‐closure plan. In practice, owners should monitor key metrics (sales per store, traffic, profit margins, etc.) and be ready to close or relocate outlets that fall consistently below thresholds.

Key signals to watch: declining same-store sales, low AUV, negative cash flow, or exorbitant rent in a given location.
Action steps: Run profitability analyses by location. If a store loses money or ties up capital, consider closing it and redeploying resources. Denny’s approach shows that closing enough weak units can raise average volume at remaining stores.
Real-world outcome: When chains concentrate on stronger locations, sales and traffic can rebound. (Restaurant Dive notes Denny’s and Wendy’s new prototype stores are generating much higher traffic and sales than their old units.)

Be Smart About Location and Leases

Closures often trace back to poor real estate decisions. In the case of On The Border, bankruptcy filings revealed that 113 lease obligations were dragging the company down, with roughly $11.9 million of 2024 rent costs coming from underperforming stores. Red Lobster and other chains have cited onerous long-term leases as a key drag. Owners should therefore prioritize sites with sustainable economics: look for locations with strong traffic or captive customer bases, and be cautious about high-rent malls or overly competitive areas.

Lease flexibility: Negotiate shorter or performance-based leases when possible. Avoid taking on large fixed rent for a location without proven demand. If sales falter, a flexible lease (or sublease options) can let you exit without years of losses.
Market analysis: Study local demographics and trends. Food & Wine notes that many consumers now prefer local/regional brands over national chains. If expanding, focus on core or culturally receptive markets rather than “spreading too thin.” Chains like Portillo’s and Buddy’s Pizza succeed by staying near home.
Portfolio balancing: Maintain a healthy mix of high‐traffic sites (e.g. main streets, popular shopping centers) and leaner formats (like ghost kitchens or smaller footprints) to hedge risk.

Lesson: Don’t overextend. On The Border’s example shows that piling up leases in bad locations can sink a brand. Wise owners will regularly audit locations and cut or renegotiate any that can’t eventually break even.

Adapt Brand and Operations

Rather than stagnating, chains are often using closures as a springboard for reinvestment. Dine Brands (Applebee’s/IHOP parent) reported that franchisees closed 83 units in 2024 but opened 65 new ones – and in 2025 plan “20–35 fewer restaurants” (net shrink) by focusing on remodelled concepts. Restaurant Dive notes that new prototype designs are boosting sales: “Denny’s and Wendy’s are leaning on new prototypes to deliver higher sales and traffic than legacy restaurants”. Similarly, Jack in the Box said it will use the capital from closed stores to speed up tech investments and reimage plans.

Owners should learn from this by keeping their brand fresh and operations efficient:

Invest in renovations and layout: Older restaurants may need physical updates to modernize the look, improve flow, or add features like dual drive-thru lanes. Applebee’s is incentivizing franchisees to remodel their restaurants in 2025. Even if overall store count falls, enhancing the design and amenities of remaining locations can drive traffic.
Revamp the menu: As Noodles’ CEO noted, a new menu and brand strategy can re-engage diners. Periodically refine offerings to match customer tastes and trends (e.g. healthy options, limited-time combos).
Optimize formats: Consider smaller off-premise locations or ghost kitchens in low-density areas. On The Border was experimenting with alternative formats to boost delivery sales.
Value propositions: Consumers have become value-sensitive – chains are rolling out deals like McDonald’s app discounts or Taco Bell’s $5 combos. Owners should be ready to highlight value (especially for family and budget segments) through promotions or loyalty deals.

Bottom line: Use closures as an opportunity, not just a retrenchment. By retooling your concept you can capture more business in the locations you do keep.

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Control Costs in the Face of Inflation

High costs have been a constant trigger for closures. Food prices passed along to restaurants rose 29% since 2020 and menu prices are up 27%, squeezing customers’ willingness to spend. At the same time, labor costs have soared: the average hourly non-tipped wage in restaurants is about $17.11 in 2024, up from $10.90 in 2019. Owners cannot roll these back, but they can manage how they allocate labor and supplies.

Staffing strategy: Cross-train employees so fewer people can cover more roles. Flexible scheduling (e.g. part-timers during peak only) helps keep hourly headcount in line with traffic. Since many restaurants can’t cut wages now, focus on productivity: one study showed chains trimming back corporate staff after closures to cut overhead.
Portion and inventory management: Reduce waste by tightening portion control and tracking inventory closely. Higher food costs make waste much more expensive. Small changes (e.g. using standardized recipes, bargaining for bulk or local supply deals) can improve margins.
Energy and rent: Examine utility usage (LED lights, programmable thermostats) to shave bills. As noted, “commercial rents have risen at the same time” as food and labor, so explore ways to lower occupancy costs (e.g. subleasing unused space, negotiating rent reductions).

Even if you can’t control inflation, meticulous cost management can protect profitability and reduce the need for further closures.

Leverage Digital Channels and Loyalty

The chains that are surviving and growing are doubling down on technology and marketing. Noodles’ leadership highlighted how a growing loyalty program and online engagement have supported their rebound. Meanwhile, larger chains have flooded apps and social media with targeted deals. For instance, McDonald’s reported heavy app usage and is launching “McValue” deals, and Chili’s and Taco Bell expanded value combos. Independent owners should follow suit:

Mobile/online ordering: Ensure that your menu is available on third-party apps and your own website. Fast, reliable online ordering keeps revenue flowing even when dine‑in lags.
Promotions via apps and social: Use SMS or app push notifications to alert customers to specials. (“Weekend fried chicken” or “kids eat free Monday” can drive incremental visits.) The chains’ focus on promotions in 2024–25 shows diners respond to perceived bargains.
Loyalty programs: Reward repeat customers with points or freebies. A small tie-in (e.g. free dessert after 10 visits) can build frequency. Noodles’ experience suggests that sustained loyalty enrollment boosted their traffic.
Data analytics: Use sales and customer data to refine your offers. Digital orders often come with feedback loops (ratings, reviews) – leverage that to fine-tune service and menu items.

In short, don’t leave money on the table. Digital tools and loyalty can help small chains punch above their weight and compete with bigger rivals on marketing muscle.

Think Local and Community‑First

Rhe pandemic-era trend of “local over national” continues into 2025. Food & Wine reports that retailers prefer regional or local concepts in malls, and consumers are “trending toward local favorites”. Even big chains are adjusting by highlighting local menu items or focusing growth in existing strongholds. For a neighborhood or indie owner, this is good news: you already have the home‑field advantage.

Emphasize local ties: Source some ingredients locally, advertise your community involvement, or feature house specials that reflect local tastes. These differentiators can be powerful marketing points against big-brand competitors.
Controlled expansion: If you franchise or have multiple units, expand thoughtfully. Rather than rushing into distant markets, grow clusters of stores that share supply chains and brand reputation.
Community relationships: Build loyalty through local partnerships (school events, co‑promotions with neighboring businesses, etc.). In a challenging economy, diners may favor a nearby “friendly spot” over an impersonal chain outlet.

By playing to your regional strengths and staying close to your customer base, you can ride out industry turbulence with more resilience.

Conclusion

The closures of 2025 send a clear message: survival depends on agility and discipline. Large chains have cut costs by trimming weak units, revisiting real-estate strategies, and reinvesting in updated formats and promotions. Independent operators can apply the same principles on a smaller scale. Regularly audit your menu and store performance, keep tight control of overhead, and lean into technology and value-driven marketing. As experts note, growth should be measured and focused on core markets.

By learning from these high-profile cases, restaurant owners can avoid the same pitfalls and be better prepared to weather future headwinds. The industry may face continued pressure, but those who adapt with smart site selection, cost management, and customer engagement will be best positioned to thrive.

6 Biggest Lessons From Recent Restaurant Chain Closures

Focus on Unit Economics: Cut Losses Early

Be Smart About Location and Leases

Adapt Brand and Operations

Control Costs in the Face of Inflation

Leverage Digital Channels and Loyalty

Think Local and Community‑First

Conclusion

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