In the last month, it seems that Chapter 11 bankruptcy filings have ratcheted up. This trend isn’t just hitting one industry, it seems to be affecting them all. Big Lots is one of the most recognizable filings, yet there is also restaurant chain BurgerFi and kitchenware company Tupperware. Fabric retailer Joann and Red Lobster are just a few of the companies that have filed earlier this year. No one is safe and the bill is coming due for questionable business decisions and price hikes. On the bright side, most of these companies are restructuring and avoiding complete shutdowns. Even though they are remaining intact, the filings almost always come with store closures and changes to products and services. Filing for chapter 11 protection is a last resort measure, so why are so many recognizable companies doing it and who is next?

Major chains like Red Lobster and BurgerFi filing for bankruptcy is nothing new as restaurants operate on the thinnest of margins and a slight shift in prices can spell doom. What is concerning is how frequent they are becoming and how it is spreading to other industries. Red Lobster claimed that their all you can eat shrimp deal sank their profits as customers took advantage of it to an extent they did not anticipate. It may have been a bad decision, yet the company was already hanging in a precarious position before the shrimp did them in. BurgerFi blamed declining traffic and the post-pandemic economy for their situation. In the same vein as Red Lobster, this filing was a long time coming. Could all of this be fallout from the pandemic?

We all know the pandemic caused massive financial suffering and the restaurant industry was particularly beaten down. It seemed though that restaurants and other industries had bounced back, at least for a while. Record profits have been gained over the last few years as companies raised prices and customers flocked back to their favorite locations that they did without in 2020 and 2021. Over the last two years though, that consumer flow has slowed to a trickle and those prices have still been rising. They lost the value proposition with their patrons, and it has spilled over into other industries. Big Lots is a discount retailer and their bankruptcy filing reasons could be easily confused with BurgerFi’s, as it describes inflation and the economy for its problems.

Some may look at these filings and say that the companies making them have never been the biggest companies and have seen struggles before 2020. That’s all true, yet even the industry giants can feel the change in the wind, and they are worried. Ask why Starbucks made an unprecedented move in firing their CEO after two bad quarters or why McDonald’s has reinstated a value meal and extended the promotion every month of its existence. Bankruptcy is not on the near horizon for those two, yet they are certainly straining under the weight of the economy.

These bankruptcies won’t be the end, and they won’t be a solution either. The restructuring and sale to lenders will keep these recognizable names in operation, yet it is just a stopgap to a problem that will keep happening as we will see even more of this before the calendar turns to 2025. There have already been over 340 filings this year, the highest that figure has been in 13 years. There is no one size solution to this problem, yet it will also take more than individual efforts from each company to stem the tide. The economy will need to stabilize, and companies will need to re-establish their value to consumers while still generating a profit. It will be no easy feat, and it will have to be done soon. Stay tuned with CSG to keep up with the latest corporate filings and closings.