"A “Restaurant Apocalypse” Is Starting To Sweep Across America,
And That Is Really Bad News For The U.S. Economy"
by Michael Snyder
"You can get a really good idea how the U.S. economy is doing by watching restaurants in your area. When the economy is booming, restaurant parking lots are full and chains are feverishly establishing new locations. But when the economy is struggling, restaurants get a lot less traffic and poor performing locations get shut down. Sadly, in 2024 it appears that a “restaurant apocalypse” has started to sweep across America. Most people have very little discretionary income to spend as a result of our cost of living crisis, and that is particularly true for our young adults. Americans under the age of 40 love to eat out, but these days most of them are experiencing financial stress, and this is having an enormous impact on the restaurant industry.
In 2023, visits to sit-down restaurants dropped by about five percent compared to 2022…"Americans are eating out less as inflation weakens the dollars in their pocket, which is leading to some harsh consequences for restaurants across the country. Visits to sit-down restaurants were down nearly five percent in 2023 from the year prior, according to location analytics firm Placer.ai. So this is a trend that has stretched on for over a year."
People just aren’t eating out as much as they once did. As a result, we are seeing a wave of closures all over the country. Even in the Big Apple, large numbers of restaurants are being shut down…Even big metropolitan areas in the US known for their great dining spots are struggling to maintain an environment where it’s profitable to run a restaurant.
Eater NY reported that over 40 bars and restaurants closed in New York City from December 2023 to January 2024, with some of the owners saying business simply never picked up after the COVID lockdowns in 2020.
When times get tough, difficult decisions need to be made. After closing 46 restaurants last year, Applebee’s has decided to close another 35 locations this year…"Applebee’s is to close another 35 further locations this year, after shutting 46 in 2023. The restaurant chain has shut at least three locations so far this year and has plans to close even more, president Tony Moralejo said in an earnings call on Wednesday. Closing restaurants was ‘an incredibly difficult decision’ and a ‘last resort’ for the company, Moralejo said."
And I am very saddened by what has happened to Boston Market.
At one time they had almost 1,000 locations all over the United States, but now the entire chain is about to go belly up…"In the case of Boston Market, a chain that once had nearly 1,000 locations nationwide, the company’s death has been slow, but the pace of its demise has picked up over the past few months. Now, with its store count continuing to dip, the chain seems to have reached the end even if it won’t confirm that given that there no longer appears to be anyone around to make that decision.
Boston Market owner Jignesh “Jay” Pandya was recently denied Chapter 11 bankruptcy for the second time and has been barred from filing again for six months. That leaves his company, which faces massive financial obligations, unable to gain court protection from its creditors."
Our ongoing inflation crisis is the primary reason why this is happening. Consumers simply have a lot less discretionary income now. Meanwhile, restaurants are facing much higher costs…"Jessica Dunker, the president and CEO of the Iowa Restaurant Association, said the reason restaurants are shuttering is because the cost of goods is up 30 percent and they are having to shell out higher wages to keep staff on."
Unfortunately, things aren’t going to get any better any time soon. For example, the cost of orange juice is expected to go up dramatically because of a very bad harvest in Brazil…"Breakfast lovers are in for another jolt as orange juice prices surge to near-record levels. A new report released on Friday indicates that Brazil, the leading global exporter of OJ, is facing its worst harvest in over three decades. This alarming development compounds existing issues in Florida’s citrus groves, which have been plagued by disease and are experiencing collapsing production levels to the lowest in decades.
Fundecitrus wrote in a note that Brazil will produce 232.4 million boxes—each weighing about 90 pounds—for the growing season this year. That’s a 24% collapse from a year earlier and the lowest production levels in 36 years."
We have reached a point where the vast majority of Americans just can’t afford to eat out on a regular basis. Needless to say, that is really bad news for fast food chains like McDonald’s. At one time, serving middle class families was their core business. But now most middle class families just can’t afford to eat at McDonald’s very often.
In a desperate attempt to lure them back, McDonald’s will soon introduce a five dollar meal deal…"McDonald’s is looking to launch a $5 meal in the US in a move to bring back price-sensitive customers. The meal includes four items, people familiar with the matter told Bloomberg and Restaurant Business. Customers would choose between two of the chain’s signature burgers - a McChicken or a McDouble - and get four-piece McNuggets, fries, and a drink. The $5 promotion would last for a month, Bloomberg reported."
So they are going to bring back affordable food for one month. That’s just great. Unless they make the five dollar meal deal permanent, I don’t expect that it will make much of a difference.
Consumers are really hurting right now. In fact, consumer sentiment just fell to the lowest level in six months…"Consumer sentiment plunged to the lowest level in six months as price increases reaccelerated, according to the latest University of Michigan survey of consumers, released Friday. Additionally, consumers are bracing for even higher price increases in the year ahead compared to readings from prior months, the survey found.
The gauge, which is closely tracked by the Biden administration, plunged 13% from April’s 77.2% reading, to 67.4%. That’s the biggest one-month drop since mid-2021. Economists polled by FactSet were expecting consumer expectations to fall to just 76.9%."
As I have discussed previously, the American people are deeply pessimistic about the economy at this stage. And they have good reason to be pessimistic, because even though our politicians in Washington are engaging in an unprecedented spending spree in a desperate attempt to keep the economy propped up, the truth is that the wheels are starting to come off and tremendous chaos is ahead.
Ed Dowd agrees that big trouble is coming during the months ahead. He just told Greg Hunter that he expects the U.S. economy “to take a nosedive sometime in the next 12 months”…"What happens to the Biden economy? Dowd says, “The economy is going to take a nosedive sometime in the next 12 months. The real economy is not doing well. The only thing that has been holding up the GDP growth is government spending. We are spending $1 trillion every 100 days. That’s adding $1 trillion to the deficit. The only job creation is government jobs, and they don’t actually add to the economy. Reports are coming out now that the low-income consumer is getting absolutely hammered. McDonald’s talked about it in their most recent earnings call. So, low-income and the middle-class are getting squeezed while the rich continue to plug along.”
I agree. Of course we don’t have to wait for the economy to come apart at the seams, because that is already happening. At one time, the entire world marveled at the greatness of the mighty U.S. economy, but our leaders have completely wrecked it. There is no way that we are going to be able to avoid disaster, and so I would encourage you to prepare for very hard times while you still can."
