Bankrupt restaurant chains permanently close popular locations

Casual and fast-casual restaurant chains, facing unsustainable debt obligations, often begin their restructuring process by closing underperforming locations. When the weight of all of their debt gets too heavy to handle, restaurant chains will turn to the bankruptcy court to restructure their ...

Jan 30, 2026 - 12:00

Bankrupt restaurant chains permanently close popular locations

Casual and fast-casual restaurant chains, facing unsustainable debt obligations, often begin their restructuring process by closing underperforming locations.

When the weight of all of their debt gets too heavy to handle, restaurant chains will turn to the bankruptcy court to restructure their liabilities and for relief from debt collectors, foreclosures, and lawsuits that come with the territory.

A major restaurant chain owner recently filed for bankruptcy, shut down 32 of its locations, and is rejecting their leases.

It takes some years to build up the debt that forces restaurant chains to close locations and file for bankruptcy. Restaurants can survive for a few years before problems arise.

The chance of a restaurant surviving its first year in business is pretty good, with about 83.1% of new restaurants making it through their first year unscathed, according to statistics from the U.S. Bureau of Labor Statistics, Owner.com reported.

Only one-third of restaurants survive 10 years

The numbers worsen over the years, as only 51.4% of restaurants survive five years in the business, and only 34.6% of eateries stay in business for 10 years.

Over the last two years, several casual restaurants filed for Chapter 11 bankruptcy, including TGI Fridays in November 2024, Buca di Beppo in August 2024 and Red Lobster in May 2024.

Italian casual restaurant chain operator Bravo Brio Restaurants, which operates chains Bravo Italian Kitchen and Brio Italian Grille, filed for Chapter 11 bankruptcy for the second time in five years on Aug. 18, 2025, to reorganize its businesses and restructure debt.

On The Border Mexican Grill & Cantina, which had about 120 locations at the beginning of 2025 and closed or vacated 40 non-performing stores, filed for Chapter 11 bankruptcy on March 4, 2025, with plans to sell its assets to its prepetition bridge loan lender.

FAT Brands closes 23 Smokey Bones locations nationwide.

FAT Brands closes 32 restaurants

And now, bankrupt restaurant chain operator FAT Brands Inc. has permanently closed 32 company-owned locations under the Smokey Bones, Johnny Rockets, and Yalla Mediterranean banners and filed a motion to reject all of their leases, according to court papers.

The Beverly Hills, Calif.-based restaurant chain operator filed a motion in the U.S. Bankruptcy Court for the Southern District of Texas on Jan. 27, authorizing the debtor to reject the leases of 23 Smokey Bones, 7 Yalla Mediterranean, and 2 Johnny Rockets locations nationwide.

Restaurant owner wants to reject leases

FAT Brands, which operated over 150 company-owned restaurants when it filed its petition, would eliminate over $492,000 in monthly lease payments if the court approves the motion to reject the 32 restaurant leases, court papers said.

The restaurant operator had already closed the 32 locations before filing for bankruptcy protection.

FAT Brands closings:

Smokey Bones: Boca Raton, Fla., Orlando, Fla., Pittsburgh, Pa., Avon, Ind., Chattanooga, Tenn., Louisville, Ky., Cheektowaga, N.Y., Charleston, S.C., Florence, Ky., Rockford, Ill., Plantation, Fla., Newport News, Va., Buford, Ga., Columbus, Ohio, Grand Rapids, Mich., Fort Lauderdale, Fla., Utica, Mich., North Wales, Pa., Stoughton, Mass., Casselberry, Fla., Maumee, Ohio, Woodbridge, Va., Wilkes-Barre, Pa.
Yalla Mediterranean: Burbank, Calif., Walnut Creek, Calif., Culver City, Calif., Pleasant Hill, Calif., Seal Beach, Calif., Dublin, Calif., Fremont, Calif.
Johnny Rockets: Orange, Calif., Santa Monica, Calif.

FAT Brands, which consists of 2,200 restaurants open or under construction, filed for Chapter 11 protection on Jan. 26, listing over $582 million in assets and over $95 million in debts in its petition.

"The Chapter 11 process will provide us with the opportunity to strengthen our capital structure to support our concepts and ensure they remain at the forefront of their sectors,” FAT Brands CEO Andy Wiederhorn said in a statement.

“We plan to use this process to connect with key stakeholders around a value-maximizing plan and will act prudently to remain steadfast in upholding and protecting stakeholder interests," Wiederhorn said.

FAT Brands defaulted on bank debt

The restaurant chain owner's financial problems magnified after it defaulted on $1.3 billion in debt owed to its indenture trustee, UMB Bank NA, when it failed to make a quarterly payment to the lender on Oct. 27.

FAT Brands said in a Securities and Exchange Commission Form 8-K filed in November that it did not have funds on hand to make the payment and that an acceleration or any subsequent foreclosure may have an adverse effect on the business and force the company and its subsidiaries to file for bankruptcy protection.

In addition to the three chains listed in the lease rejection motion, FAT Brands operates 15 other restaurant brands, including Fatburger, Hot Dog on a Stick, Marble Slab Creamery, Round Table Pizza, Ponderosa Steakhouse & Bonanza Steakhouse, and Twin Peaks.