Financial distress in the restaurant industry has led several fast-food and fast casual chains to file for bankruptcy, with businesses reorganizing, selling their assets or shutting down permanently.

Fast-casual Tex-Mex chain Tijuana Flats Restaurants on April 19 filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Middle District of Florida, with ambitious plans to turn around the company that included selling the company to a new ownership group and closing 11 of its locations.

Related: Luxury appliance retailer files Chapter 7 bankruptcy to liquidate

The new owners, Flatheads LLC, purchased the restaurant chain from TJF USA LLC with a plan to revitalize its restaurants and reinvigorate the customer experience.

Another restaurant chain had more depressing plans, as fast casual restaurant chain Foxtrot and Dom’s Kitchen & Market, with 33 locations across the nation, on April 23 revealed that it was abruptly filing Chapter 7 bankruptcy liquidation and shutting down all of its locations immediately. The reason for the filing was unclear, according to reports.

While struggling restaurant chains file bankruptcy, close down locations, and in some cases go out of business, a popular Boston fast-food chain is bucking that trend and intends to emerge from Chapter 11 with a plan to expand its footprint in New England by four times.

Fast food restaurant emerges from bankruptcy

Boston-based vegetarian fast-food restaurant chain Clover Food Lab filed for Chapter 11 Subchapter 5 bankruptcy in the U.S. Bankruptcy Court for District of Delaware on Nov. 3, 2023, to reorganize its business as its sales did not fully recovered from the effects of the Covid pandemic, according to its website.

In addition to lower than expected sales, the company in court papers said that high rent for its locations and inadequate funding as a result of the failure of Silicon Valley Bank contributed to the chain's distress.

The restaurant chain had planned to raise capital to expand in New England and into New York but the fallout from the failure of Silicon Valley Bank resulted in its financing plans to collapse. The debtor said that high rents and low sales at three of its locations led it to seek lease concessions from its landlords, which was unsuccessful and forced the company to file bankruptcy.

The restaurant chain opened in 2008 as a single food truck on the Massachusetts Institute of Technology campus in Cambridge, Mass., and offers an organic, vegetarian menu that "changes by the minute to keep up with daily available produce from farms in New England," according to Clover Food Lab's website. The company had 15 locations when it filed its Chapter 11 petition, but closed locations in Boston's Copley Square and Somerville's Assembly Row during its reorganization.

Clover Food Lab in a April 24 statement said that it will emerge from Chapter 11 Subchapter V bankruptcy this week with a five-year plan to add 47 new stores, initially opening locations in the Greater Boston area and then elsewhere in New England. It will focus on smaller outlets in urban areas and around universities, the statement said according to Boston Restaurant Talk. The expansion will grow the chain from 15 locations when it filed bankruptcy to 60 outlets after a five-year period.

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From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for March 2024. Over the past three months, the indexes increased in 44 states, decreased in five states, and remained stable in one, for a three-month diffusion index of 78. Additionally, in the past month, the indexes increased in 41 states, decreased in two states, and remained stable in seven, for a one-month diffusion index of 78. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 0.7 percent over the past three months and 0.3 percent in March.
emphasis added

Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on map for larger image.

Here is a map of the three-month change in the Philly Fed state coincident indicators. This map was all red during the worst of the Pandemic and also at the worst of the Great Recession.

The map is almost all positive on a three-month basis.

Source: Philly Fed.

And here is a graph is of the number of states with one month increasing activity according to the Philly Fed.  recession unemployment pandemic fed federal reserve gdp unemployment

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The contraction and expansion of retailers in this decade has been something to marvel at. 

On the one hand, many specialty retailers that made large footprints and catered to niche consumer interests have struggled since the covid pandemic, which forced most shoppers to stay at home and take up hobbies.

Related: Popular restaurant chain filing for bankruptcy, closing all locations

Joann Fabrics, Body Shop, Bed Bath & Beyond, and Party City all filed for bankruptcy in the past year. 

The pandemic may be behind us, but it has permanently shifted how we think about shopping. Now, most of us prefer to shop online for things we know we like, such as party supplies or home decor. 

And for the things we're open to being influenced on, as with a new fragrance or specialty body lotion, we also look online, seeking others' opinions on forums and social media, often before going in and discovering for ourselves. 

Retailers take more precautions

But the past several years have shifted the way that surviving retailers think about the shopping experience, too. 

Retail crime, be it theft or violence, has surged. For example, smash-and-grabs jumped in metropolitan areas where some stores took softer policies on shoplifting.

Other stores struggled to keep robust workforces, opting instead for more autonomous technology like self-checkout kiosks to help customers move more quickly with their purchases.

But more self-checkouts created more inventory shrink, the industry term for a loss of product. This occurs in part when customers accidentally or purposely fail to properly scan items and aren't caught by a security system.

Target institutes an under-18 policy 

Large stores like Target  (TGT)  and Walmart  (WMT)  have been hit particularly hard by inventory shrink, with some CEOs calling the levels of it unsustainable for business and profitability. 

This forced Target in March to limit self-checkout to customers with 10 items or fewer during normal business operations. 

And a Target location in the Columbia Heights neighborhood of Washington is now implementing a stricter policy, mandating that anybody under age 18 must be accompanied by an adult to enter the store. 

Some cities like Washington have seen an uptick in juvenile crime, especially when it comes to attempted robbery, carjacking and petty theft. 

Earlier this year customers noticed a sign posted outside the Columbia Heights Target on 14th Street, which is a part of a massive retail complex also housing a Best Buy, Old Navy and Lidl. 

"All guests under the age of 18 must be accompanied by an adult at this Target store," the sign reads at the entrance.

View the original article to see embedded media.

Customers note that some departments within the Target store are under lock and key, including personal-care products and menswear like socks, boxers and undershirts. 

The location, which is a part of the DC USA shopping complex, serves more than 36,000 people a day and is the largest retail development in the city. 

The greater DC USA shopping complex has similar signs posted throughout the area, mandating that minors must be accompanied by legal adults.

TheStreet has reached out to Target for comment.

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