Kevin O'Leary Warns Of Restaurant Apocalypse — 'An Upscale McDonald's Is A Luxury Many Can't Afford'
American restaurant chains are squeezed by rising prices and fewer customers, forcing companies like Red Lobster to declare bankruptcy and Applebee's to close dozens of locations.
"The U.S. restaurant industry finds itself on the menu," "Shark Tank" star Kevin O'Leary wrote in a column for the Daily Mail.
O'Leary points out a double whammy for restaurants — people are way more into delivery these days, skipping the dine-in experience, and with more folks working remotely or on a hybrid schedule, office lunch outings are a thing of the past.
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"This has been devastating to businesses that invested in brick-and-mortar locations," O'Leary wrote. "Eateries in Urban locations have been hit especially hard as their expensive locations are no longer receiving the footfall they need to meet rent."
O'Leary blames lingering supply chain problems from the pandemic for increasing food prices. According to the U.S. Department of Agriculture (USDA), the cost of all food jumped by 25% between 2019 and 2023. That's a bigger increase than other major categories like housing and health care. The USDA says supply chain issues were a major factor in 2020-2021, while bird flu and the war in Ukraine added to price hikes in 2022.
Making matters worse, O'Leary says inflation is forcing people to cut back on extras, including dining out.
"In this economy, an ‘upscale McDonald's' is a luxury that many can't afford," O'Leary wrote.
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It's not all doom and gloom, though. While some restaurants have downsized or closed, others are adapting. Some are moving to cheaper locations, while others are ditching the dine-in experience altogether and focusing solely on takeout kitchens.
Big chains like Starbucks and McDonald's also try to lure customers back with budget-friendly deals.
Some financial experts see the slowing down of spending as a positive sign for consumers, who are more mindful of their money.
"Americans need to reprioritize their cash flow in difficult times," Andrew Herzog, a certified financial planner and associate wealth manager at the Watchman Group in Texas, told MarketWatch.
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