In 2024, the restaurant industry will see both victories and defeats, with Chili's and burger chains among the winners and losers.

• This year, consumers reduced their restaurant visits, resulting in increased competition among eateries for a smaller customer base.
• In 2020, the restaurant industry faced numerous challenges, resulting in 26 Chapter 11 bankruptcy filings, including those of Red Lobster and TGI Friday's.
• Fast-casual eateries like Cava and Wingstop profited from the segment's success, while Chili's emerged victorious with promotions that highlighted value.

The restaurant industry faced challenges in 2020, resulting in the separation of the biggest chains into winners and losers, as customers became more selective with their dining choices.

Jennifer Jennings, who works in sales in Tulsa, Oklahoma, stated that she has been eating out less this year, but the food still tastes great and it's much more affordable.

The cost of food outside the home increased by 3.6% in the past year, as per the Labor Department's consumer price index. Meanwhile, grocery prices rose by only 1.6% during the same period, making it more appealing to cook at home rather than dine out.

This summer, value wars have reignited among restaurants, with chains taking aim at their rivals in marketing and social media posts. In response, many consumers have cut their restaurant spending, leading to slower sales and greater competition. To boost sluggish traffic trends, restaurants have ramped up innovation, introducing new menu items.

RJ Hottovy, head of analytical research for Placer.AI, stated that the winning chains are not remaining stagnant; instead, they are innovating, whether through new menu items, marketing strategies, or emphasizing value.

Despite a slight decline in year-over-year traffic in January and February, the industry tracker Black Box Intelligence reported that visits picked up in March. However, eateries faced challenges over the summer as consumers tightened their budgets. Despite offering value meals that promised affordable burgers and fries, the restaurants couldn't reverse the trend.

During the pandemic, the number of bankruptcy filings among bars and restaurants has increased significantly. In 2021, twenty-six establishments filed for Chapter 11, which is just one less than the total number of filings in 2020. Notable filers this year include Red Lobster and TGI Fridays.

Although traffic has improved in the fourth quarter, some industry experts believe it's too early to predict a full recovery. A Numerator survey of over 2,000 consumers revealed that the majority, regardless of income group, plan to maintain their current spending levels at limited-service restaurants in the upcoming months.

In the fourth quarter, the chains that were already successful have seen their gains increase, further propelling their success.

Here are the winners and losers of the restaurant industry in 2024:

WINNER: Value

This year, restaurant CEOs made "value" their top priority as they tried to boost sales and attract price-sensitive customers.

In late April, the industry was alerted by a warning that consumers had become more "discriminating." Three months later, the company's second-quarter sales missed estimates and its U.S. restaurant foot traffic decreased. In response, the burger giant introduced a $5 combo meal, which was followed by its rivals with their own discounts and deals.

According to Circana data, the number of people who used value menu deals to travel increased by 9% between October and the previous year.

But value meals alone won't save the industry.

According to David Portalatin, Circana senior vice president and industry advisor for food and food service, the increase in lift from the deals is not sufficient to counteract the overall decline in traffic.

Rewritten sentence: In addition to the cost, the value of a product now encompasses the overall experience and quality it provides.

According to Michael Zuccaro, Moody's Ratings vice president of corporate finance, for low-income consumers, the dollar amount is the primary concern, while for everyone else, it's the value. Even though they have money, people are becoming more selective as they notice things are becoming more expensive.

LOSER: Fast food

Although there was an increase in the availability of $5 combo meals, the quick-service restaurant industry experienced a 2% decline in traffic from January to October, according to Circana data. This is concerning for the industry because fast food accounts for approximately two-thirds of all restaurant visits.

Numerator data shows that more than a quarter of McDonald's and Taco Bell's customer bases are low-income diners who make less than $40,000 per year. This decline in fast-food traffic is largely attributed to this group.

Numerous consumers have opted to reduce their spending at fast-food restaurants by either avoiding French fries or skipping visits altogether to prepare meals at home.

"Hottovy stated that competition is intense among grocery and food retailers, with the majority of it occurring in the lower- to middle-income consumer market."

Taco Bell, like other fast-food chains excelling currently, has a high value perception.

During economic downturns or recessions, fast-food restaurants tend to benefit as consumers cut back on spending. However, this time, higher-income consumers have chosen to prioritize quality and satisfaction over cost when deciding where to dine.

WINNER: Chicken

In 2024, the top-performing fast-food chains primarily focused on chicken: Chick-fil-A, Raising Cane's, and others.

Although beef prices have increased, chicken prices have remained stable, making poultry a more appealing and healthier option for some consumers, even when it is breaded and fried.

Since the chicken sandwich wars of 2019, beef has been losing market share to chicken, and restaurants are responding to the shift in consumer behavior by adding more chicken options to their menus. McDonald's, for instance, has recently made the Chicken Big Mac a permanent addition to its U.S. menu.

Raising Cane's, a privately held chain, has been gaining popularity with its chicken tenders and is currently the fourth-largest chicken chain in the U.S. with a market share of 7.8%, according to Barclays. The chain could potentially surpass KFC, a struggling chicken chain, in the near future.

In recent years, KFC, owned by , has lagged behind its competitors, such as Chick-fil-A and Popeyes, who have gained market share with innovative menu items and the growing preference for boneless chicken among consumers.

LOSER: Burgers

Burgers are losing market share to chicken chains.

McDonald's has long held a dominant position in the burger market, with a 48.8% market share, according to Barclays. However, the chain lost some ground earlier this year when it put off low-income consumers with its high menu prices. Nevertheless, by October, things started looking up for McDonald's: its $5 value meal was winning back customers, and its pricier Chicken Big Mac was driving traffic.

McDonald's has announced plans to invest $165 million to support its franchisees and boost marketing efforts after a fatal E. Coli outbreak linked to slivered onions used in its Quarter Pounders caused sales to plummet, particularly in affected states. In addition, the chain has brought back its McRib for a limited time and introduced a new value menu that will launch in January.

According to a note from Gordon Haskett Research Advisors, traffic turned positive for McDonald's in the week ended Dec. 8, marking the first time since the Centers for Disease Control and Prevention announced the outbreak on Oct. 22. Analysts are optimistic that McDonald's will be able to put the incident behind it.

For rivals Burger King and Wendy's, that's bad news.

Burger King, like McDonald's, introduced a $5 value meal during the summer to attract price-conscious customers. Despite a decline in same-store sales in the third quarter, Restaurant Brands CEO Josh Kobza stated that the business is currently in a better state than it was in September 2022, when the company launched its U.S. turnaround strategy for Burger King.

Wendy's has been facing challenges in the value wars, and in an attempt to improve its performance, the company has decided to shut down 140 underperforming restaurants in the fourth quarter.

The 25th anniversary of Spongebob Squarepants has led to a promotion that has boosted sales for the burger chain. Some locations ran out of key ingredients for the "Krabby Patty" meal, as noted in an October report from Wolfe Research.

WINNER: Taco Bell

Taco Bell is another rare fast-food winner.

Despite Pizza Hut and KFC experiencing three consecutive quarters of same-store sales declines, the Mexican-inspired chain was the only one to report growth in the same-store sales every quarter this year.

Taco Bell's success can be attributed to consumers' perception of its value, as it was the top limited-service chain that diners across all income groups considered to be more affordable than groceries, according to a Numerator survey of more than 2,000 consumers.

Taco Bell's "brand buzz" has been credited by Yum, as evidenced by actress Selena Gomez's Instagram post featuring the brand's Mexican Pizza on a picnic blanket. However, Taco Bell's PR chief clarified on LinkedIn that the post was not sponsored by the brand.

In hundreds of locations, artificial intelligence software is being rolled out to take drive-thru orders. In early December, the company unveiled a new drink-focused concept, called the Live Mas Café, with the first location being tested in San Diego.

Yum will showcase Taco Bell in an investor presentation in late January, detailing its strategy for the brand in the upcoming year.

WINNER: Fast-casual chains

Despite online backlash over portion sizes and the departure of longtime CEO Brian Niccol in September, traffic to restaurants has continued to grow, with Wingstop's quarterly same-store sales climbing more than 20% in every report it has released this year. Additionally, the stock of Wingstop has skyrocketed 192% this year.

The fast-casual restaurant industry has experienced a 3% increase in traffic and an 8% increase in dollar sales from January to October 2021 compared to the same period in 2020, according to Circana data.

According to Portalatin of Circana, you spend more money when you go out compared to staying in, and fast casual strikes the ideal balance in the value equation.

Fast-casual chains, including Chipotle, have a customer base that tends to be higher-income, which benefits them. Chipotle executives have stated that they have not experienced the same decline in traffic as the rest of the industry because their customers have more disposable income to spend on dining out.

Despite being a fast-casual category, there were still some losers, including BurgerFi and Roti, who filed for Chapter 11 bankruptcy due to declining traffic and rising costs.

According to John Bringardner, head of Debtwire, it's possible that the company expanded too quickly and faced other problems, which ultimately led to their difficulties.

WINNER: Brian Niccol

In August, Niccol surprised the restaurant industry by being appointed as the new CEO of the company, following the ouster of his predecessor. This news caused Chipotle's stock to fall and Starbucks' shares to rise, resulting in a combined market cap swing of $27 billion, indicating Wall Street's confidence in Niccol as a leader.

Six years into his tenure, Niccol left Chipotle. He successfully led the company out of its foodborne illness crisis, embraced online ordering, updated its locations for the digital age, and navigated the company through the pandemic. Wall Street analysts anticipate that his replacement, Scott Boatwright, will continue the path set by Niccol.

Niccol's appointment at Starbucks may bring significant changes to the coffee giant, as the board hired him following two quarters of declining same-store sales. Customers had grown disillusioned with Starbucks' high prices and chaotic, uninviting stores, and even discounts and new drink launches failed to entice them back.

As CEO, Niccol has vowed to restore the company to its former glory, with plans to revamp the U.S. business. In October, he revealed his initial ideas, ranging from minor changes like reintroducing Sharpies to more ambitious goals, such as reducing the extensive drink menu.

In 2025, Wall Street is enthusiastic about his plans. Piper Sandler has ranked Starbucks as its top restaurant idea. BTIG has also named it as a top pick, alongside Wingstop.

LOSER: Casual dining

Through October, the data from Circana shows that there has been a 2% decline in traffic to casual-dining restaurants year-to-date.

Since the Great Recession, casual-dining chains have been struggling to compete with fast-casual options that offer high-quality food at cheaper prices with greater convenience. This year, their decline in visits is a result of years of waning demand.

Some consumers are also skipping casual-dining chains and instead frequenting local independents.

In 2021, Red Lobster and TGI Fridays were the largest losers in the restaurant industry, both declaring Chapter 11 bankruptcy. Red Lobster, which filed in May, emerged from bankruptcy with a new owner, management team, and strategy to revive the business.

Circana's Portalatin stated, "Some weeding out is occurring among concepts that are overused and stressed."

Dine Brands-owned Applebee's is among other casual-dining chains facing challenges in attracting customers.

Despite the presence of outliers such as Texas Roadhouse, Chili's, and Olive Garden, the restaurant segment has shown improvement in its metrics. However, some chains are experiencing deeper deterioration that is being masked by the success of these outliers. Darden Restaurants, the parent company of Olive Garden, will report its latest quarterly results on Thursday.

WINNER: Chili's

Despite the struggles of casual restaurants, Chili's, owned by [company name], stood out as a bright spot. The chain, often associated with families, became a hot reservation among Gen Z diners.

This year, the bar and grill's turnaround was successful due to effective advertising and viral TikTok deals. In its most recent quarter, Chili's experienced a 14.1% increase in same-store sales, driven by a 6.5% rise in traffic.

The "3 for Me" bundle, priced at $10.99, attracted consumers seeking value. Additionally, Chili's advertised the promotion by targeting the prices of its fast-food competitors. Meanwhile, the Triple Dipper combo, which includes three appetizers, gained popularity on TikTok, resulting in a 70% increase in sales compared to the previous quarter. Today, the Triple Dipper accounts for 11% of the chain's business, as stated by Brinker CEO Kevin Hochman during the company's latest earnings call on October 30.

Chili's success has led to the emergence of competitors, including Applebee's and Olive Garden, who have introduced their own value meal and pasta bowl promotions, respectively.

WINNER OR LOSER? Restaurants in 2025

At the Restaurant Finance and Development Conference in Las Vegas in mid-November, restaurant executives were hopeful about the prospects for 2025.

Portalin, the prediction tool of Circana, indicated that inflation will continue to decrease next year, providing much-needed stability to prices and the industry.

"Consider the challenges consumers have faced in the past year, including natural disasters, global conflict, and a polarizing national election," he stated. "If we can overcome these obstacles and maintain certain economic and labor standards, we anticipate an increase in customer traffic in 2025."

Not all industry experts are confident that 2025 will see a full restaurant recovery.

Placer.AI's Hottovy stated that he believes the company will maintain its value-oriented, deal-driven consumer mindset as it moves forward from 2024.

Moody's predicts modest sales growth for the restaurant industry, but Zuccaro says companies will compete for market share.

The value wars will not slow down and may even intensify.