News
Bankruptcy & Creditors' Rights Co-Chair Randy Klein is quoted in "Bankruptcy Trends to Watch in 2025," published in the January 2, 2025, edition of Reuters. The article focuses on several particularly hard-hit industries that struggled in 2024, which will continue to experience financial distress and restructuring activity in 2025, including casual dining and retail, health care and automotive.
The article author, Dietrich Knauth, writes that rising interest rates, inflation, higher labor costs, and post-pandemic shifts in consumer spending were common factors cited by companies that filed for bankruptcy in 2024. Business bankruptcy filings rose 33.5 percent in the 12 months ending Sept. 30, 2024, according to statistics from the Administrative Office of the U.S. Courts. Bankruptcy experts expect those factors to continue to drive companies over the brink next year.
Randy Klein comments on the steep rise in bankruptcies seen in the casual dining sector in 2024, headlined by famous restaurant chains like Red Lobster and TGI Fridays. Several smaller chains like California Pizza Kitchen, Bucca di Beppo, and Rubio's Coastal Grill also went bankrupt in the past year.
Some of those restaurant brands, backed by private equity, expanded too rapidly and then collapsed under their own weight, while others have cited higher labor costs, especially in states like California, when seeking bankruptcy protection.
In the article Randy says that restaurant chains will continue to contend with higher interest rates and inflation in food prices in 2025, forcing customers to re-evaluate whether they will continue spending on casual dining restaurants that were previously seen as offering good value for the money.
"The costs of running a restaurant business has gone up significantly, and restaurants are not always able to pass those costs through to their customers," said Randy. "Food prices have gone up, check sizes have gone down, and people are going out to eat less frequently."
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