Casual Dining Chains Retreat: Why Denny’s and Hooters Are Shutting Down Locations

 The American casual dining sector is undergoing a significant transformation as two once-dominant restaurant chains—Denny’s and Hooters—quietly close hundreds of their locations across the country. These closures, while subtle in execution, underscore a larger narrative about shifting consumer habits, financial pressures, and the changing nature of the restaurant business in a post-pandemic world.

Denny’s: Strategic Closures Amid Modernization

Denny’s, the classic 24-hour diner famed for its breakfast offerings and round-the-clock service, is in the process of streamlining its operations. According to company leadership, the chain is set to close up to 90 locations by the end of 2025. This follows 180 closures that occurred in 2024, totaling nearly 270 restaurants shuttered in under two years.

While these numbers may appear drastic, the company frames this move as a calculated decision aimed at long-term growth. Many of the locations being closed have been operational for over 30 years and are considered underperforming in the current economic climate. Denny’s Chief Financial Officer, Robert Verostek, emphasized that this “portfolio optimization” is intended to free up resources, boost cash flow, and enable reinvestment into stronger, more profitable locations.

However, this is not a retreat. Denny’s plans to open 30 to 40 new restaurants while remodeling more than 250 existing ones. The brand is also banking on reinvigorated interest in its popular value menu, the $2-$4-$6-$8 deal, which has reportedly led to modest gains in same-store sales. Additionally, the expansion of virtual kitchen concepts like Banda Burrito signals a push toward relevance in an increasingly digital and delivery-focused food landscape.

Hooters: A Franchise-Focused Future After Bankruptcy

Hooters, known for its sports-bar vibe, wings, and iconic branding, has encountered an even steeper financial hill. In early 2025, the company filed for bankruptcy, facing more than $370 million in debt. This financial turmoil prompted the closure of 30 company-owned locations across several U.S. states.

Though Hooters’ decline may not have been as publicly visible, the numbers tell a clear story. At the end of 2023, the chain had 293 locations—down from 333 in 2018. That represents a 12% drop over five years and reflects changing consumer preferences as well as struggles to attract a younger demographic.

In response, Hooters is shifting toward a full franchise model. By offloading the operational burden of company-owned locations, the brand hopes to maintain a leaner, more sustainable footprint. The company also has plans to expand its brand into new areas such as frozen retail products and new international markets. While this doesn’t necessarily reverse the brand’s domestic decline, it does suggest an adaptive strategy for the future.

Broader Industry Pressures

The setbacks experienced by Denny’s and Hooters are not anomalies—they’re part of a wider contraction within the casual dining segment.

1. Changing Consumer Preferences
Today’s diners, particularly millennials and Gen Z consumers, are turning away from traditional sit-down chains. Many prefer fast-casual eateries that offer healthier options, faster service, and digital convenience. Delivery apps and virtual kitchens have further accelerated this shift, making it easier than ever to enjoy a restaurant-quality meal at home without committing to a full dining-out experience.

2. Economic Headwinds
Inflation, rising food costs, and higher wages have all increased operating costs for restaurants. At the same time, many consumers are tightening their budgets, opting for cheaper meal options or eating out less frequently. For casual dining chains, which often rely on a specific value proposition and slower table turnover, these pressures are difficult to absorb.

3. Real Estate and Lease Challenges
Many of the restaurant closures involve locations where long-term leases or outdated facilities made continued operation untenable. Commercial rent hikes, especially in urban or high-traffic suburban areas, have forced chains to reconsider their presence in less profitable spots.

4. Labor Shortages
The entire hospitality industry continues to grapple with labor shortages post-pandemic. With fewer available workers and increasing labor costs, maintaining full-service dining operations has become more difficult, particularly for chains that depend on large staffs to maintain their traditional service model.

A Shared Strategy: Leaner and Smarter

Despite their differences in branding and target demographics, both Denny’s and Hooters are adopting similar strategies to navigate this transitional period:

• Cutting Underperforming Units: By eliminating locations that drain resources, both brands can reallocate investment to higher-performing sites or growth opportunities.

• Investing in Digital and Delivery: With consumers increasingly ordering online, both brands are experimenting with virtual kitchens, delivery partnerships, and streamlined menus.

• Rebranding and Retooling: From remodeling stores to revamping menus and adjusting service models, the goal is to stay relevant in an evolving marketplace.

This shift may mark the end of the road for many longstanding neighborhood locations, but it also signals a more agile and responsive business model. Denny’s and Hooters are betting that fewer but more efficient restaurants, paired with innovative offerings, can outpace the challenges facing the broader dining sector.

What This Means for the Future of Dining

The quiet closures by Denny’s and Hooters represent more than corporate belt-tightening—they’re emblematic of a cultural shift. The days when family dinners or sports nights at a sit-down chain were staples of American life may be fading. In their place is a dining culture driven by convenience, customization, and digital integration.

Other chains are watching closely and making similar moves. TGI Fridays, Applebee’s, and Red Robin have also scaled back operations and shifted focus to delivery, remodeling, and menu innovations. As consumers become more selective and economic uncertainty lingers, the pressure to adapt will only increase.

The silver lining is that this evolution may result in better service, more targeted experiences, and ultimately, stronger brands. While it’s bittersweet to see familiar establishments disappear from the local landscape, it also opens the door for new concepts better suited to the tastes and lifestyles of modern diners.