Following the continued recent demise of the casual restaurant brands, this week we offer up one possible reason – zombie brands.

In the finance industry, analysts have coined the term zombie stocks for companies that need financial bailouts to operate and exist in a precarious balance between solvency and insolvency. It’s not a stretch to suggest that many of the recent closings and brand failures could could be classified in this vernacular as zombie brands artificially propped up through Covid, PPP and finances made available by the SBA Restaurant Revitalization Fund. 

Rather than see the natural market conditions benefit the strong and punish the weak, money helped stabilize the latter, leaving even the healthy companies to benefit less than they deserve to. With restaurants being able to apply for funds up to 10 million per business and up to 5 million per location, the Restaurant Revitalization Act potentially delayed the inevatability of thinning that we are experiencing now.

While there are certain regional economic circumstances heavily impacting the recent decline, such as growing wage pressures, it’s impossible to argue that some of these are not a market correction that would have naturally occurred sooner without the financial intervention. Long term prognosis? The industry as a whole should benefit from this correction. Those who operate with a healthy balance sheet will finally be able to free themselves from the zombie apocalypse.