As popular sit-down chains like Red Lobster and TGI Fridays close locations nationwide, a variety of businesses—especially fast-food and fast-casual chains—are moving into these valuable properties. In Woodbridge, Virginia, a former TGI Fridays will soon become a LongHorn Steakhouse, while a previous Red Lobster in Naples, Florida, is being transformed into a Chick-fil-A.
This shift has been fueled in part by the financial struggles of chains like Red Lobster, TGI Fridays, and Denny’s, which have faced challenges since the pandemic. Red Lobster filed for bankruptcy under prior owner Thai Union, and TGI Fridays under private equity firm TriArtisan Capital Advisors, resulting in over 175 closures this year. Many of these full-service restaurants, which traditionally serve low- and middle-income diners, have lost traffic as customers opt for faster, more cost-effective options like Chick-fil-A and Chipotle.
Rather than remaining vacant, these spaces are quickly being repurposed. New tenants see opportunities in their convenient locations and freestanding designs, with many opting to install drive-thru lanes—a trend that has grown as fast-casual and fast-food chains expand. Chipotle, for example, plans to open 4,000 new locations, most featuring drive-thru lanes, and Chick-fil-A is developing locations with expanded drive-thru lanes to meet demand.
As demand for available commercial properties outpaces supply, companies like First Watch and Fogo de Chao are also taking over these vacated spaces. First Watch has transformed former TGI Fridays and Red Lobster sites into some of its top-performing restaurants and plans to expand further.
With limited construction of new commercial properties, the national retail vacancy rate has dropped to 4.1%, the lowest in decades. Freestanding restaurant properties, often located on high-traffic streets or next to shopping centers, have become highly attractive real estate for businesses looking to avoid the downturn facing indoor malls.