Fast Food Chains That Filed For Bankruptcy

Financial failure is so terrifying to consider that we occasionally trivialize the prospect — like the ever-lurking "Bankrupt" tiles on the titular "Wheel of Fortune." Real-life bankruptcy is no laughing matter, of course — something the fast food industry knows all too well.

Since approximately 80% of all restaurants close within five years of opening (via CNBC), the threat of bankruptcy — and permanently shuttering — is an unfortunate, ever-present one for fast food businesses. But while filing for bankruptcy is never a cause for celebration, it's not an automatic death knell, either. After all, two types of bankruptcy are available to restaurants (via Total Food Service): Chapter 7, where a company's assets are sold to pay any outstanding debts, and the business likely ends; and Chapter 11, which involves restructuring and reorganizing a company's debts, allowing it to stay in business.

Now, we don't explicitly enjoy highlighting a business' prior low points. But discussing fast food joints that utilized this legal safeguard can still be somewhat interesting — ghoulishly-speaking, that is. So read on, and learn about those unlucky fast food chains that, at one time or another, filed for bankruptcy.

The notion that Del Taco could be considered a legitimate threat to Taco Bell's fast food Mexican supremacy is patently silly. After all, Taco Bell has more than 7,000 locations in 30 different countries as of 2022 (via Yum! Brands); Del Taco, on the other hand, has only 592 U.S.-based locations. Yet back in the early 1990s (before the rise of Chipotle or Moe's, among others), Del Taco did indeed fancy itself a worthy competitor to Taco Bell, which was a main catalyst behind its decision to file for bankruptcy in 1993 (via Los Angeles Times).

The fast food chain's decision to file for Chapter 11 bankruptcy wasn't expected to change much at the ground level, with then-president Kevin K. Moriarty telling the Los Angeles Times that "customers will see no difference in our operations." Additionally, since its bankruptcy filing was driven by a desire to match the might of Taco Bell, Del Taco presented a fairly aggressive expansion plan for the remainder of the '90s at the time.

Of course, even in 1993, Del Taco had a mere 175 restaurants compared to Taco Bell's 3,700 locations. Frankly, then, it's hard to believe Del Taco's contention that it could have ever competed with Taco Bell — with or without the restructuring of its then-substantial debt load.

Every kid understands the appeal of Chuck E. Cheese, regardless of how often they frequent the pizza chain. But the innate popularity of the restaurant-arcade-animatronic-band-venue all rolled into one doesn't mean it's been smooth sailing since it first opened in San Jose, California in 1977 (via Fast Company). In fact, less than a decade into its existence, the chain was already racked with debt — leading its original parent company, Pizza Time Theater Inc., to file for Chapter 11 bankruptcy in 1984 (via Washington Post).

After a court ruled it had to repay $50 million in defaulted bonds, Pizza Time Theater Inc. took the drastic step of filing for bankruptcy to avoid corporate destitution. While this helped the chain avoid going belly-up during the 1980s, it didn't ensure the chain's long-term survival — particularly in the midst of a once-in-a-lifetime global pandemic. So, in 2020, shortly after the widespread emergence of COVID-19, Chuck E. Cheese's parent company (now CEC Entertainment) was forced to file for Chapter 11 bankruptcy (again), according to Nation's Restaurants News – shedding a massive $705 million debt by December 2020 in the process.

Getting noticed as a new face in the fast food donut game may seem impossible, considering Dunkin' and Krispy Kreme have essentially cornered the market. The undeniably daunting task didn't stop Blue Star from first selling its gourmet donuts in 2012, though — and, somewhat surprisingly, that challenge didn't really precipitate the fast food chain's decision to file for Chapter 11 bankruptcy in October 2020, either (via Restaurant Business Online). No, the culprit for Blue Star's bankruptcy filing was an all-too-familiar one in 2022: The COVID-19 pandemic.

Like many other restaurants (fast food or otherwise), Blue Star's business was devastated by the widespread shutdowns and social distancing orders during the initial pandemic period. The impact was so detrimental that, in its Chapter 11 bankruptcy filing from August 2020 (via Restaurant Business Online), the donut chain declared its intention to shift its business model towards a "wholesale and e-commerce delivery operation" in the future.

Eventually, Blue Star was able to secure the financial help required to emerge somewhat intact from its bankruptcy, though it was hardly unscathed. After all, only three stores remained open as of March 2022 — down from 11 locations in 2019 before the pandemic began (via The Oregonian).

The phrase "ahead of its time" is a bit of a hoary old cliché in 2022. But there's a reason it exists, and times when it's appropriate to use — as in the case of the former fast food chain D'Lites. First opened in 1981, the health-focused fast food joint offered lighter versions of popular items, including lean burgers and veggie sandwiches (via Time). But D'Lites sputtered after expanding too quickly during its first few years, and, in August 1986, was forced to file for Chapter 11 bankruptcy (via New York Times).

While D'Lites filed for Chapter 11, it may have been better off filing for Chapter 7 bankruptcy — and simply liquidating its assets right away, rather than attempting to remain in business. After all, according to South Florida Sun-Sentinel, only one south Florida D'Lites remained open by 1987 (of a previously-planned 12 locations), and consumers appeared disinterested in the so-called healthier fast food chain by that time.

By the end of the decade — and, most likely, soon after D'Lites founder Doug Sheley sold the company — the fast food chain had closed all locations for good (via Franchise Times). Actually, considering the swift rise-and-fall of D'Lites, maybe a different cliché would be more appropriate: "gone too soon."

Mashed may be a website based around all things food, but that doesn't mean we're aware of every ... single ... restaurant open in the U.S. We live in an enormous nation, after all, and there's only so much information the human brain can handle at any given time (via Live Science). Long story short, some of us may have been unaware of Happy Joe's Pizza before this article, but that doesn't mean it's unworthy of our consideration — particularly in light of its parent company, Dynamic Restaurant Holdings, filing for Chapter 11 bankruptcy in September 2022 (via QSR Magazine).

Interestingly, Happy Joe's bankruptcy was exclusive to its parent company and any corporate-owned restaurants, as the pizza chain's 37 franchised locations were unaffected by the move. One of the main reasons given by the company when filing for bankruptcy was less interesting, though: the financial toll taken by 2022's historically-high inflation. Another was Happy Joe's now-antiquated restaurant model (via Franchise Times).

Unfortunately, two Happy Joe's locations were forced to close due to the bankruptcy. But as Dynamic Restaurant Holdings CEO Tom Sacco told Franchise Times in 2022, "restructuring was the right thing to do for the long-term health of the Happy Joe's brand" — meaning the future may still be bright overall for the fast food pizza chain.

Of all the fast food chains we've included in this article, the most unusual entry has to be Horn & Hardart Automat. After all, according to Britannica, Horn & Hardart was essentially a chain of self-serve cafeterias located in New York City and Philadelphia — not exactly what modern diners consider "fast food." Then again, that industry didn't really exist when Horn & Hardart first opened in 1888. But fast food was around a century later, which may help explain Horn & Hardart's filing for Chapter 11 bankruptcy (its second time doing so in 10 years) in September 1981 (via United Press International).

In some ways, it's not entirely unreasonable to describe Horn & Hardart as one of the first fast food chains. After all, the grab-and-go concept of Horn & Hardart — with food ready and waiting for customers to take upon arrival — means its description as one of the original fast foods, according to The Philadelphia Tribune, is fairly legitimate.

Still, faced with stiff competition at the time from an exponentially-growing fast food market, the pair of bankruptcies in the '70s and '80s proved too much for Horn & Hardart to overcome. And, by 1991, the once-thriving fast food chain had closed for good.