Craft-beer-themed restaurants, like BJ’s and Yard House, have found success by pairing their extensive beer selections with diverse food offerings.
BJ’s (BJRI) began its journey in 1978 as a Chicago-style deep-dish pizza restaurant in Southern California, later pivoting to focus on craft beer. Similarly, Yard House, which started in 1996 in Southern California, boasts an impressive selection of over 100 beers on tap. BJ’s currently operates approximately 216 locations nationwide, while Yard House has about 88 locations across the U.S., making them standout examples of successful craft beer chains in the country.
Positive Earnings Amid Economic Pressures
On July 25, BJ’s reported earnings that exceeded analysts’ expectations, causing its stock to rise as much as 10%, peaking at $38.87 on July 23. However, the shares have since declined to $29.49, reflecting broader market pressures due to fears of an economic slowdown. Yard House, on the other hand, is owned by Darden Restaurants (DRI), benefiting from the larger company’s stability.
Smaller Chains Face Significant Challenges
In contrast, smaller craft beer restaurants have faced more severe difficulties post-pandemic, struggling with rising interest rates, escalating costs, and inflation. Many have also seen a decline in customers, who are dealing with their own economic challenges.
One such establishment, Melt Bar & Grilled, filed for Chapter 11 bankruptcy protection on June 14 in the U.S. Bankruptcy Court for the Northern District of Ohio. The Lakewood, Ohio-based chain, founded in 2006 by Matt Fish, is known for its gourmet grilled cheese sandwiches and craft beers. However, it has struggled with increased food and labor costs due to inflation and has faced lawsuits from landlords. Melt currently operates six locations in Ohio, down from 14 locations at its peak in 2017.
Other craft beer restaurants have also succumbed to financial pressures. Zydeco Brew Works in Ybor City, Florida, filed for Chapter 11 in January, closing its main brewery and restaurant location in Tampa. Additionally, Griffin Claw Brewing Co., which operates in Michigan, filed for Chapter 11 on July 26 to resolve an ownership dispute among its partners.
World of Beer Files for Bankruptcy
In a notable development, World of Beer, a competitor to BJ’s and Yard House, filed for Chapter 11 bankruptcy on August 2. The company’s parent, WOB Holdings, along with 11 affiliates, cited rising interest rates, burdensome lease obligations, inflation, increased operating costs, and a sluggish recovery in customer dining habits as contributing factors. The debtor listed $10 million to $50 million in assets and liabilities, including over $25.6 million owed to Synovus Bank.
Established in 2007, World of Beer expanded to as many as 75 locations across 20 states by 2016, even launching a franchise in Shanghai, China. However, the company has since closed more than half of its locations, currently operating just 34. In the year leading up to its bankruptcy filing, 14 locations were closed. Some locations have rebranded rather than shut down entirely; for instance, three franchises in Virginia were rebranded as Crafthouse in May 2017 by their owner, Evan Matz.
The landscape for craft beer restaurants remains complex, with established chains thriving while smaller ones continue to face mounting challenges in a rapidly changing economic environment.
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