Eating healthy is important, but when we want to treat ourselves or crave some delicious comfort food, we often think of Italian food.
Yes, hummus is great, but for a real treat, I want pasta, pizza, and some mouth-watering ice cream.
Unfortunately, even Italian restaurants have not been immune to the effects of the country’s economic challenges over the past few years. Rising costs are a major challenge across the industry.
According to the National Restaurant Association, more than 9 in 10 operators cite food, labor, insurance, energy and swipe card fees as significant challenges.
Additionally, 42% of operators said their restaurants will not be profitable by 2025.
Several Italian or Italian-American chains have filed for Chapter 11 bankruptcy protection in the past few years:
Fazoli’s is closing two more locations in Michigan. Photo credit: jetcityimage on Getty Images ·Photo by jetcityimage on Getty Images
Recent trends in healthy eating have led people to avoid eating delicious but high-carbohydrate foods. But that’s not the only factor that has Italian restaurants in trouble.
Several industry reports reveal three key reasons why Italian restaurants are at risk in 2026.
Consumers trade in old items for new ones: Upper-income diners may still eat at upscale Italian restaurants; however, middle-income families are forced to switch to fast food and eating at home. Data from the U.S. Department of Agriculture shows that in January 2026, the CPI for food outside the home (purchased at restaurants and other food services) was 4% higher than in January 2025, while the CPI for food at home (purchased at a grocery store or supermarket) was 2.1% higher than in January 2025.
Raw material prices fluctuate greatly: “Fortune Business Insights” said that Italian cuisine relies heavily on wheat (pasta), cheese and specialty oils, and these categories have the most volatile raw material prices, “ultimately affecting profitability and manufacturing costs.”
Shifts in consumer preferencesTexas Roadhouse, for example, officially overtook Olive Garden as the top casual-dining chain by sales in late 2024, signaling a shift in consumer preferences from pasta-heavy menus to steakhouses, said TheStreet’s Kirk O’Neil, who specializes in bankruptcy and restructuring news.
The owner of a popular Italian restaurant chain recently filed for Chapter 11 bankruptcy and the chain is still struggling. Now it’s closing more locations.
Italian fast-casual restaurant chain Fazoli’s is closing two locations in Michigan, leaving just a few open in the state, Grand Rapids WOOD-TV reported.
On Feb. 25, a closure sign was posted outside the Muskegon store at 1780 E. Sherman Blvd. Close to US-31 and 2521 Alpine Ave. NW, off 3 Mile Road.
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The sign read: “This store is now closed. Thank you for supporting the Fazoli store. We appreciate the opportunity to serve you.”
These notifications further direct customers to remaining Fazoli stores in Battle Creek, Lansing and Jackson. Fazoli’s still owns and operates a location in Monroe and a location in Mishawaka near the Michigan-Indiana border, Click on Detroit reports.
Fazoli’s has been slowly closing stores in West Michigan over the past few months. The company closed a restaurant at 570 Baldwin Street in Jenison in December and another at 4615 W. Main Street in Kalamazoo in September, MLive reported.
The closure comes as its parent company, California-based FAT Brands Inc., continues to struggle financially.
According to the official press release of FAT Brands, in January 2026, FAT Brands filed for Chapter 11 of voluntary bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of Texas.
“Our dynamic portfolio of brands has demonstrated tremendous resilience over the past several years in a challenging restaurant operating environment. We are well positioned for long-term profitability and growth. The Chapter 11 process will provide us with the opportunity to strengthen our capital structure to support our ideas and ensure they remain at the forefront of the industry,” said Andy Wiederhorn, CEO of FAT Brands.
According to TheStreet’s Daniel Kline, FAT Brands plans to use the filings to de-leverage its balance sheet, maximize value for its stakeholders and support the continued growth of its brands.
“FAT Brands’ portfolio of 18 restaurant concepts spans more than 2,200 locations worldwide. Iconic brands such as Fatburger, Johnny Rockets and Round Table Pizza are expected to operate as usual during the Chapter 11 process and will continue to deliver their signature dining experiences,” Kline wrote.
The company said in its bankruptcy filing Assets and liabilities both range from $1 billion to $10 billiona common wide bracket in Chapter 11 disclosures.
FAT Brands is overwhelmed by debt related to securitized borrowings; its total debt is estimated to be approx. US$1.5 billion to US$1.58 billion Due to leveraged buyouts and financing strategies.
The restaurant operator had closed 32 locations before filing for bankruptcy, TheStreet’s Kirk O’Neil reported.
Smoked Bones: Boca Raton, FL; Orlando, FL; Pittsburgh, PA; Avon, IN; Chattanooga, TN; Louisville, KY; Cheektowaga, NY; Charleston, SC; Florence, KY; Rockford, IL; Plantation, FL; New York, VA Port News; Buford, GA; Columbus, OH; Grand Rapids, MI; Fort Lauderdale, FL; Utica, MI; North Wales, PA; Stoughton, MA; Casselberry, FL; Maumee, OH; Woodbridge, VA; Wilkes-Barre, PA
Yala Mediterranean: Burbank, CA; Walnut Creek, CA; Culver City, CA; Pleasant Hill, CA; Seal Beach, CA; Dublin, CA; Fremont, CA
Johnny Rockets: Orange, California; Santa Monica, California Source: TheStreet
Fazoli’s was founded in Lexington, Kentucky in 1988 to create fresh, high-quality Italian cuisine with the speed and convenience of a fast food restaurant.
Its core philosophy is “fast, fresh, Italian”. The restaurant is famous for its signature all-you-can-eat garlic breadsticks.
“At Fazoli’s, we promise more than just a meal; we offer an experience that makes every guest an integral part of our family. Here, breaking the breadsticks is more than a tradition; it invites you to savor every delicious moment. Join us at Fazoli’s, where every visit is an unforgettable chapter in our shared Italian food story,” reads Fazoli’s “Our Story” page.
Fazoli’s has grown from a single restaurant in Kentucky to a national brand with more than 208 locations in 28 states, making it one of the largest Italian quick-service restaurants in the United States.
In addition to breadsticks, Fazoli’s menu includes freshly prepared pasta entrees, sandwiches, salads, pizzas and desserts.
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This article was originally published by TheStreet on February 27, 2026, and first appeared in the Restaurant section. Click here to add TheStreet as your preferred source.
