Nick Neonakis, Franchise Consulting Co. Joins!

**Nigel** (0:00)
It's The Hammer and Nigel Show. Hello, my name is Nigel. Jason Hammer is out. Ethan Hatcher is in sort of a disturbing trend that I want to pivot to here of big restaurant chains shutting down all over the country. What is the cause of this? I mean, we're talking Pizza Hut, Papa John's, Wendy's, just to name a few. We'll bring on a restaurant industry expert, my man Nick Neonakis. Nick, first time on the show. Thank you for coming.
This headline for Business Insider, chain restaurants closing hundreds of locations across the US. Can we pinpoint to any big picture reasons why?

**Nick Neonakis** (0:41)
Yeah, we certainly can. These are iconic names that people think, how on earth is this closing?

**Nigel** (0:47)
Yes.

**Nick Neonakis** (0:49)
You can really tie it down to a couple of main factors.
Number one, labor. Labor, labor. So hard to find good people, very expensive, and labor costs have been skyrocketing since the pandemic. So we're in this pandemic hangover, even in 2026

**Nigel** (1:06)
Wow.

**Nick Neonakis** (1:07)
Next up, food inflation. Okay. Think about it. Everything that's going into that restaurant is getting trucked in. Diesel's gone up, costs have gone up, production has gone up, the great farmers in Indiana, the hard work that they do, all their costs have gone up. That all gets passed through to the consumer. Then facilities, the rent has gone up all across the board.
So you take a look at all of this, and it's a lot more expensive to make that hamburger or that pizza. But the restaurants aren't the only people that are feeling this. The consumers are too. So people are starting to trade down from higher-end restaurants, lower-end restaurants, middle to lower-end restaurants. People are saying, you know what, maybe I don't need that pizza. Maybe I'm going to make something at home. So you've got a supply shock and a demand shock going on right now, and that's why you're seeing these companies close.

**Nigel** (2:01)
I do feel like some of the sit-down restaurants as opposed to the fast food restaurants. So like you had the choice to go to Wendy's or Chili's. I feel like Chili's is making a concerted effort to get people to come in and have the experience of sitting down at a restaurant while at the same time, because I just saw an advertisement, we're not affiliated with Chili's in any way, but they had the burger and the chips and the drink for like $10. You know what I'm saying? And so I do feel like there's this effort by some of these restaurant chains to get people to avoid fast food and come in and sit down in their restaurant and have that experience once again, which has been lost for a couple of years.

**Nick Neonakis** (2:41)
Yeah, they have to, you know, they're kind of in the fight of their lives, right? So imagine the size of a Chili or an Applebee. So TGI Fridays, you know, a couple of chains you don't really see a whole lot of anymore. These are big footprint, a lot of people working in there. They have to change the model, get people in. And so what you're seeing is the trade down from maybe a nicer restaurant where people want to go and, you know, sit down and have a meal.
Let's go to a Chili's, you know, maybe it's going to cost half of what a higher end steakhouse or something is going to cost. So this is the trading down effect that you're seeing.

**Nigel** (3:17)
Now, what happens, and I'll give you another example, because I feel like service was really bad there for a while after the pandemic, because like you said, service at restaurants and even the availability of some of the stuff on the menu, like I went to a certain wing outlet, I remember, and they were out of wings.
It's talk a little bit more about how hard it is to get good help this day and age, because I know you're a restaurant and industry expert speaking with Nick Neonakis here. You work mainly in franchises, but I think you could probably help and consult somebody who's starting a restaurant for the first time to be successful. But it is hard to start. You need good help in these places.

**Nick Neonakis** (4:03)
Yeah, we can break it down into three different parts on the timeline. So if you go back to the beginning of the pandemic in 2020, everything's closed, maybe some drive-ins. Everybody who's working is treated like a hero. Remember, you go into the restaurant, you feel like this was a member of Patton's Army liberating Europe.