As Red Lobster and TGI Fridays Close, Fast-Food Chains and Other Businesses Move Into Prime Real Estate

With Red Lobster and TGI Fridays shuttering locations across the U.S., new businesses are seizing the opportunity to take over these prime properties. In Woodbridge, Virginia, a former TGI Fridays will soon house a LongHorn Steakhouse, while a closed Red Lobster in Naples, Florida, is set to become a Chick-fil-A. In Watertown, New York, a former Red Lobster is being repurposed into a Northern Credit Union bank.

This trend comes amid financial struggles for well-known family dining chains. Red Lobster and TGI Fridays both filed for bankruptcy this year, closing over 175 locations combined due to challenges under private equity ownership and declining customer traffic. Denny’s is also feeling the strain, with plans to close 150 restaurants. These closures reflect shifting dining habits, with many consumers opting for more affordable fast-food or fast-casual options like Chick-fil-A and Chipotle, which have become more profitable than traditional sit-down dining.

“This isn’t an ‘oh my God’ moment; it’s an opportunity,” explained Jeff Kreshek, a senior vice president at Federal Realty, which owns several vacant properties previously occupied by these restaurant chains. For landlords, the closures create new chances to attract tenants willing to pay higher rents and draw more foot traffic. Many fast-food and fast-casual chains—such as In-N-Out, Whataburger, and Raising Cane’s—are taking over these locations, driven by the profitability of drive-thru models. Drive-thrus require less space, staff, and maintenance, making them a smart investment for restaurant chains.

Beyond fast-food giants, smaller chains like First Watch, a breakfast brand, and Brazilian steakhouse Fogo De Chão are also expanding into former casual dining spaces. First Watch has already repurposed several locations and opened its largest restaurant to date in a former Red Lobster location in Maryland, with plans to open over 25 more.

Prime real estate for vacant restaurants is in high demand due to a lack of new construction and increased costs for labor and materials. Freestanding buildings on busy streets or in shopping centers are particularly appealing, offering parking and visibility that attract potential tenants. As supply remains tight, especially with the U.S. retail vacancy rate at a low of 4.1%, businesses are taking advantage of these rare openings to grow their footprint across the country.