This “Red Flag” Is Sending a Huge Warning to Investors

Believe it or not, there are 12 restaurant chains currently in bankruptcy. The list includes restaurants such as Logan’s Roadhouse, Ryan’s, Johnny Carino’s, and Fox & Hound.

Restaurants come and go. That’s normal. But the number of large bankruptcies is not normal at all. Nation’s Restaurant News says, “The current wave of bankruptcies is definitely unusual…”

Why is this happening? It is due to a widespread consumer pullback and decreased spending on eating out. The restaurant chains suffering the most were already weak. Some are even in their third bankruptcy.

The financial struggles in the restaurant industry are a “red flag” for the rest of the U.S. economy:

The restaurant industry is not a sideshow. About 14 million people work in it, according to the National Restaurant Association. With $710 billion in annual sales, it’s an important part of consumer spending and accounts for about 4% of GDP. If the industry is having problems, it’s a red flag for the overall economy.

This is not good. Restaurant spending is a fairly good barometer for the financial health of the American consumer.

Declining restaurant spending is a clear indicator that the U.S. economy is not doing as well as advertised.