Vegan Food Companies Grapple With High Costs, Slim Customer Pool

Plant-based restaurant chain Planta is the latest to succumb in a wave of restaurant defaults as specialty dining grapples with rising food costs and a smaller customer base than conventional eateries.

Vegan restaurants face hardships that often mirror those of nonvegan establishments, including rising rent and operating costs. But those challenges are compounded by a limited clientele and, in some locations, the high prices of plant-based protein alternatives like Beyond Meat and Impossible Foods.

“Certain specialty cheeses or specialty meats are generally more expensive, and it depends on the kind of restaurant, but if they’re relying on those kinds of products, then it might be difficult,” said Meredith Marin, co-founder of Vegan Hospitality, a network of consultants for food service businesses.

Conventional restaurant chains, including On the Border, Hooters, and Rubio’s, have increasingly filed for bankruptcy since the Covid-19 pandemic.

Rising food and utility costs, and shifts in dining habits have made it difficult for restaurants to remain profitable, according to Jason Kaplan, CEO of restaurant and hospitality consulting firm JK Consulting.

Businesses with a limited customer base may experience greater distress in the current economic environment, marked by high inflation, said Catherine Beideman Heitzenrater, a Duane Morris LLP partner specializing in the retail and consumer-facing sector. Nonvegans who are curious or don’t follow a strict diet might be deterred from trying more expensive food, she noted.

“When customers have uncertainty and they’re really watching every dollar, the cost of things becomes more important, which puts specialty outlets perhaps at a competitive disadvantage,” Heitzenrater said.

Planta Default Hits Industry

Joseph Barsalona, a Pashman Stein Walder Hayden partner representing Planta, said the chain’s upscale dining appeals to a narrow niche of a limited clientele. He also noted a broader decline in demand for plant-based offerings.

“It leaves you a subset of consumers still focused on eating healthy,” he said. “It’s still a very strong contingent of people, but you don’t have the same math that you could have going to these types of restaurants.”

Planta, which filed for bankruptcy in May, has restaurants in Florida, Georgia, California, New York, Illinois, Maryland, and Washington, D.C.

During the pandemic, the surge in plant-based food popularity helped drive Planta’s expansion.

“Based on that demand at that time, the valuation for Planta was very high, and they were able to take private equity financing to have an aggressive growth, because this was seen as the future,” Barsalona said. “Veganism is not going away, but it’s not going to be generally accepted amongst regular burger-eating Americans, and so some of these stores never even got off the ground.”

Planta had committed to leases and couldn’t complete construction, secure materials, and hire staff, according to court papers. While Planta had over $46 million in sales in 2024, it was still recovering from the construction schedule of 12 restaurants in three years.

Planta’s bankruptcy is a lesson in avoiding rapid expansion in a short period, Kaplan said. “They misinterpreted the demand for their offerings,” he added.

Planta is planning to reorganize. It will cease operations at some locations in California, including West Hollywood, as well as in Brooklyn, N.Y., and West Palm Beach, Fla., among others. Barsalona said Planta will pursue a sale.

Vegan restaurant defaults are less common because there are fewer vegan eateries, and many choose to close their doors rather than restructure in bankruptcy.

In addition to Planta, at least seven plant-based food businesses have sought protection in nearly five years. Primary Vegan Philly, Seabirds Kitchen, and Atlantic Natural Foods, a food supplier with brands like Loma Linda and Chik’n, filed for bankruptcy this year.

Uzzi Raanan, a Greenberg Glusker partner, said chains can use bankruptcy to ditch less successful locations and negotiate with creditors.

“It sometimes makes sense for these businesses to use the bankruptcy process to reject their failing restaurant leases and to reorganize their overall debts,” Raanan said.

Rejecting leases “might be hard” otherwise, Heitzenrater said, noting bankruptcy offers “a way to quickly dispatch unprofitable locations.”

Diana Edelman, a restaurant consultant and founder of Vegans, Baby, said many vegan restaurants she knows closed as a result of rent hikes.

Expansion, she added, has “to be sustainable and managed so they aren’t left in a position where the market and operations can be nails in the coffins for them.”

Vegan Market Hurdles

Although the pandemic sparked interest in vegan food, consumers’ various reasons for exploring those options mean they’re not necessarily long-term restaurant customers.

Clients motivated solely by health may lack consistent vegan dining habits, and if funds are limited, they might seek alternatives or chase the next “new health trend,” said Edison Mellor-Goldman, founder of vegan guide LA Herbivore.

“Those consumers are treating vegan restaurants almost like a luxury good,” he said. “They can afford to pamper their body by going to a vegan restaurant, but if money gets tight, they are going to dial it back.”

Many vegans are also accustomed to cooking at home because of dietary restrictions, limited dining options, and higher meal prices.

“Vegans can resort back to cooking and don’t depend on restaurants the same way that other people do,” Marin said.

Unlike conventional restaurants, vegan eateries can’t easily revamp menus or add meat-based dishes to attract more foot traffic without risking backlash from core customers. Sage Regenerative, a former vegan chain in Los Angeles, closed in January after it added animal products, sparking outrage in the vegan community.

“Struggling vegan restaurants that have announced that they’re expanding their venue and offering more nonvegan options usually don’t go well,” Marin said. “They lose their base of vegan customers, and they end up closing anyway.”