Unsurprisingly, I have some insight on this.
Casual dining is still plenty profitable. Done correctly, you can make plenty of money running a casual, upscale casual, or family dining establishment. Here are the problems:
1. Profits aren't as high as they used to be pre-Covid, which for brands owned by private equity firms, which at this point is almost all of them, is tantamount to failure. So they declare bankruptcy before they need to, they shut down restaurants that are or at least could be profitable, and they trim costs wherever they can, to make the investor prospectus sheet look better.
2. Most companies that hold these restaurants don't intend to keep them. They are trying to squeeze as much money out of them as they can, and then sell the brands. In order to make these decimated brands attractive, they focus more on bumping the bottom line than they do growing or sustaining the business itself. This is what ultimately killed Red Lobster.
3. The restaurant industry right now is enamored by a business model that focuses entirely on labor efficiency above all else. This isn't exactly new, but the level it's being taken to is making running restaurants near impossible for many people. It used to be, you'd make your profit by cutting waste, by earning new customers, and by keeping labor down to a reasonable level. Now, you just slash labor. Period. And you expect the small number of people who are left to find some way to still sell the food.
4. The menu is unwieldly. Related to #3, you can't use a skeleton crew to sell a ten-page menu. Very few companies have come to grips with the fact that, if you are going to slash labor to a minimum, you need a tiny, streamlined menu that just a small number of people can handle. Waffle House has figured it out. Go to a Waffle House sometime, and ask yourself why you can't even get French Fries anymore. The reason is, because they figured out how to design a menu that even during a busy period, only three employees could handle.
Long story short, the casual dining concept is (or could be) alive and well, but the people who own many casual dining concepts haven't yet figured out what they need to accept to make it happen.