"The restaurant is bad."
Translation:Das Restaurant ist schlecht.
In a different example sentence I was asked to translate something like "....is not good". I wrote "....ist schlecht" and was marked wrong. I think we are both right in the sense that the same general meaning is implied (not good = bad), but I believe Duo wants a more exact translation. The German word for "bad" is "schlecht" and the German for "not good" is " nicht gut". So, your sentence is correct, but not for the purposes of Duo's translation exercises.
Hope that helps!