On the Border Files for Bankruptcy Amid Industry Challenges
On the Border Mexican Grill at dusk. (Jeffrey Greenberg/Universal Images Group via Getty Images)
On the Border Mexican Grill & Cantina has recently filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Georgia. The Tex-Mex restaurant chain, which is owned by Argonne Capital Group, reported the closure of 40 establishments amidst ongoing challenges in the current economic landscape.
Details of the Bankruptcy Filing
According to its bankruptcy documentation, On the Border operates a total of 80 restaurants both within the United States and internationally. The chain has faced significant obstacles including a decline in customer traffic, difficulties in employee retention, and escalating operational costs due to increased minimum wage laws.
The bankruptcy filing reflects a broader trend in the restaurant industry, where many operators have accumulated substantial debt during the COVID-19 pandemic. Daniel Gielchinsky, a bankruptcy attorney, anticipates that more restaurants will likely seek bankruptcy protection in the coming years as they navigate these challenges.
Industry Context
On the Border is not alone in its struggles. Other major restaurant chains, including TGI Friday’s, Denny’s, Ruby Tuesday, and Red Lobster, have also filed for bankruptcy protection as they grapple with the impacts of the pandemic and changing consumer behaviors. Reports indicate that the quick-service sector has started to see a downturn in customer visits, as individuals increasingly choose to dine at home.
Gielchinsky noted that “customers never came back in full force” post-pandemic, which has resulted in stagnant revenue streams. Consequently, many debt-burdened establishments are finding it challenging to meet their financial obligations.
Attempts to Stabilize Operations
Amid its bankruptcy proceedings, On the Border plans to divest three of its properties in the first quarter of fiscal 2025, aiming to generate approximately $5.8 million to assist in repaying its debts. CEO G.J. Hart has acknowledged that while financial results for fiscal 2024 fell short of expectations, the company has made “substantial improvements to the guest experience” to regain customer traffic.
Additionally, other brands are taking similar measures. Red Robin has publicly considered closing 70 of its locations once existing leases expire to better adapt to the current market conditions.
Customers at a restaurant at the Ferry Building in San Francisco on May 31, 2024. (David Paul Morris/Bloomberg via Getty Images)
Conclusion
The future for On the Border and similar establishments remains uncertain as they attempt to navigate a challenging economic landscape. Continued consumer hesitancy and elevated operational costs will challenge many in the restaurant sector, prompting further adjustments and potentially additional bankruptcy filings.
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