Sometimes a Chapter 11 bankruptcy happens like a train wreck moving in slow motion. When it’s a restaurant chain that’s running out of cash, observant customers sometimes see the writing on the wall.
Maybe the number of people working gets a little thin, certain items are out of stock. and/or quality suffers in certain areas. The signs may be subtle, or they could be very obvious like Boston Market having its Colorado headquarters seized by the Colorado Department of Revenue (DOR) over unpaid back taxes and withheld wages.
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That’s even more impressive since the restaurant chain, which was founded in a city just outside of Boston, hid its headquarters in Colorado. Now, Boston Market has dwindled to a handful of locations and its owner has been barred from filing for Chapter 11 protection by the bankruptcy court.
In other cases, restaurant bankruptcy filings are slowly telegraphed by the company’s financial results. Red Lobster, which is not a publicly-traded company, shared that it was losing money and it let it be known that its all-you-can-eat shrimp promotion cost it $11 million.
Nobody knew when the filing would come but it was clear one would happen. When it did, the company’s process moved relatively quickly as it was purchased out of bankruptcy by its main creditor.
A similar process is underway at another restaurant chain that first closed a bunch of restaurants, and then filed for Chapter 11 bankruptcy protection.
Rubio’s Coastal Grill closed nearly 5o of its California locations.
Image source: Shutterstock
Mexican chain closes restaurants
When Rubio’s first shared that it was closing 48 California locations, it tried to make the decision seem strategic and blamed it on a new law in the state that increased the minimum wage for fast-food workers working at chains that have more than 60 locations in the state. The law, which went into effect April 1, forced the affected chains to raise the minimum wage to $20 from $16.
Rubio’s, at the time, operated 134 locations across California, Arizona, and Nevada.
The restaurant chain made the move after a “thorough review of its operations and the current business climate. While painful, the store closures are a necessary step in our strategic long-term plan to position Rubio’s for success for years to come,” a Rubio’s spokesperson told Restaurant Dive.
When the closures became public, Rubio’s spokespeople did not share that a bankruptcy filing was imminent,
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Rubio’s filed Chapter 11 bankruptcy
Rubio’s Coastal Grill, not long after it closed 48 California locations, filed for Chapter 11 bankruptcy protection in the District of Delaware Bankruptcy Court. In the filing, the company shared that it has $10 million to $50 million in assets and $50 million to $100 million in debt.
The company previously filed for Chapter 11 bankruptcy in 2020. At the time, it balmed Covid for its financial woes.
In this case, the process has not taken very long and a buyer has emerged.
“Two months after declaring bankruptcy, Rubio’s Coastal Grill has been sold to its lender, The Original Fish Taco LLC, an affiliate of TREW Capital Management restaurant investment firm, in an uncontested bid for $40 million,” Nation’s Restaurant News reported.
TREW, which is run by former Famous Dave’s CEO Jeff Crivello, took on $72 million of the chain’s debt earlier this year. The company has been using that method to build a portfolio of restaurant brands.
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Crivello’s company lends money to restaurants in financial distress which gives the company an edge in purchasing them if they default on their loans. TREW currently has a similar arrangement with BurgerFi International, Inc. which operates its namesake brand and Anthony’s Coal Fired Pizza & Wings.
The TREW bid, which needs to be apoproved by the bankruptcy court, does not include eight locations in Nevada. Rubio’s is considering a separate bid for those retaurants.
Rubio’s opened as a taco stand selling fish tacos in Mission Bay, San Diego in 1983.
“270 million fish tacos later, we’re still serving up fresh, delicious Baja-inspired food that celebrates our Mexican, coastal roots,” the company shared on its webiste.
