By The Epoch Times | Created at 2025-03-09 02:49:59 | Updated at 2025-03-09 15:14:41
12 hours ago
Many states raised their minimum hourly wages last year, putting additional pressure on the restaurant industry.
Restaurant chain On The Border is going bankrupt after factors such as inflation and labor costs reportedly weighed down on company finances.
Atlanta-based OTB Holdings LLC, owner of On The Border Mexican Grill & Cantina chain of Tex-Mex restaurants, has “voluntarily filed for relief under Chapter 11 of the Bankruptcy Code” in a Georgia court, the company said in a March 5 statement.
“The company intends to use the proceedings to drive operational improvements and pursue a sale of substantially all of its assets.”
The company clarified that On The Border restaurants will continue to operate as usual during bankruptcy proceedings.
On The Border operates 80 restaurants across the United States and internationally, according to a court document submitted by its chief restructuring officer, Jonathan Tibus. The restaurant “has been weighed down in recent years by macroeconomic factors” that have negatively affected its operations.
“Casual dining restaurants are acutely impacted by consumer sensitivities to eating out versus staying in. And because of inflationary pressures, restaurant menu prices across the industry have risen significantly faster than grocery and other consumer prices,” said the document.
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Usually, when labor inflation grows at a faster pace than inflation on commodities, prices at restaurants often outpace grocery costs, which negatively impacts customer interest in dining out, Tibus wrote.
“In addition to inflationary costs imposed on the labor force, 50% of states increased minimum hourly wages in 2024. Restaurant average hourly wages have outpaced the restaurant industry’s ability to increase prices, putting pressure on margins.”
On The Border eventually decided to file for Chapter 11 bankruptcy. It has secured $10 million in funding from a lender to support the process. It expects to enter into an asset purchase agreement with an affiliate of the lender.
“This restructuring is the best path forward for On The Border,” said company president Chris Rockwood.
“It allows us to address several financial and operational challenges and emerge stronger and refocused on our growth. The support we’ve received from our vendors and lenders will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”
Restaurants Under Pressure
Multiple restaurants have filed for bankruptcy in the past year after being weighed down by costs and profitability concerns.
Some of the top restaurant brands that filed for Chapter 11 last year include Red Lobster, Buca di Beppo, Roti, Sticky’s Finger Joint, and Tijuana Flats.
Red Lobster filed for bankruptcy in May 2024 after struggling with rising labor and lease costs. Italian dining brand Buca di Bepp made its bankruptcy filing last August, with the company president saying that the restaurant industry “has faced significant challenges.”
Jonathan Carson, co-CEO of bankruptcy services and technology company Stretto, told The Epoch Times that “most restaurants lose money, and there’s a reason for that. It’s a hard business with low margins and trends that are hard to navigate.”
“When you add higher prices and a continually and increasingly overburdened consumer balance sheet, I think it makes the industry prime for restructuring.”
Laura Adams, a money expert and award-winning author, cited the rise of home delivery services as another reason contributing to the declining appeal of restaurants.
“I think people have become used to ordering out, eating casually at home, and wearing casual clothes while watching Netflix,” she said.
Meanwhile, commercial Chapter 11 bankruptcy filings fell 42 percent in February year-over-year, according to a March 4 statement from the American Bankruptcy Institute (ABI). Total commercial filings fell by 16 percent during this period.
The decline in bankruptcy filing volume last month was “primarily due to fewer filing days and a typical trend of filings after tax return season,” said Michael Hunter, vice president of bankruptcy data provider Epiq AACER.
ABI said February 2024 Chapter 11 numbers were inflated by “the related filings of two sizeable commercial Chapter 11 proceedings.” In addition, February 2024 had one extra day due to the leap year, enabling more submissions to be made that month.
ABI Executive Director Amy Quackenboss said that “inflation, elevated interest rates, tighter lending terms and geopolitical tensions are creating more challenges for distressed consumers and businesses looking to alleviate their growing debt loads.”
Mark Gilman contributed to the report.
