The once bustling On The Border Mexican Grill, now facing bankruptcy and closures.
On The Border Mexican Grill & Cantina, a beloved Tex-Mex restaurant chain, filed for Chapter 11 bankruptcy protection amid rising labor costs and declining customer traffic. The chain is set to close over 70 locations in an effort to stabilize its finances. Houston-based Pappas Restaurants is eyeing an acquisition, offering bridge financing as On The Border grapples with over $19.6 million in outstanding debt. This situation reflects a larger trend of financial struggles in the casual dining industry, with other well-known brands facing similar challenges.
In an unsettling turn of events for fans of On The Border Mexican Grill & Cantina, the beloved restaurant chain filed for Chapter 11 bankruptcy protection on March 4. The iconic Tex-Mex dining establishment is facing tough times, pinpointing challenges such as rising labor costs, declining customer traffic, and the ever-looming shadow of inflation as key contributors to its current predicament.
The situation has pushed On The Border to enact drastic measures, with the announcement to close over 70 locations. This move will significantly shrink its operational footprint as the chain attempts to stabilize its finances and rebound from a series of financial challenges. Once upon a time in 1982, On The Border began its journey in Dallas, expanding to an impressive 160 locations by 2010 and even reaching international shores with a venue in South Korea in 2007.
In a surprising twist, Pappas Restaurants, based in Houston, is entering the fray with plans to acquire On The Border. Pappas, which operates a number of popular dining brands such as Pappadeaux Seafood Kitchen and Pappasito’s Cantina, is equipped with around 90 locations of its own. As part of this acquisition process, Pappas has offered bridge financing to help On The Border during its restructuring phase.
The bankruptcy filing has revealed that On The Border is grappling with over $19.6 million in outstanding debt. Additionally, the chain faces issues with a considerable number of creditors—around 10,000 to be precise. Currently, On The Border operates 60 restaurants in the U.S., along with 20 more locations that are overseen by franchisees in both the U.S. and South Korea.
As part of its bankruptcy strategy, On The Border is also seeking permission to reject leases for its underperforming locations, hinting at a clear-cut strategy to streamline operations. The court documents indicate that OTB Lender LLC, an affiliate of Pappas, is set to become what is known as the stalking-horse bidder in this acquisition process, positioning itself as a frontrunner among potential buyers.
The current woes of On The Border are not isolated incidents. The restaurant chain’s struggles mirror a larger trend plaguing the casual dining sector, with other popular establishments like TGI Fridays and Red Lobster following similar paths. As economic pressures mount and consumer behavior shifts, even established players are finding it challenging to navigate these rocky waters.
With the bankruptcy proceedings underway, On The Border is keen on finalizing a buyer by May. The path to recovery appears steep, given the closures of at least 77 underperforming restaurants across 24 states. In the meantime, the upcoming months will be pivotal for the restaurant chain as it seeks to regain stability and win back the hearts of its loyal customers.
As the story unfolds, restaurant enthusiasts will be watching closely to see how these developments play out and whether On The Border will be able to reclaim its position as a go-to destination for delicious Tex-Mex cuisine.
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