On The Border Mexican Grill & Cantina Faces Restructuring Amid Chapter 11 Filing, Closing Dozens of Locations
On The Border Mexican Grill & Cantina, a familiar name in the casual dining scene, has recently filed for Chapter 11 bankruptcy protection, signaling a period of significant restructuring for the restaurant chain. Court documents released in conjunction with the filing reveal that the company intends to close more than 70 locations across the United States, seeking court approval to reject existing lease agreements. This strategic move aims to alleviate financial burdens and pave the way for a more sustainable future.
The Chapter 11 filing, initiated earlier this month, underscores the challenges faced by On The Border in the current economic climate. In the official filing, the company cited a confluence of factors contributing to its financial difficulties, including persistent economic headwinds, labor shortages that have impacted operations, underperforming restaurant locations that have failed to meet expectations, and escalating creditor enforcement actions that have added to the company’s financial strain.
Jonathan Tibus, Chief Restructuring Officer for OTB Holdings, the parent company of On The Border, emphasized the profound impact of macroeconomic forces on the company’s financial health. "On The Border has been weighed down in recent years by macroeconomic factors that have negatively impacted the Company," Tibus stated in court records obtained by USA TODAY. "Casual dining restaurants are acutely impacted by consumer sensitivities to eating out versus staying in." This statement highlights the vulnerability of casual dining establishments to fluctuations in consumer spending habits, particularly in times of economic uncertainty.
At the time of the Chapter 11 filing, On The Border operated approximately 60 company-owned restaurants throughout the United States. However, the court records indicate that the company’s footprint has been even larger, with over 70 locations now slated for closure. The discrepancy between the number of operating restaurants at the time of filing and the number of planned closures suggests that some locations may have already been shuttered prior to the bankruptcy proceedings.
For instance, a location in Phoenix, Arizona, was reportedly closed in late February, according to local news station ABC15, predating the official Chapter 11 filing. This closure serves as an example of the proactive measures taken by the company to address underperforming locations and streamline operations. The list of locations whose leases the company intends to offload has been included in court filings, offering insight into the specific restaurants affected by the restructuring plan.
Tibus provided a historical overview of On The Border in the court documents, tracing the company’s evolution from its humble beginnings to a nationally recognized brand. "Originally known as On The Border South Texas Café, the Company, in 1982, opened a single cantina with the goal of sharing bold, border-style food with its customers," he recounted. This initial vision of offering authentic border-style cuisine laid the foundation for the restaurant’s subsequent growth and expansion.
In 1994, just 12 years after its inception, Brinker International, a prominent player in the restaurant industry, acquired On The Border. This acquisition marked a significant milestone for the company, providing access to greater resources and expertise. Under Brinker International’s ownership, On The Border expanded its reach through franchising, opening its first franchised location. By 2001, the restaurant chain had surpassed 100 locations across the United States, solidifying its position as a major player in the casual dining sector.
The expansion continued into the international market, with On The Border opening locations in South Korea in 2007, further diversifying its portfolio and extending its brand presence beyond the United States. However, the company’s ownership structure underwent further changes in subsequent years. In 2010, Brinker International sold On The Border, along with 160 restaurants, to Golden Gate Capital. This marked another transition in the company’s history, as it came under the ownership of a private equity firm.
In 2014, Golden Gate Capital subsequently sold On The Border to Argonne Capital Group, another private equity firm. This series of ownership changes reflects the dynamic nature of the restaurant industry and the ongoing pursuit of growth and profitability. At the time of the Chapter 11 filing, court records indicate that On The Border employed approximately 2,800 people. The planned closure of numerous locations will undoubtedly have a significant impact on the company’s workforce, raising concerns about job losses and the economic consequences for affected employees and communities.
The future of On The Border remains uncertain as it navigates the Chapter 11 bankruptcy process. The company aims to emerge from bankruptcy as a leaner, more efficient organization, focused on its most profitable locations and strategic growth opportunities. However, the path to recovery will likely be challenging, requiring careful management of resources, effective communication with stakeholders, and a renewed focus on delivering a compelling dining experience that resonates with consumers. The outcome of the bankruptcy proceedings will ultimately determine the long-term viability of On The Border and its ability to adapt to the evolving landscape of the casual dining industry.
