On the Border Mexican Grill & Cantina, a longtime favorite in Tex-Mex dining, has filed for Chapter 11 bankruptcy protection. Known for its sizzling fajitas and handcrafted margaritas, the chain has long been a go-to spot for casual dining enthusiasts. However, shifting consumer habits and economic pressures have placed the company in a difficult position, prompting major operational changes.
On the Border Seeks Chapter 11 Protection Amid Financial Struggles
On March 4th, On the Border Mexican Grill & Cantina, owned by Argonne Capital Group, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of Georgia.
The Tex-Mex chain had already shuttered 40 underperforming locations the previous month but continues to operate 60 restaurants across 18 states, which will remain open throughout the bankruptcy process. Additionally, 20 franchised locations in the U.S. and South Korea are unaffected. In 2023, Technomic data reported a total of 120 On the Border restaurants across all ownership models.
Jonathan Tibus, On the Border Holdings’ Chief Restructuring Officer, cited economic challenges, labor shortages, underperforming locations, and creditor enforcement actions as key factors behind the bankruptcy filing.
At the time of the filing, On the Border reported estimated liabilities between $10 million and $50 million. Bankruptcy records indicate that the casual dining chain carries more than $25 million in debt and has over 10,000 creditors.
On the Border has faced longstanding financial struggles, despite efforts to revitalize the brand. In 2020, the company brought in a new CEO and launched a digital transformation to modernize operations and boost sales. However, the casual-dining chain failed to achieve the expected turnaround. According to Technomic financial data, same-store sales declined nearly 3% in 2023, while its unit count dropped by 3.2%.
The Industry-Wide Restaurant Crisis
Like many of its competitors, On the Border has experienced declining foot traffic, rising operational costs, and ongoing labor retention challenges, particularly as minimum wage increases in several states have added further financial strain.
The chain is just one of many restaurant brands forced to seek bankruptcy protection after struggling with mounting debt accumulated during the COVID-19 pandemic. And according to bankruptcy attorney Daniel Gielchinsky, it won’t be the last, as more restaurant chains are likely to file for protection in the coming years.
In recent years, TGI Friday’s, Denny’s, Ruby Tuesday, Rubio’s Coastal Grill, and Red Lobster have all sought bankruptcy protection, with Hooters of America potentially following suit. Many in the industry had anticipated a return to pre-pandemic dining habits, but the quick-service sector has instead faced consecutive quarters of declining traffic, as inflation-conscious consumers continue opting to dine at home more frequently.
“Customers never came back in full force” due to shifting habits and financial constraints, which prevented top-line revenue from recovering and left debt-heavy restaurants struggling to meet loan obligations, Gielchinsky explained to Fox Business.
While some restaurant chains have avoided bankruptcy, they have been forced to downsize significantly to stabilize operations, improve efficiency, and attract customers back to their locations.
History of On the Border
On the Border first opened its doors in Dallas in 1982, quickly establishing itself as a go-to destination for Tex-Mex cuisine. In 1994, Brinker International, the parent company of Chili’s, acquired the brand and began expanding its footprint through franchising. By 2001, the chain had surpassed 100 locations across the U.S. and later ventured into South Korea in 2007 as part of its international growth strategy.
Ownership of On the Border changed hands multiple times over the years. In 2010, Brinker sold the brand to Golden Gate Capital, which later transferred ownership to Argonne Capital Group in 2014.
Sources: Fox Business, Nation’s Restaurant News