Major Mexican Grill Chain Seeks Bankruptcy Protection Amidst Financial Struggles

On the Border Mexican Grill has filed for Chapter 11 bankruptcy protection, joining a growing list of restaurant chains struggling to survive in a post-pandemic economy.

Key Takeaways

On the Border, a Tex-Mex chain based in Irving, Texas, filed for Chapter 11 bankruptcy with over $25 million in debt.
The company has closed 40 underperforming locations, leaving 80 restaurants still operating (60 company-owned and 20 franchised).
Rising operational costs, labor shortages, and declining consumer traffic contributed to the financial crisis.
A restructuring expert, Jonathan Tibus, has been appointed as chief restructuring officer to guide the reorganization.
This bankruptcy is part of a broader trend affecting restaurant chains still dealing with pandemic-related debt and changing consumer habits.

Financial Struggles Lead to Bankruptcy Filing

On the Border Mexican Grill & Cantina, a well-known Tex-Mex restaurant chain, filed for Chapter 11 bankruptcy protection in the Georgia Northern Bankruptcy Court. The company, owned by Argonne Capital Group, has accumulated more than $25 million in debt and lists over 10,000 creditors in its filing. The bankruptcy includes six affiliated entities with operations in Kansas, Maryland, and New Jersey, highlighting the widespread nature of the company’s financial troubles. This filing marks one of the first significant foodservice bankruptcies of 2025.

The restaurant chain has significantly reduced its footprint, dropping from 120 locations to just 80 units currently operating, with 60 company-owned and 20 franchised restaurants. As part of its restructuring plan, On the Border is seeking court approval to terminate leases for locations that are no longer operational, a move aimed at cutting costs and streamlining operations. The company has brought in restructuring specialist Jonathan Tibus as chief restructuring officer to navigate the bankruptcy process.

🚨#BANKRUPTCY🚨 On the Border Mexican Grill & Cantina is the latest in a growing number of chain restaurants to file for bankruptcy. https://t.co/p8V2o7dcKi

— KWTX News 10 (@kwtx) March 7, 2025

Economic Challenges and Industry Trends

The bankruptcy filing comes after a challenging period for On the Border, which saw same-store sales decline by nearly 3%. This downward trend occurred while competitors in the same category reported significant sales and unit growth, putting the chain at a competitive disadvantage. A failed digital makeover further complicated the company’s efforts to modernize and adapt to changing consumer preferences, leaving it struggling to maintain relevance in an increasingly digital marketplace.

Multiple factors contributed to On the Border’s financial distress, including a challenging macroeconomic environment, persistent labor shortages, and rising operational costs. Increasing minimum wages across various states further squeezed profit margins, making it difficult for the company to maintain profitability. The closures of 40 underperforming stores were a direct response to these challenges, as the company attempted to eliminate locations that were draining resources without generating adequate returns.

Part of a Larger Restaurant Industry Crisis

On the Border’s bankruptcy is not an isolated incident but rather part of a concerning trend in the restaurant industry. Other well-known chains facing similar difficulties include TGI Friday’s, Denny’s, Ruby Tuesday, Rubio’s Coastal Grill, and Red Lobster, all of which have either filed for bankruptcy or are undergoing significant restructuring. There are also rumors that Hooters may be preparing for bankruptcy filings later this year, further indicating the widespread nature of the industry’s struggles.

A key factor driving these financial challenges is the persistent impact of the COVID-19 pandemic on consumer behavior. Restaurant spending has not returned to pre-pandemic levels, with inflation causing more Americans to opt for home-cooked meals instead of dining out. This shift in consumer habits has created a difficult environment for restaurant chains, particularly those in the casual dining sector that were already operating on thin margins before the pandemic hit.

Strategic Responses Across the Industry

Many restaurant chains are responding to these challenges by reducing their physical footprint to improve financial stability. Red Robin, for example, has announced plans to close 70 locations and sell properties to repay debt. Similarly, Wendy’s recently closed 140 underperforming locations in an effort to enhance its restaurant footprint and overall system health. These strategic reductions represent a broader industry adjustment to the new economic reality facing food service businesses.

For On the Border, the Chapter 11 filing provides an opportunity to reorganize and potentially emerge as a more streamlined and financially viable operation. By shedding unprofitable locations and addressing its debt burden through the bankruptcy process, the company hopes to position itself for future success. However, the path forward remains challenging, as the restaurant industry continues to navigate the lasting effects of the pandemic, ongoing inflation, and evolving consumer preferences that have fundamentally changed the dining landscape.