Dive Brief:
- Roti, a fast casual brand operating in Illinois, Minnesota and the Washington, D.C., area, has filed for Chapter 11 bankruptcy protections, according to court documents filed last week.
- The brand, which has 19 stores according to a court filing, saw its unit count drop from a pre-pandemic high of 42 restaurants to 26 in 2023, according to a declaration by the brand’s CEO, Justin Seamonds.
- 2024 has seen a long list of restaurant brands and operators seek bankruptcy protections, ranging from industry giants like Red Lobster to smaller, niche chains like Sticky’s Finger Joint.
Dive Insight:
Roti survived the COVID-19 pandemic in part by negotiating rent deferrals with its landlords. Many of the brand’s rent deferral agreements have expired “leading to a significant increase in operational expenses which have been difficult to meet,” Seamonds said in the filing.
Under existing leases the company faces about $350,000 in rental obligations each month, or $4.2 million a year, which the declaration said was a significant strain on its liquidity.
Seamonds said an unspecified national restaurant company was in negotiations with Roti to acquire eight of its units over the last several months and said it was possible the company would serve as a stalking horse bidder for those stores.
Real estate costs have helped drive other restaurants, like Red Lobster, over the edge. As rent deferrals end and commercial landlords face pressure from their creditors, it may become more difficult for restaurant brands to negotiate over real estate costs.
