Dive Brief:
- Rubio’s filed for Chapter 11 bankruptcy protection on Wednesday as part of facilitating a sale of the business, the company said in a press release.
- Its 86 locations in California, Arizona and Nevada will continue normal operations, the company said.
- Rubio’s said it has been negatively impacted over the past few years by diminishing traffic, attributable to the work-from-home trend. Rising food and utility costs, combined with the increase of the minimum wage in California to $20 per hour, also have caused financial pressures.
Dive Insight:
Rubio’s, a Mexican QSR chain, is the first restaurant with a significant base of locations in the Golden State to file for bankruptcy following California’s fast food minimum wage requirement for 60 or more units. That law went into effect April 1.
Many chains in the state have been raising prices to accommodate the increased labor costs. Rubio’s closed 48 locations last week — 13 in San Diego, 24 in Los Angeles and 11 in Northern California, the company said.
“Despite the Company's best efforts to right-size the company, the continued challenging economic conditions have negatively impacted its ability to meet the demands of its debt burden,” Nicholas Rubin, chief restructuring officer at Rubio’s, said in a statement. “The Company believes the best path forward for Rubio's is through a court-supervised sale process that will position the brand for long-term success to grow and flourish."
It’s estimated to have between $10 million to $50 million in assets and $100 million to $500 million in liabilities, the court filing showed. The chain said it has a commitment from its existing lender to provide debtor-in-possession financing and has adequate liquidity for its operational needs during a sales process.
Rubio's will begin a stalking horse purchase agreement to sell its business to an entity formed and controlled by its existing lender. It also will file a motion to accept bids during the sales process, which is expected to be completed within 75 days.
Hilco Corporate Finance has been retained to conduct the sales process, the press release said. Hilco will seek higher or better offers from bidders interested in purchasing the business.
The company will file motions to continue operations during the sale, and employees wages and benefits will continue. Co-founder Ralph Rubio will continue with the company.
Rubio’s is the latest chain to file bankruptcy in the past two months. Red Lobster, Sticky’s Finger Joint and Tijuana Flats are among the chains to go bankrupt since April.
