Less than a week after abruptly closing nearly 50 California locations, Rubio’s has filed for Chapter 11 bankruptcy protection. The company said it is pursuing this action to facilitate the sale of the 41-year-old business, adding that its remaining 86 locations in California, Arizona, and Nevada will continue to operate as is.
The company has cited challenging economic conditions, diminishing in-store traffic driven by sustained work-from-home trends, rising food and utility costs, and “significant increases to the minimum wage in California.” On April 1, California’s minimum wage increased by 25% to $20 an hour.
"Rubio's Coastal Grill is one of the legendary fast casual chains with a strong and loyal customer following in its communities," Nicholas Rubin, chief restructuring officer, said in a statement. "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. 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."
Rubin adds that the company has a commitment from its existing lender to provide debtor-in-possession financing and has “more than adequate liquidity to meet all its operating needs during the sale process.” Meanwhile, the company plans to enter into a stalking horse purchase agreement to sell its assets to an interested buyer chosen by the lender. Rubio’s will also file to allow other companies an opportunity to submit bids to purchase assets, with an anticipated sale transaction to be completed within the next 75 days.
Rubio’s is seeking court approval to continue operations during the sale process to ensure continued payment of employee wages and benefits. All gift cards and rewards will be honored at the remaining 86 locations.
Notably, the fast casual concept also filed for Chapter 11 bankruptcy protection in late 2020 after closing over a dozen locations during the pandemic. According to Technomic Ignite data, Rubio’s closed seven locations in 2023 versus 2022. In the past three years, its footprint has shrunk by 7%, while in the past 10 years, it’s closed 48 locations – a nearly 25% retrenchment. Sales also stagnated last year, while its categorical competitors increased sales by over 11% on average.
Rubio’s was founded in 1983 in San Diego by Ralph Rubio, who will remain with the company during the bankruptcy process. Rubio's was acquired by private-equity firm Mill Road Capital in 2010 for $91 million. In 2015, the concept chanted its name from Rubio’s Fresh Mexican Grill to Rubio’s Coastal Grill as part of a renewed focus on seafood. At the time, Rubio said the move would differentiate Rubio’s from the crowded fast casual Mexican segment.
Rubio’s is the latest in what seems like an avalanche of restaurant concepts seeking bankruptcy protection as recovery from the pandemic continues, costs and interest rates remain high, and consumers start to show more discernment.
Red Lobster filed for bankruptcy last month after also retrenching a significant portion of its system. Also, bankruptcy filings have come so far this year from Party Fowl, Boxer Ramen, Tijuana Flats, Sticky Fingers, Oberweis Dairy, and Foxtrot/Dom’s Kitchen.
In 2023, Corner Bakery Café filed, as did major franchisees from Burger King, Wendy’s, CKE, Popeyes, Denny’s, and McDonald’s. Bankruptcy filings reached the highest annual total on record for private equity and venture capital-backed companies in the U.S. in 2023, according to S&P Global Market Intelligence data. Overall, U.S. corporate bankruptcy filings reached a 13-year peak last year.
Contact Alicia Kelso at [email protected]
