Rubio’s Coastal Grill this week made its second bankruptcy filing in four years, less than a week after closing 48 California restaurants in a climate of declining sales and rising business costs.
The Carlsbad, California-based company filed for Chapter 11 protection in a Delaware bankruptcy court as it seeks to restructure its finances and find a buyer for its remaining 86 restaurants in three states.
The 40-year-old company, which once had around 200 fast-casual restaurants serving Mexican-style food, previously emerged from bankruptcy in 2020 as it trimmed its location count among other cost-cutting measures.
“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, Rubio’s chief restructuring officer, said in a statement this week. “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.”
The company’s June 5 bankruptcy filing said Rubio’s has assets of $10 million to $15 million, with liabilities between $100 million and $500 million. The company has received approval for debtor financing to keep restaurants operating during the bankruptcy process and potential sale.
A California law that took effect April 1 requires fast-food and fast-casual chains with 60 or more U.S. locations to pay their workers at least $20 per hour, higher than the state’s general hourly minimum of $16.
Rubio’s did not cite the new law specifically but said ongoing rising costs of doing business in California spurred its move last week to close 48 locations throughout the state. The company said its remaining 86 restaurants continue to operate as usual in California, Arizona and Nevada.
The Rubio’s website indicates the chain has closed a total of 50 California restaurants so far in 2024. A Rubio’s spokesman said the company, majority-owned by private equity firm Mill Road Capital, is not granting interviews or commenting beyond its recent public statements.
U.S. restaurants across several categories have recently reported declining sales and profits amid lingering high costs, as consumers cut back on non-essential spending. Chains that already offer relatively low-priced fare, including McDonald’s and Burger King, have been increasing their offerings of budget-priced items to lure customers.
This week’s Rubio’s filing comes after last month’s bankruptcy filing by Orlando, Florida-based seafood chain Red Lobster. The firm closed 93 full-service restaurants nationwide and is now asking the Florida court for authorization to exit as many as 135 more leases at underperforming locations.