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Don Pablos

Don Pablo’s files for bankruptcy

Filing marks the 10th restaurant company bankruptcy in 11 months

Rita Restaurant Corp., the operator of the 12-unit Mexican chain Don Pablo’s, filed for bankruptcy protection on Tuesday, citing overall weakness in the casual-dining sector and the encroachment of fast-casual Mexican chains.

The filing is the second restaurant bankruptcy filed this week and the third in the past seven days. It’s also the 10th since November 2015— and the third bankruptcy of a company owned or managed by the San Antonio-based Food Management Partners, following previous filings by Buffets LLC and Zio’s Italian Kitchen.

In a statement, the company said it filed for Chapter 11 bankruptcy to “restructure its debts and liabilities and recapitalize the business” while continuing to operate “many of the remaining restaurants.” The statement said the company “currently operates 12 restaurants in nine states,” though a filing said the company operated 16 restaurants in 10 states.

“The restaurant industry is under severe pressure from outside forces,” Peter Donbavand, vice president of business development for Rita Restaurants said in the statement. “Increasing minimum wage requirements, more expensive employee benefit plans and rent hikes in many locations all add to mounting expenses. Add to that the recent slowdown in industry-wide sales and at our restaurants, and we cannot continue to operate under current obligations.”

The company, which also owns the one-unit Hops Grill and Brewery, estimated assets and liabilities of $1 million to $10 million.

The filing is the second bankruptcy for Don Pablo’s since 2008. The chain was founded in 1985 in Lubbock, Tex. At one point, the company said in a filing, it had 120 locations around the country and was one of the largest full-service Mexican chains in the country.

Filings in the bankruptcy blamed the problem on the struggles of the casual-dining business. “The casual dining industry is highly competitive and faces increased competition from fast-casual dining options,” the company said in the filing. “Despite the relatively steady economy in most of the United States, the casual dining environment remains depressed.”

The company noted that the presence of Chipotle Mexican Grill and several other fast-casual competitors, including Moe’s Southwest Grill, Panchero’s Mexican Grill, Baja Fresh, Qdoba Mexican Eats and Tijuana Flats, put pressure on the business.

The company also attributed “the competitive intrusion of Mexican product offerings” by varied menu bar-and-grill chains like Chili’s Grill & Bar, Applebee’s Grill & Bar and TGI Fridays.

The company filed for bankruptcy in February 2008 and then was acquired by DDJ Capital management LLC. The chain was sold to Food Management Partners, a burgeoning brand operator, in 2014. At the time Don Pablo’s had 34 locations.

The current bankruptcy comes amid a nearly unprecedented wave of bankruptcies in the restaurant business. Garden Fresh Restaurants LLC filed for federal debt protection on Monday. Cosi Inc. filed for debt protection last week. That followed bankruptcies at several other chains, starting with Quaker Steak & Lube last November and including Logan’s Roadhouse and the owner of Fox & Hound and Champps.

Overall, the operators of 16 multi-unit restaurant chains have filed for bankruptcy in the past 11 months.

Update: Oct. 4, 2016 This post has been updated to include comment from the company and correction on Don Pablos unit count. The chain has 12 units.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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