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Tijuana-Flats-Chapter-11-Red-Lobster-Oberweis Dairy.jpg Tijuana Flats
Tijuana Flats’ Chapter 11 filing follows similar action by Oberweis Dairy and rumors of restructuring at Red Lobster.

Restaurant bankruptcies and the thousands of cuts

Tijuana Flats’ Chapter 11 follows Oberweis filing and rumors of Red Lobster reorganization

Bankruptcy filings, no matter the industry, are the result of a thousand cuts.

This month has produced filings and rumors of more to come in the pandemic-shaken restaurant industry.

Maitland, Fla.-based Tijuana Flats Restaurants filed for Chapter 11 protection in the Florida Middle District Bankruptcy Court after closing a total of 40 restaurants this year, 11 of them last week.

And, while Tijuana Flats is in the fast-casual segment, North Aurora, Ill.-based Oberweis Dairy filed April 12 for Chapter 11 bankruptcy reorganization at the 43-unit dairy and retail concept.

And Bloomberg reported April 16 that Orlando, Fla.-based Red Lobster, a stalwart in the casual-dining segment, was talking with experts about a possible bankruptcy filing. The company named Jonathan Tibus, known for his restructuring expertise, as CEO in late March.

In the Tijuana Flats case, the company said in court documents that “in 2021 and 2022, prior management sought to increase revenues and profits by expanding menu options.

“The menu changes had the opposite effect, however, as the menu additions required more equipment, staffing, and time to prepare. The latter point led to slower delivery of food to the customers, higher costs, and growing dissatisfaction among the company's customer base, with a resulting drop in sales over time.”

That led to compressed margins because of increased food and labor costs, the company said.

Also, the company said, it suffered “changes in consumer spending habits in the post-COVID inflationary environment.”

While the company tried to raise prices to meet the economic challenges, it met with limited success, “eventually requiring the closure of 29 corporate-owned restaurants” between January and April 2024.

It said competition in the market segment “is also fierce.”

The company “chose to file Chapter 11 proceedings to deal with the accounts payable and tax obligations, which have accrued over the last two years, through a reorganization plan or going-concern sale”

The fast-casual concept said Friday that it had arranged a sale by owner TJF USA LLC to Flatheads LLC.

Joe Christina, who was named CEO of Tijuana Flats in November 2022 when it had 124 units, would continue in that role, the company said. The company said it ended last week with 91 units, 65 locations throughout Florida and 26 franchised restaurants located in Alabama, Florida, North Carolina, and Tennessee.

Tijuana Flats said it was also in default on a loan from Truist, which had been reassigned. As of mid-March, Tijuana Flats said it owed $18.8 million on the facility. It had defaulted on installment payments of $250,000 on Dec. 31 and $500,000 in March.

Assets of $1 million to $10 million were listed and liabilities of $10 million to $50 million were noted.

Liabilities include foodservice suppliers, energy companies and taxing entities.

In the Red Lobster case, owner Thai Union Group in March hired Tibus, a managing director with restructuring firm Alvarez & Marsal, as its new CEO. Bloomberg said Red Lobster was in talks with the with law firm King & Spalding to divest long-term contracts and renegotiate leases.

NRN sister publication Restaurant Business reported a number of vendors were struggling to get payments from Red Lobster.

Oberweis on April 16 issued a statement that said, “We, like many companies, have been forced to make some very difficult decisions related to the structure of our company. These difficult decisions are always made with full consideration of other options and with an eye towards the best future of our company.”

The company said in documents filed with the Northern District of Illinois that it was pursuing a sale, and 127 jobs would be eliminated by June 11 at the North Aurora facility, it said in filing under the Illinois Worker Adjustment and Retraining Notification Act.

“As part of this filing process, it was a necessary legal step to issue a WARN notice to employees in the North Aurora location,” Oberweis said. “The intention is to complete the sale of the company through this court-approved process as swiftly as possible.”

Contact Ron Ruggless at [email protected]

Follow him on X/Twitter: @RonRuggless


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