Popular Mexican Restaurant Chain Faces Financial Turmoil and Legal Proceedings

Judges gavel beside Chapter 11 bankruptcy documents.

Tex-Mex restaurant chain On the Border has filed for Chapter 11 bankruptcy protection while struggling with over $25 million in debt and facing a challenging economic landscape that has forced the closure of 40 locations.

Key Takeaways

On the Border Mexican Grill & Cantina filed for Chapter 11 bankruptcy protection on March 4 in Georgia Northern Bankruptcy Court with over $25 million in debt.
The chain has closed 40 underperforming locations, reducing its restaurant count from 120 to 80 units (60 company-owned and 20 franchised).
The bankruptcy follows declining traffic, worker retention issues, rising costs, and a nearly 3% decline in same-store sales.
This filing is part of a larger trend among restaurant chains struggling with post-pandemic debt, including TGI Friday’s, Denny’s, Red Lobster, and Ruby Tuesday.
Restructuring expert Jonathan Tibus has been appointed as chief restructuring officer to guide the company through this process.

Financial Crisis and Immediate Response

The Irving, Texas-based Tex-Mex restaurant chain’s bankruptcy filing on March 4 revealed staggering financial challenges, including over $25 million in debt spread across more than 10,000 creditors. The filing encompasses six affiliated entities operating in Kansas, Maryland, and New Jersey. As part of its restructuring strategy, On the Border has already shuttered 40 underperforming locations, bringing its total count down to 80 restaurants – 60 company-owned and 20 franchised – across the United States and international markets.

The company is now seeking court approval to terminate leases for non-operational locations as it attempts to stabilize its financial position. Argonne Capital Group, which owns the chain, has appointed Jonathan Tibus, a recognized restructuring expert, as chief restructuring officer to navigate this challenging period. The decision to file for bankruptcy protection follows a failed digital makeover and a concerning 2.8% decline in same-store sales, placing the company at a significant disadvantage compared to competitors who reported growth during the same timeframe.

🚨#BANKRUPTCY🚨 On the Border Mexican Grill & Cantina is the latest in a growing number of chain restaurants to file for bankruptcy. https://t.co/p8V2o7dcKi

— KWTX News 10 (@kwtx) March 7, 2025

Contributing Factors to the Bankruptcy

Multiple factors contributed to On the Border’s financial downfall. The company cited a challenging macroeconomic environment and persistent labor shortages as primary reasons for its current situation. Additionally, the chain has struggled with declining customer traffic, worker retention issues, and escalating operational costs. The recent increases in minimum wages across several states have further strained the company’s finances, making it increasingly difficult to maintain profitability across all locations.

Consumer spending patterns have shifted significantly since the COVID-19 pandemic, with inflation causing more Americans to eat at home rather than dining out. Despite efforts to adapt to these changing market conditions, On the Border has been unable to return to pre-pandemic performance levels. This struggle reflects a broader industry challenge, as restaurant patronage nationwide has not recovered to levels seen before 2020, creating a difficult operating environment for casual dining establishments with high overhead costs.

Industry-Wide Challenges and Similar Cases

On the Border’s bankruptcy filing represents one of the first significant foodservice bankruptcies of 2025, but industry analysts suggest it won’t be the last. Reports indicate that Hooters may also be preparing for bankruptcy filings later this year, signaling continued turbulence in the casual dining sector. This pattern extends beyond Tex-Mex cuisine, with notable chains like TGI Friday’s, Denny’s, Ruby Tuesday, Rubio’s Coastal Grill, and Red Lobster all having faced similar financial difficulties requiring significant restructuring or bankruptcy protection.

The industry-wide response to these challenges has been a strategic reduction in physical locations. Red Robin announced plans to close 70 locations and sell properties to repay outstanding debt. Similarly, Wendy’s recently closed 140 underperforming locations in an effort to enhance its restaurant footprint and overall system health. These moves reflect a growing recognition that maintaining profitability in the current economic climate often requires operating fewer, but more financially viable, locations rather than maintaining a larger footprint of struggling restaurants.

Path Forward Under Bankruptcy Protection

The Chapter 11 filing allows On the Border to continue operating while restructuring its debt and renegotiating obligations with creditors. This legal protection provides breathing room for the company to implement necessary operational changes without the immediate pressure of debt collection. The company will likely use this period to reassess its business model, potentially focusing on strengthening its remaining 80 locations rather than pursuing aggressive expansion strategies that characterized many restaurant chains in the pre-pandemic era.

For loyal customers, On the Border restaurants that remain open will continue serving their signature Tex-Mex offerings throughout the bankruptcy process. However, the long-term survival of the brand will depend on the effectiveness of its restructuring efforts and ability to adapt to a challenging market where consumers are increasingly selective about their dining expenditures. The outcome of this bankruptcy filing will serve as an important indicator of whether established casual dining chains can successfully navigate the profound market shifts triggered by the pandemic and subsequent economic pressures.