An unexpected restaurant chain now files a surprising bankruptcy after announcing the closure of 48 of its locations.
Rubio’s Coastal Grill, a California-based restaurant chain known for its fish tacos, filed for bankruptcy protection on Wednesday.
The company said on May 31 that it had closed down 48 locations in California.
In a statement, Rubio’s blamed the closures on “the rising cost of doing business in California.”
It also operates restaurants in Arizona and Nevada.
Rubio’s has over $100 million in debt, according to a bankruptcy petition filed in the state of Delaware on Wednesday.
It is not the first rodeo in the bankruptcy court for Rubio’s.
In 2020, it also filed for Chapter 11.
Although it survived, Rubio’s closed all of its Colorado, Utah, and Florida restaurants the same year.
A Rubio’s spokesperson cited the “rising cost of doing business” and the “current business climate” in California as key factors behind the closures of its Golden State restaurants.
The 48 affected locations include 24 in the Los Angeles area, 13 in San Diego, and 11 in Northern California.
Although Rubio’s did not explicitly blame the new law, many restaurant industry experts have raised concerns about the state’s new $20 minimum wage for fast food workers.
The law came into effect on April 1.
President and CEO of the California Restaurant Association Jot Condie said: “Daily headlines have chronicled job losses, reduced working hours, restaurant closures, and higher prices for California’s inflation-weary consumers as a direct result of this minimum wage hike.
Feedback from our members suggests this has become a breaking point for many small restaurant businesses.”
Rubio’s was founded in 1983 in San Diego.
It specializes in Mexican food, with an emphasis on fish tacos.
Founder Ralph Rubio was inspired to open a restaurant in his hometown after taking a spring break trip to Mexico during his college days.
He remains chairman of Rubio’s, 41 years after opening his first restaurant.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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