Mexican Restaurant Chain Faces Financial Turmoil: What Led to This Move?

Popular Tex-Mex chain On the Border has filed for Chapter 11 bankruptcy protection, closing 40 locations as it struggles with over $25 million in debt and joins a growing list of restaurant casualties in the post-pandemic economy.

Key Takeaways

On the Border Mexican Grill & Cantina filed for Chapter 11 bankruptcy in Georgia Northern Bankruptcy Court with more than $25 million in debt and over 10,000 creditors.
The Tex-Mex chain has closed 40 of its 120 locations, now operating just 80 restaurants (60 company-owned and 20 franchised) across the U.S. and internationally.
Declining customer traffic, labor shortages, increased operational costs, and rising minimum wages contributed to the company’s financial struggles.
This bankruptcy joins other major restaurant chains like TGI Friday’s, Denny’s, Ruby Tuesday, and Red Lobster that have faced similar financial challenges since the pandemic.
Industry experts believe inflation has caused more consumers to eat at home, preventing restaurant spending from returning to pre-pandemic levels.

Financial Crisis and Immediate Actions

On the Border, the Irving, Texas-based Tex-Mex restaurant chain owned by Argonne Capital Group, submitted its bankruptcy filing in the Georgia Northern Bankruptcy Court. The company reported being over $25 million in debt with more than 10,000 creditors. The filing includes six affiliated entities across Kansas, Maryland, and New Jersey. As part of its restructuring efforts, On the Border has already closed 40 underperforming locations, reducing its restaurant count from 120 to just 80 units – 60 company-owned and 20 franchised locations.

The company is seeking court approval to terminate leases for the non-operational locations. Jonathan Tibus, a restructuring expert, has been appointed as chief restructuring officer to guide the company through this challenging period. The bankruptcy marks one of the first significant foodservice bankruptcies of 2025, potentially signaling continued struggles in the restaurant industry. Industry insiders have also noted rumors that Hooters may be preparing for bankruptcy filings later this year, indicating broader sector distress.

🚨#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

Underlying Causes of On the Border’s Decline

Multiple factors contributed to On the Border’s financial downfall. The company faced a challenging macroeconomic environment with rising operational costs and persistent labor shortages. A failed digital makeover initiative further strained resources while the chain reported a nearly 3% decline in same-store sales. This performance stands in stark contrast to competitors in the same category who reported significant sales and unit growth during the same period, suggesting On the Border’s issues extend beyond industry-wide challenges.

The Tex-Mex chain’s struggles mirror broader industry trends where worker retention has become increasingly difficult amid rising minimum wages. The combination of declining customer traffic and increased operational expenses created an unsustainable financial situation for many of its locations. While the popular Tex-Mex concept once thrived, changing consumer preferences and economic pressures have eroded its market position considerably over recent years.

Part of a Larger Restaurant Industry Crisis

On the Border’s bankruptcy is the latest in a troubling trend of restaurant chains struggling with debt accumulated during and after the COVID-19 pandemic. Other notable casualties include TGI Friday’s, Denny’s, Ruby Tuesday, Rubio’s Coastal Grill, and Red Lobster, all of which have filed for bankruptcy protection. Industry data suggests that consumer spending at restaurants has not returned to pre-pandemic levels, as inflation has caused more people to opt for eating at home rather than dining out.

Many restaurant chains are implementing similar strategies to improve financial stability by reducing their number of locations. Red Robin announced plans to close 70 locations and sell properties to repay its debt. Similarly, Wendy’s closed 140 underperforming locations to enhance its restaurant footprint and overall system health. These industry-wide adjustments reflect a fundamental reshaping of the restaurant landscape as businesses adapt to post-pandemic economic realities and changing consumer behaviors.