Popular Restaurant Chain Faces Financial Woes Amid Industry Struggles

On the Border Mexican Grill & Cantina, a once-thriving Tex-Mex chain, has filed for Chapter 11 bankruptcy protection with over $25 million in debt, forcing the closure of 40 restaurants as the casual dining industry continues to face post-pandemic economic headwinds.

Quick Takes

On the Border filed for Chapter 11 bankruptcy in Georgia Northern Bankruptcy Court with over $25 million in debt and more than 10,000 creditors.
The chain has closed 40 underperforming locations, reducing from 120 to 80 units (60 company-owned and 20 franchised).
The bankruptcy was driven by declining traffic, labor shortages, rising costs including minimum wage increases, and failed digital initiatives.
The filing is part of a concerning trend among restaurant chains still struggling with pandemic-era debt, including TGI Friday’s, Denny’s, and Red Lobster.

Financial Collapse of a Tex-Mex Giant

The Irving, Texas-based Tex-Mex restaurant chain On the Border has officially filed for Chapter 11 bankruptcy protection in the Georgia Northern Bankruptcy Court. Court documents reveal the company is over $25 million in debt with more than 10,000 creditors. The bankruptcy filing encompasses six affiliated entities with operations in Kansas, Maryland, and New Jersey. This marks one of the first major foodservice bankruptcies of 2025, signaling continued challenges for the restaurant industry as it struggles to recover fully from pandemic-related disruptions and adapt to changing consumer habits in a difficult economic climate.

Owned by Argonne Capital Group, On the Border has experienced a significant contraction, with its restaurant count dropping from 120 to just 80 units currently operating – 60 company-owned and 20 franchised locations. The chain is seeking court approval to terminate leases for non-operational locations, a move aimed at stemming further financial bleeding. To navigate through this restructuring period, the company has appointed Jonathan Tibus, a specialized restructuring expert, as chief restructuring officer to oversee the bankruptcy process and attempt to steer the company toward financial stability.

🚨#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

Root Causes of the Bankruptcy Filing

The company’s financial troubles stem from multiple factors converging simultaneously. Court documents cite a challenging macroeconomic environment, persistent labor shortages plaguing the entire restaurant industry, and the financial drain from 40 underperforming locations that ultimately closed. The chain also struggled with a failed digital makeover initiative and recorded a nearly 3% decline in same-store sales, while competitors in the Mexican restaurant category reported significant sales and unit growth during the same period. This divergence in performance highlights fundamental operational and strategic challenges specific to On the Border.

Worker retention issues have further complicated operations, with the rising minimum wage in many states adding to labor costs. These financial pressures created a perfect storm for the Tex-Mex chain, ultimately forcing it to seek bankruptcy protection as the most viable path forward. Industry analysts note that On the Border’s troubles reflect both company-specific missteps and broader industry challenges, as many restaurant chains have struggled to adapt to post-pandemic consumer preferences while facing inflationary pressures on food, labor, and real estate costs.

Part of a Broader Restaurant Industry Crisis

On the Border’s bankruptcy filing is not an isolated incident but part of a troubling trend among restaurant chains still struggling with debt accumulated during the COVID-19 pandemic. Other major casual dining establishments, including TGI Friday’s, Denny’s, Ruby Tuesday, Rubio’s Coastal Grill, and Red Lobster, have all either filed for bankruptcy or faced significant financial distress in recent years. These industry-wide challenges reflect a fundamental shift in consumer behavior, as spending at restaurants has not returned to pre-pandemic levels, with inflation causing more Americans to choose eating at home over dining out.

Strategic downsizing has become a common tactic for survival in the industry. Red Robin recently announced plans to close 70 locations and sell properties to repay debt, while Wendy’s closed 140 underperforming locations to improve its overall system health. Industry insiders also report that Hooters may be preparing for bankruptcy filings later this year, further underscoring the dining sector’s continued vulnerability. The scaling back of restaurant footprints represents a pragmatic approach to achieving financial stability in an increasingly competitive and cost-conscious market environment.