Rubio's Restaurants Files for Chapter 11 Reorganization Amid Employee Payment Issues

SAN DIEGO, June 5, 2024 -- Rubio's Restaurants, Inc., a fast casual restaurant chain specializing in coastal Mexican food, has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code to facilitate the sale of the business according to a press release from the resturant chain. This announcement follows recent reports from employees that they were unable to cash their paychecks.

A Rubio's in CaliforniaPhoto byGoogle Earth

Rubio's operates 86 locations in California, Arizona, and Nevada, which will continue normal operations during the reorganization process. The company has faced challenges over the past few years, including reduced in-store traffic due to work-from-home practices, rising food and utility costs, and significant increases in the minimum wage in California.

"Despite our best efforts to right-size the company, the continued challenging economic conditions have impacted our ability to meet debt demands," said Nicholas Rubin, Chief Restructuring Officer of Rubio's Coastal Grill. "We believe the best path forward is through a court-supervised sale process."

Rubio's has secured debtor-in-possession (DIP) financing from its existing lender to ensure adequate liquidity during the sale process. The company will enter into a stalking horse purchase agreement with an entity formed by its existing lender. A court-supervised bidding process will allow other companies to submit bids for the assets. The sale transaction is expected to be completed within 75 days, with Hilco Corporate Finance conducting the sale process.

The company will file motions to ensure continued operations during the sale process, including payment of employee wages and benefits, continuation of customer programs, and other relief. Despite the reorganization, daily operations at the 86 locations will continue as usual, and all gift cards and rewards will be honored.

Rubio's recently closed 48 underperforming locations in California, citing the rising cost of doing business in the state. These closures included 13 in the San Diego area, 24 in the Los Angeles area, and 11 in northern California.