California restaurant chain files for bankruptcy, leaving workers in a bind

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Recent news coming out of California’s restaurant scene. One Table Restaurant Brands, the company behind popular chains Tender Greens and Tocaya, has just filed for Chapter 11 bankruptcy. This unexpected move has thrown a curveball to its 1,147 employees, leaving them uncertain about their futures.

One Table was formed in 2021 as a lifeline for Tender Greens and Tocaya, which were hit hard by the COVID-19 pandemic. The idea was to merge the two brands to pool resources and streamline their operations. But it seems that the plan didn’t go as smoothly as hoped.

CEO Harald Herrmann, in a court filing, explained that the company was struggling with high debt, shrinking sales, and costly third-party delivery fees. Even though the business combination was meant to be a strategic move, it didn't shield One Table from financial woes.

Tender Greens saw its average unit volume (AUV) drop from $3.4 million in 2019 to $2.9 million in 2023. Tocaya faced an even steeper decline, with its AUV falling from $3.4 million to $2.1 million over the same period. This decline in sales wasn’t just about numbers; it also impacted their profitability. Pre-pandemic, Tender Greens had a solid 16% profit margin, which has now slipped to 9.4%. Tocaya’s profit margin has plummeted from 13.1% to just 1.6%.

The company also struggled with debt from its expansion phase between 2017 and 2019. When One Table merged the brands, it inherited this debt, which became unsustainable as sales and profits fell and interest rates climbed. The interest rate on their $28 million credit agreement surged from 11.6% to 15.9% since the merger.

To make matters worse, their exclusive sales agreement with Uber Eats and Postmates turned into a double-edged sword. Herrmann claims that to meet sales volume guarantees, these delivery platforms slashed prices so much that ordering in was cheaper than dining at the restaurants.

And it’s not just about sales and debt. Inflation and labor market changes, like the FAST Act affecting California’s minimum wage landscape, have added to the pressure. While One Table’s brands aren’t directly impacted by this law (they’re not large enough to be required to pay $20 an hour), the increased competition for workers has pushed wages up across the board.

It’s a tough situation for One Table Restaurant Brands, and while the bankruptcy filing will allow them to restructure, the path forward remains uncertain. For the employees and the restaurants, this is a moment of challenge and change. We’ll keep an eye on how things unfold.