Pappas Restaurants rescues bankrupt Mexican restaurant chain

Some Texans may say barbecue is the state’s specialty, but others argue that Tex-Mex is its top cuisine. 

Tex-Mex blends Texas and Mexican flavors to create a one-of-a-kind culinary fusion experience. Featured dishes include fajitas, tacos, and burritos, with margaritas being the favored drink.

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Due to the state’s strong Mexican cultural influence, Tex-Mex food has grown incredibly popular among native Texans. Although Texas has many Mexican and Tex-Mex restaurant chains, one has remained constant for over 40 years. 

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Established in 1982, On The Border Mexican Grill & Cantina is a Dallas-based restaurant chain known for its colorful decor, mesquite-grilled fajitas, and hand-crafted margaritas.

On The Border files for Chapter 11 bankruptcy and closes multiple locations

On The Border filed for Chapter 11 bankruptcy in early March this year. It listed assets and liabilities between $10 million and $50 million and over $19 million in prepetition secured debt, as stated in the filing. 

The restaurant chain attributed its decision to file for bankruptcy to a challenging macroeconomic environment. This environment forced it to increase prices, as it was losing customers to inflation and a slowdown in consumer spending. 

On The Border was also affected by labor shortages, influencing restaurant underperformance in most locations and creditor enforcement actions. This led to the closing of over 40 restaurants in February because it could no longer sustain them financially. 

After the mass closures, the restaurant chain was left with only 60 company-owned and 20 franchised locations. 

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Trying to sustain these underperforming restaurants caused On The Border to lose millions on lease payments for these locations, hurting its liquidity. 

Due to this massive loss, it had to institute holds on vendor and rent payments to have enough cash to continue operations. This led to vendors stopping the provision of goods and landlords cutting off services and repossessing leases.   

However, Pappas Restaurants came to On The Border’s rescue and provided $10 million in debtor-in-possession financing to help it continue operations while it navigated the bankruptcy process.  

Pappas Restaurant to acquire On The Border

Pappas Restaurants is a Houston-based restaurant operating company with nearly 90 locations across nine brands. 

After helping On The Border through this tough time, it finally took the leap and announced that it had been selected as the prevailing bidder to acquire the Mexican restaurant chain and help it emerge from bankruptcy. 

Once the acquisition is closed, On The Border will join Pappas Restaurants’ team, allowing it to expand its restaurant portfolio and presence in the Mexican food category. 

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Pappas Restaurants is optimistic about On The Border’s potential and the growth it can bring to its company with the addition of its 60 company-owned restaurants. 

“On The Border is a brand with deep heritage and loyal guests, and we see tremendous opportunity to invest in its future. Our shared Texas roots and passion for hospitality make this a natural fit,” said Pappas Restaurants CEO Mike Rizzo.

The restaurant operating company revealed it has plans to enhance On The Border’s menu, operations, and guest experience while maintaining its signature brand.

The acquisition is still subject to court approval and is expected to be finalized in the next few weeks.

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