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Tijuana Flats declares bankruptcy and closes restaurants

Tijuana Flats declares bankruptcy and closes restaurants
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Tijuana Flats was sold to a company known as Flatheads LLC. | Photo: Shutterstock.

Tijuana Flats, the Florida-based chain of Tex-Mex restaurants, has declared bankruptcy, closed 11 restaurants and is being sold to a new ownership group, the company said on Friday.

The fast-casual chain filed for Chapter 11 bankruptcy protection, declaring $1 million to $10 million in assets and from $10 million to $50 million in liabilities. It has nearly $19 million in secured debt. 

The company said that it filed for bankruptcy as part of an arrangement to sell to an ownership group called “Flatheads LLC.” It had been owned by TJF USA, LLC.

The brand has been shuttering corporate locations all year. The chain started the year with 105 corporate locations, according to data from Restaurant Business sister company Technomic. It closed 29 of them by April, and then another 11 this week, shedding 40 total restaurants, according to court documents. Franchisees operate another 26 locations.

The company said it started a strategic review in November and conducted a “unit-by-unit analysis of financial performance, occupancy costs and market conditions.”

Tijuana Flats said it would “continue to provide full support for its franchisees” and said remaining locations will “continue to operate as normal.”

Joe Christina, who was appointed CEO in 2022, said in a statement that the new ownership group plans to “reinvest, focus and emphasize the things that originally brought so many people to love Tijuana Flats.”

“We understand the immediate financial actions taken by them to ensure the long-term health of this great and iconic brand,” he said. Christina will remain as CEO.

This is the second bankruptcy filing of a restaurant chain this week, following a filing by the ice cream chain Oberweis Dairy. Red Lobster, the Orlando-based casual dining seafood chain, is also contemplating a bankruptcy filing.

Tijuana Flats last year generated nearly $170 million in system sales. Its unit volumes increased 3.8%, according to data from Restaurant Business sister company Technomic.

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The brand’s system sales have averaged 0.1% growth over the past five years, according to Technomic. By contrast, the average growth for the fast-casual Mexican sector was 10.5% over that period.

According to court documents, the company blamed its problems on “a confluence of adverse events.”

The company’s lender last year required the company to post a $1.2 million payment as an interest reserve that, along with another $250,000 in quarterly principal reduction payments drained Tijuana Flats of working capital.

Tijuana Flats in 2021 also sought to expand the brand’s menu to boost sales. “The menu changes had the opposite effect, however, as the menu additions required more equipment, staffing and time to prepare,” a court filing said. That led to slower service times, higher costs and diminished customer satisfaction that led to a drop in sales.

The company also blamed rising food and labor costs coming out of the pandemic, along with changes in consumer spending. The company’s efforts to raise prices to offset those costs have “met with limited success.”

The company declared bankruptcy in part to deal with bills and tax obligations that have accrued over the past two years.

Details of the new ownership group are not available. Flatheads’ address is listed as an office in Encino, California, according to court documents.

UPDATE: This story has been updated to add information from court documents.

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