Rubio's Restaurants, a fast casual restaurant chain specializing in coastal Mexican food, filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company is taking this action to facilitate the sale of the business. The Company has 86 locations in California, Arizona and Nevada that will continue normal operations.
Like the restaurant industry overall, Rubio's has been negatively affected over the past few years by diminishing in-store traffic attributable to work-from-home practices remaining in place, and by rising food and utility costs that, combined with significant increases to the minimum wage in California, put pressure on a number of its locations.
"Rubio's Coastal Grill is one of the legendary fast casual chains with a strong and loyal customer following in its communities," said Nicholas Rubin, Chief Restructuring Officer of Rubio's Coastal Grill. "Despite the Company's best efforts to right-size the company, the continued challenging economic conditions have negatively impacted its ability to meet the demands of its debt burden. The Company believes the best path forward for Rubio's is through a court-supervised sale process that will position the brand for long-term success to grow and flourish."
Rubin said that the Company has a commitment from its existing lender to provide debtor-in-possession (DIP) financing and has more than adequate liquidity to meet all its operating needs during the sale process.
The Company will be entering into a stalking horse purchase agreement to sell its business as a going concern to an entity formed and controlled by its existing lender. Pursuant to Section 363 of the Bankruptcy Code, Rubio's also will be filing a motion for the implementation of bidding procedures to allow other companies the opportunity to submit bids through a Court-supervised process to purchase the assets being sold. The Company anticipates the sale transaction will be completed within 75 days. Hilco Corporate Finance is being retained to conduct a sale process under the bid procedures, pursuant to which Hilco Corporate Finance will seek higher or better offers from prospective bidders interested in purchasing the business.
The Company will be filing customary motions in the Chapter 11 cases, seeking court approval to continue operations during the sale process. These motions, subject to court approval, will ensure continued payment of employee wages and benefits, continued customer programs and other relief.
Daily operations at 86 Rubio's restaurants in California, Arizona and Nevada will continue with business as usual. Guests can enjoy the same fresh, delicious, coastal-inspired food they have come to expect from Rubio's Coastal Grill for years to come. All gift cards and rewards will be honored.
Co-founder Ralph Rubio, the iconic face and guiding force behind the company's popular menu items, will continue with the company and will provide his usual inspiration and energy going forward.
On June 1, Rubio's closed 48 underperforming locations in California --13 in the San Diego area, 24 in the Los Angeles area and 11 in northern California.
"Making the decision to close a store is never an easy one," the Company said in a statement. "While painful, the store closures are a necessary step in our strategic long-term plan to position Rubio's for success for years to come. The closings were brought about by the rising cost of doing business in California."
Proposed advisors to the Company are Raines Feldman Littrell LLP led by Hamid Rafatjoo as legal counsel, Force Ten Partners with Nicholas Rubin as the proposed Chief Restructuring Officer and Brian Weiss leading the restructuring advisory services, Hilco Corporate Finance as investment bank, led by Teri Stratton, and Strick And Company as strategic communications advisor to the Company.