In Debt More Than $25M, Tex-Mex Chain On the Border Files for Bankruptcy

On the Border closed at least 77 locations in 24 states and owes lender CrossFirst Bank approximately $11.7 million. The casual dining brand cited a difficult macroeconomic environment, labor shortages and underperforming restaurants as factors in the bankruptcy.

Citing more than 10,000 creditors and with upwards of $25 million in debt, Texas-based restaurant chain On the Border Mexican Grill & Cantina filed for Chapter 11 bankruptcy protection March 4. It engaged Hilco Corporate Finance to manage a sale process and wants to finalize a buyer by May.

The filing by OTB Holding, parent company of On the Border, comes after the chain in recent weeks closed at least 77 locations in 24 states that were deemed underperforming or were expected to drive losses. The company continues to operate 60 restaurants—all of them leased—and franchisees in the United States and South Korea operate 20 units.

In documents filed with the U.S. Bankruptcy Court in the Northern District of Georgia, Jonathan Tibus, OTB’s chief restructuring officer, listed “a difficult macroeconomic environment, labor shortages, an underperforming restaurant footprint and creditor enforcement actions” as factors in the bankruptcy.

On the Border, noted Tibus, suffered from inflationary pressures that forced it to raise menu prices. Hourly wages, meanwhile, “have outpaced the restaurant industry’s ability to increase prices, putting pressure on margins.” OTB “struggled in the last year to recruit and maintain a complete workforce,” which affected operations.

Lease obligations likewise weighed on the company, according to court documents, with OTB a party to 113 active leases. On the Border spent approximately $25 million in lease obligations last year, more than $11 million related to underperforming stores.

“Given the company’s operational headwinds and financial position, payment of lease obligations associated with non-performing leases has caused significant strains on the company’s liquidity,” wrote Tibus, a managing partner at Alvarez & Marsal North American Commercial Restructuring in Atlanta who was CEO and oversaw Chapter 11 restructuring efforts of Red Lobster last year. He advised on Krystal’s restructuring in 2020 and several others in recent years.

OTB in 2022 entered into a revolving loan credit facility with CrossFirst Bank for $15 million and later defaulted. By January 2025 the company required additional working capital to continue operations, according to court documents, and secured $4 million in bridge financing. As of March 4, CrossFirst is owed approximately $11.7 million while the bridge lender, an affiliate of Pappas Restaurants, is owed more than $4 million. Houston-based Pappas, court documents note, is a potential buyer.

U.S. Foods, OTB’s largest food vendor, is owed approximately $3.8 million. Other creditors include real estate investment trust Vereit, which is owed $2.9 million in rent, and marketing agency Bailey Lauerman, which is owed $1.6 million.

On the Border, which serves a range of Tex-Mex cuisine, got its start in Dallas in 1982. Chili’s owner Brinker International acquired the chain in 1994 and grew it to 160 locations before selling it to Golden Gate Capital in 2010. Atlanta-based private equity firm Argonne Capital Group bought the company in 2014. Argonne is the largest franchisee of IHOP, operating nearly 300 units, and is a franchisee of Applebee’s, Wingstop and Planet Fitness.

In recent years steps were taken to revitalize the brand, including investments in digital, but Technomic data shows the recovery didn’t materialize. On the Border saw a nearly 3 percent decline in same-store sales in 2023, and a 3.2 percent drop in its unit count.

Average gross sales for company-owned restaurants were $2.3 million in 2023; U.S. franchisees reported an AUV of $2.5 million that year.

This latest bankruptcy illustrates the ongoing struggles in the casual dining segment. TGI Fridays, Red Lobster and Buca di Beppo all filed for bankruptcy over the last year. Earlier this year, a multi-unit Twin Peaks franchisee also filed for bankruptcy.