The parent company of the fast-casual Tender Greens and Tocaya Modern Mexican concepts joined the growing number of restaurant chains seeking Chapter 11 bankruptcy protection.
One Table Restaurant Brands LLC filed on Wednesday and is seeking $3 million in financing from lender Breakwater Management LP to continue operations while the company seeks a buyer.
The company operates 24 Tender Greens and 15 Tocaya units in California and Arizona and employs more than 1,147 people at the restaurants and a corporate office in Los Angeles. Restaurants will continue to operate “business as usual,” the company said, and there are no immediate plans to close units.
“We ran every possible option to the ground in order to avoid bankruptcy, but ultimately, restructuring our debt is the best decision for our team members, valued vendor partners and loyal guests,” said One Table CEO Harald Herrmann, in a statement. “We expect to emerge from this restructuring process stronger and better positioned to prosper in our hyper-competitive industry.”
In court documents, the company blamed COVID, primarily, saying the pandemic was “catastrophic” for both brands.
While both Tender Greens and Tocaya survived, “the ferocious pressures and stresses on each business” forced the two to combine in August 2021 in an unusual 50/50 business combination. One Table was formed to oversee both brands and provide a platform of shared people resources and supply chain synergies, the filing said.
At the time, the two brands had 45 units, and investors in Tender Greens included Danny Meyer’s Union Square Hospitality Group, as well as Breakwater Management.
Tender Greens came into the deal with a stronger balance sheet and back-office operations, according to the bankruptcy filing, but Tocaya has superior marketing and design and held a Postmates agreement that initially appeared to provide a guaranteed income stream of about $12 million, based on a sales volume guarantee.
In 2022, however, the agreement was terminated by Postmates, which had by then been acquired by Uber, without explanation. One Table contested that decision and later reached a settlement with Uber/Postmates, but the sales volume guarantee was reduced to $5 million.
After that, however, Tocaya’s third-party delivery sales plummeted by about 30%. In an effort to make the exclusive deal work, Uber/Postmates discounted heavily, making it more affordable to order Tocaya for delivery than dine in the restaurants, which the company said hurt the brand's reputation.
Court documents indicated the two brands also continued to face “significant business and macroeconomic challenges,” including rising interest rates, higher food and labor costs, and the sharp increase in the fast-food minimum wage in April, which also forced fast-casual operators to raise wages to compete.
Both brands brought debt into the merger, which before the pandemic seemed manageable. But post-pandemic headwinds left the company unable to service debt obligations, which now total about $29 million.
Though Tender Greens’ sales dropped by an average of about 32% per store in 2020 due to the pandemic, the brand rebounded and has recovered about two-thirds of those sales since the merger of the two brands, the filing said.
Tocaya, meanwhile, performed even worse than during the pandemic. In 2020, sales were also down 32% for the Mexican brand, but now sales average about 41% below pre-pandemic levels, the court documents said.
At Tender Greens, for example, the average unit volume was $3.4 million in 2019, dipping to $2.3 million in 2020. But that average climbed back to $2.9 million in 2023.
Tocaya, however, had an AUV of $3.4 million in 2019, which dipped to $2.3 million in 2020. Last year, the chain’s AUV was $2.1 million. The company has closed four Tocaya units and one Tender Greens location since 2019.
Restaurant-level profits at Tender Greens are about 9.4%, down from pre-pandemic levels of about 16%, while Tocaya’s restaurant-level profits are 1.6%, down from the pre-pandemic level of about 13.1%.
One Table has been seeking a buyer since 2022, court documents indicate, and 22 potential buyers expressed interest, but no deal was signed. The feedback was consistent, court documents said: Too much debt and an underperforming company in Tocaya.
Now a sale is expected through the bankruptcy.
The industry has seen a number of bankruptcy filings in recent months, including Red Lobster, Rubio's and others.
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