Unexpectedly, A Chain of Restaurants in California Has Now Filed for Bankruptcy
It was a surprise when a California restaurant chain filed for bankruptcy, leaving its 1,147 workers in a lot of uncertainty.
Court records show that One Table Restaurant Brands, which owns the 24-unit chain Tender Greens and the 15-unit chain Tocaya, filed for Chapter 11 bankruptcy on Wednesday.
After COVID-19 hit and destroyed Tender Greens and Tocaya in 2021, One Table was made.
A statement made by CEO Harald Herrmann in support of the company’s bankruptcy on Thursday says that the strange business combination was meant to “provide a leveraged platform of shared people resources and supply chain synergies.”
Herrmann says that the company was also hurt by high debt after the business came together, less traffic, and high commission rates for third-party shipping.
Both brands’ sales never went back up after COVID-19. For example, Tender Greens’ average unit volume dropped from $3.4 million in 2019 to $2.9 million in 2023, which was only a small rise from its low point of $2.3 million in 2020.
Herrmann said that Tocaya’s AUV dropped from $3.4 million to $2.1 million in 2023, which was its lowest AUV since 2020.
Not only did sales drop, but so did earnings at both brands. Before the pandemic, Tender Greens had 16% profits and Tocaya had 13.1%. Now, they are only 9.4% and 1.6%, respectively.
Herrmann’s statement says that when the brands came together, they both had debt that was being used to pay for growth between 2017 and 2019.
As part of the merger, that debt was merged, but it could no longer be paid off as sales and profits dropped and interest rates rose.
Today, the interest rate on the company’s $28 million loan went up from 11.6% at the time of the merger to 15.9%.
From 2021 to 2023, the chains had an exclusive sales agreement with Uber Eats and Postmates that included a sales volume guarantee. Herrmann says that to meet that guarantee, the delivery platforms cut prices so much that it was cheaper to order delivery than to eat at one of the restaurants.
The company also said that general economic pressures and the FAST Act’s effect on California’s job markets were to blame.
The law doesn’t apply to One Table’s brands because they aren’t big enough to have to pay $20 an hour. However, restaurant leaders said at the time it was passed that smaller chains would have to raise wages to stay competitive.