The parent company of Tender Greens and Tocaya Modern Mexican, two fast-casual concepts, joined the increasing number of restaurant chains seeking Chapter 11 bankruptcy protection.
One Table Restaurant Brands LLC made a filing on Wednesday and is looking for $3 million in financing from lender Breakwater Management LP to keep operating while it looks for a buyer.
People Employed
More than 1,147 people are employed by the company, which has 24 Tender Greens and 15 Tocaya locations in California and Arizona and a Los Angeles-based corporate office.
According to the company, restaurants will continue to operate “business as usual,” and there are no immediate plans to close any of them.
CEO Statement
One Table CEO Harald Herrmann said in a statement, “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.”
“We expect to emerge from this restructuring process stronger and better positioned to prosper in our hyper-competitive industry.”
COVID Impact
The company claimed in court documents that COVID was primarily to blame, describing the pandemic as “catastrophic” for both brands.
“The ferocious pressures and stresses on each business” forced Tender Greens and Tocaya to combine in an unusual 50/50 business combination in August 2021, despite the fact that both survived.
One Table Establishment
According to the filing, One Table was established to oversee both brands and provide a platform for shared human resources and supply chain synergies.
Breakwater Management and Danny Meyer’s Union Square Hospitality Group were investors in Tender Greens, which had 45 units at the time.
Brand Strengths
According to the bankruptcy filing, Tender Greens entered the deal with a stronger balance sheet and back-office operations.
On the other hand, Tocaya has superior marketing and design and held a Postmates agreement that appeared to initially provide a guaranteed income stream of approximately $12 million based on a sales volume guarantee.
Postmates Dispute
Postmates, which had already been acquired by Uber at the time, terminated the agreement without providing any explanation in 2022.
The sales volume guarantee was reduced to $5 million as a result of One Table’s dispute with Uber/Postmates, which led to a settlement.
Exclusive Deal
However, Tocaya’s third-party delivery sales plummeted by approximately 30% after that. Uber/Postmates offered substantial discounts in an effort to make the exclusive deal work.
This made it cheaper to order Tocaya for delivery than to dine in the restaurants, which the company said hurt the brand’s reputation.
“Significant Challenges”
According to court documents, the two brands also continued to face “significant business and macroeconomic challenges,” such as rising interest rates and rising costs for food and labor.
Additionally the sharp increase in the fast-food minimum wage in April caused issues, which also compelled operators of fast-casual restaurants to raise wages in order to compete.
Pre-Pandemic Debt
Prior to the pandemic, debt between the two brands appeared manageable. However, the company was unable to service its debt obligations, which now total approximately $29 million, due to post-pandemic headwinds.
According to the filing, despite the fact that Tender Greens sales decreased by approximately 32% on average per store in 2020 as a result of the pandemic, the brand rebounded and has recovered approximately two-thirds of those sales since the merger of the two brands.
Tocaya Sales
Tocaya, on the other hand, did even worse than before the pandemic. According to court documents, the Mexican brand’s sales decreased by 32% in 2020. However, sales are now on average 41% lower than they were before the pandemic.
For instance, the average unit volume at Tender Greens dropped to $2.3 million in 2020 from $3.4 million in 2019. However, in 2023, that average increased once more to $2.9 million.
Seeking a Buyer
However, Tocaya’s AUV decreased from $3.4 million in 2019 to $2.3 million in 2020. The chain’s AUV was $2.1 million last year. Since 2019, the company has shut down four Tocaya locations and one Tender Greens location.
Tocaya’s restaurant-level profits are 1.6 percent, down from the pre-pandemic level of approximately 13.1%, while Tender Greens’ restaurant-level profits are approximately 9.4%.
According to court documents, One Table has been looking for a buyer since 2022.
