California-based Rubio's Coastal Grill files for bankruptcy
Rubio's plans to operate its remaining 86 restaurants in California, Arizona and Nevada.
Rubio’s Coastal Grill — which just announced plans to shutter nearly 50 locations in California — has filed for bankruptcy protection again.
The company filed in bankruptcy court in Delaware on Wednesday, marking the second time Rubio’s Restaurants, Inc. did so in four years.
The fast casual chain said "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" over the past few years.
CALIFORNIA EFFECT: CHAIN CLOSES NEARLY 50 LOCATIONS CITING RISING COST OF DOING BUSINESS
The news comes shortly after the company announced it abruptly closed 48 under-performing locations throughout California, citing the "rising cost of doing business in the state."
About 13 of the closures were in the San Diego area; 24 were in the Los Angeles area; and 11 were in Northern California. Rubio's said it plans to continue to operate 86 restaurants in California, Arizona and Nevada.
Passersby look in the windows of Rubio's Coastal Grill in Los Angeles on Monday. (Zoe Cranfill/Los Angeles Times via Getty Images / Getty Images)
"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," Rubio’s Coastal Grill Chief Restructuring Officer Nicholas Rubin said.
Cato Institute policy analyst Marc Joffe told FOX Business that the move was "further evidence that fast casual restaurants like Rubio’s are struggling in California’s high-cost business environment,"
However, Ken Yager. CEO of Newpoint Financial Advisors, told FOX Business that "there are three major factors at play for restaurants like Rubio's Coastal Grill."
CALIFORNIA'S $20 MINIMUM WAGE FOR FAST-FOOD WORKERS GOES INTO EFFECT
For one, "consumers are trading down. Pocket books are tighter, and people are making price-conscious decisions," Yager said, adding that "restaurants that cannot refresh with new customers are vulnerable."
Rubio's Coastal Grill has announced the closure of 48 locations in California. (Adobe Stock)
On top of that, restaurants and incumbent brands have to work "harder to defend themselves against new, fresh concepts and competition." Not only is competition rising, but consumer preferences are also changing, he noted.
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"While that is happening, in California and elsewhere, you are seeing wage increases," Yager said. "An increased cost of labor can make mounting issues more difficult to navigate, especially in the short term."