A bankruptcy court approved the sale of On the Border Mexican Grill & Cantina to Pappas Restaurants, a Texas-based restaurant group.
The operator owns about 90 restaurants under the brand names Pappadeaux Seafood Kitchen, Pappasito’s Cantina, Pappas Bar-B-Q and more. Pappas was the prevailing bidder in the On the Border auction. Salud Brands was the designated backup bidder.
The United States Bankruptcy Court in the Northern District of Georgia approved On the Border’s sale to Pappas May 15. On the Border’s portfolio includes 60 U.S. stores and 20 South Korean stores.
On the Border filed for bankruptcy in March, citing about $25 million in debt, following the closing of about half of its restaurants earlier this year. OTB Holding, On the Border’s former parent company, filed for Chapter 11 protection.
"On The Border is a brand with deep heritage and loyal guests, and we see tremendous opportunity to invest in its future,” said Pappas CEO Mike Rizzo in a statement. Our shared Texas roots and passion for hospitality make this a natural fit."
The restaurant group plans to modernize On the Border to drive sales, including debuting a revitalized menu as well as improving operations and guest experience.
Pappas was the stalking-horse bidder in the sale, providing OTB with $10 million in debtor-in-possession financing, which is a way for bankrupt companies to maintain operations during the sale process.
Neither Pappas Restaurants nor OTB’s bankruptcy attorneys responded to requests for comment, so the purchase price is undetermined.
In the Chapter 11 filing from March, OTB’s Chief Restructuring Officer Jonathan Tibus said the bankruptcy came from problems related to inflation, food costs and labor shortages.
The company closed 77 underperforming stores, which OTB spent more than $11 million on for lease obligations last year.
The majority of On the Border’s stores are corporate owned. In 2023, average unit volume for 109 corporate restaurants was $2.3 million, according to last year’s franchise disclosure document. Of the five franchised locations that reported sales, average unit volume was $2.5 million.
In 2021, On the Border opened two net stores, but closed five in 2022. In 2023, it yielded one new net store.
In 2022, OTB entered into a $15 million revolving loan credit agreement with CrossFit Bank, which it later defaulted on. As of March 4, OTB owed the bank nearly $12 million. The company also owed about $3.8 million to food vendor U.S. Foods.
The company’s seen a change in ownership several times in more than four decades.
On the Border opened in 1982 in Dallas. Twelve years later, Brinker International bought the concept, which specializes in Tex-Mex cuisine.
Brinker, which franchises Chili’s, sold On the Border in 2010 to a Golden Gate Capital affiliate.
In 2014, Golden Gatesold the chain to Argonne Capital Group, a 300-unit IHOP franchisee.