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Rubio's Coastal Grill, a well-known California-based restaurant chain famous for its fish tacos, has filed for Chapter 11 bankruptcy protection.

This marks the second bankruptcy filing for the company in just four years due to the severe challenges it faces amid rising operational costs in California.

This latest filing follows a previous bankruptcy in 2020 when the pandemic forced the company to close 26 underperforming restaurants and exit the Colorado and Florida markets.

The company underwent a complete restructuring at that time but has continued to face financial difficulties.

Recent Challenges

Rubio's Coastal Grill was founded in 1983 and over the decades, it expanded to approximately 200 locations across California and other states, becoming a staple in the fast-casual dining sector.

However, the COVID-19 pandemic dealt a significant blow to Rubio's, forcing the closure of its restaurants in Florida and Colorado. Additionally, the chain has struggled to compete with industry giants like Chipotle.

Rising food prices and increasing worker wages have further strained the company's financial health. The LA Times reports that these challenges culminated in Rubio's recent decision to close 48 of its 134 restaurants in California, effective June 1, 2024. Rubio's attributed the closures to "the rising cost of doing business in California," according to a statement from media strategist Sitrick & Co.

The sudden closures also left many employees shocked and without notice. LA Times reports that some workers received phone calls over the weekend informing them that their jobs had been eliminated.

Despite the shutdowns, Rubio's plans to keep 86 locations open in California, Arizona, and Nevada, focusing on markets where they believe they can remain competitive.

What's Next?

According to the bankruptcy petition filed in Delaware, Rubio's has accumulated over $100 million in debt (via Reuters).

In its brief statement on Monday, Rubio's acknowledged the difficulty of the closures but described them as a "necessary step in our strategic long-term plan to position Rubio's for success for years to come."

The restaurant industry is grappling with inflation and higher labor costs, which have led to increased consumer prices and a pullback in spending, especially among lower-income households. Rising unemployment and higher consumer debt have further compounded these issues.