New

Fast-food Chains Owner May File Chapter 11 Bankruptcy In Default

Fast-food and casual restaurant chains, facing unsustainable debt obligations, have needed to file for Chapter 11 bankruptcy protection in the last year to reorganize their businesses.

In some cases, restaurant chains will restructure their prepetition debts to enable them to continue operating. In other cases, a company's debt obligations are so unmanageable that it may opt to sell its assets to its lenders, who will offer a credit bid of the debt they are owed.

On The Border sold assets to lender

That's what popular Tex-Mex restaurant chain On The Border Mexican Grill & Cantina did when it filed for Chapter 11 bankruptcy on March 4, 2025, with plans to sell its assets to its prepetition bridge loan lender, an affiliate of Pappas Restaurants.

The casual restaurant chain's owner OTB Holding LLC blamed issues with liquidity, a negative macroeconomic environment, and creditor enforcement actions, among other economic problems, for its financial distress. Its liabilities included over $19.6 million in funded debt.

Lender buys Pinstripes for credit bid at auction

Also, Italian restaurant chain Pinstripes Holdings Inc. on Oct. 31 won bankruptcy court approval to sell its assets to an affiliate of its prepetition secured lender Silverview Credit Partners LP for a credit bid of $15 million of the $115 million debt Pinstripes owed.

Pinstripes had filed a prearranged Chapter 11 bankruptcy on Sept. 8, seeking to sell its assets, including seven restaurant locations, to the stalking-horse bidder.

Casual Mexican restaurant chain Uncle Julio’s, which operates 36 locations in 12 states, however, never filed for bankruptcy, and instead, in December 2024, sold its assets in a foreclosure auction to Sun Holdings, facing unsustainable debt obligations.

Uncle Julio's locations

Colorado (2)
Florida (2)
Illinois (5)
Maryland (4)
Missouri (1)
New Jersey (1)
New York (1)
Oklahoma (2)
Tennessee (1)
Texas (10)
Virginia (6)
Wisconsin (1)

Fatburger parent company Fat Brands Inc. defaulted on about $1.3 billion in debt.

Shutterstock

Fat Brands might file for bankruptcy protection

And now, major fast-food chain franchisor Fat Brands Inc. is considering a Chapter 11 bankruptcy filing after defaulting on $1.3 billion in debts owed to its lender UMB Bank NA, according to a Securities and Exchange Commission Form 8-K filed by the company.

The franchisor of major fast-food and casual restaurant chains, including Fatburger, Hot Dog on a Stick, Round Table Pizza, Johnny Rockets, Twin Peaks, Smokey Bones, and Ponderosa and Bonanza Steakhouses, failed to make its quarterly payment to the lender on Oct. 27, the filing said.

Fat Brands' franchises

Fatburger
Hot Dog on a Stick
Round Table Pizza
Johnny Rockets
Twin Peaks
Smokey Bones
Ponderosa and Bonanza Steakhouses
Marble Slab Creamery
Hurricane Grill & Wings
Great American Cookies
Buffalo's Cafe
Elevation Burger
Pretzelmaker
Native Grill & Wings
Fazoli's
Yalla Mediterranean

UMB Bank sent Fat Brands notices of acceleration on the debt on Nov. 17, asserting that the debts were immediately due and payable. The bank had not yet issued a foreclosure notice on the collateral securing the debt, according to the filing.

Fat Brands said that it could not provide any assurance that a foreclosure would not occur.

Fat Brands lacks funds to pay its debts

The company asserted that it does not have funds on hand to pay the principal and interest, and that an acceleration or any subsequent foreclosure may have an adverse effect on the business and force the company and its subsidiaries to file for bankruptcy protection.

More bankruptcy:

"The company had been in discussions with representatives of the noteholders regarding one or more potential transactions involving a refinancing, restructuring, or similar transaction of the securitization notes," the company said in the filing.

"The company intends to continue pursuing those discussions, but cannot provide any assurances that it will reach an agreement on terms that are satisfactory to the company and the noteholders promptly, or at all," the company said.

Back to Listing

credit: