Tex-Mex restaurant chains have battled economic issues over the last two years that have led operators to file for Chapter 11 bankruptcy, as well as Chapter 7 liquidation.Moe’s Southwest Grill franchisee Quality Fresca I LLC, which operates 38 restaurant locations in Florida, South Carolina, Virginia, and Washington, D.C., filed for Chapter 11 bankruptcy, seeking to close 16 locations, facing industry headwinds, increased costs, and declining revenue, which has depleted its liquidity, according to court documents.Quality Fresca seeks to reorganize its business in bankruptcy to sustainable profitability or sell its assets.The Palm Beach, Fla.-based debtor will seek court approval of up to $1.6 million in debtor-in-possession financing from its ultimate parent and prepetition lender GR Loanco 1 LLC.
Moe’s Southwest Grill franchisee Quality Fresca I LLC files for bankruptcy to reorganize.M. Suhail / Getty Images
Moe’s franchisee seeks to close locationsThe debtor also filed a motion to reject 16 Moe’s Southwest Grill leases with plans to close 14 underperforming locations in Florida, one in Virginia, and one in Georgia.Quality Fresca filed its petition in the U.S. Bankruptcy Court for the Southern District of Florida on Aug. 4, listing $1 million to $10 million in assets and $10 million to $50 million in debt obligations.Moe’s Southwest Grill parent company and franchisor Go To Foods has not filed for bankruptcy.The debtor generated about $58.9 million in revenue and total negative consolidated EBITDA of $111,204 in fiscal year 2025. It reported $26.3 million in revenue in 2026 through June 15.The debtor owes about $16 million in secured debt obligations and defaulted on its franchise agreements on Aug. 5, 2025. The franchisee entered into an addendum agreement on Sept. 4, 2025. Quality Fresca owned 69 Moe’s locationsQuality Fresca, one of the Tex-Mex chain’s largest franchisees, had purchased 67 Moe’s franchises in Florida, South Carolina, Virginia, Maryland, and Washington, D.C., on March 9, 2020, and two more in Florida in August 2021.Since purchasing 69 locations, financial distress has forced the franchisee to close 31 restaurants by the petition date. The debtor employs 603 workers, including 49 salaried and 554 hourly employees.”Although several of the restaurants have remained profitable, others have been operating at a loss, resulting in the debtor’s inability to meet its obligations and achieve the financial metrics required under various agreements,” Chief Restructuring Officer G. Michael Verdisco said in a declaration.Significant foot traffic lossThe debtor suffered significantly from a loss of foot traffic, resulting in declining revenue without proportionate decreases in rental obligations, debt service, and other liabilities. The company blamed recent increases in costs of shipping and food, decreased availability of labor, and inflation for exacerbating its cash flow issues. Moe’s Southwest Grill, which is owned by Roark Capital Group affiliate Go To Foods, was founded in 2000 and has 541 locations in 39 states nationwide.On the Border closed all restaurantsAnother unrelated Tex-Mex chain, On the Border Mexican Grill & Cantina, suffered more severe financial distress as it closed all of its locations before its operating company, OTB Hospitality, filed for Chapter 7 liquidation on June 19, the company shared in a press release.On the Border franchise locations in South Dakota, Florida, Nevada, California, and South Korea continue operating independently, however, and were not included in the Chapter 7 case.Related: Popular bookstore chain closing 33-year-old location