Del Taco Franchisee Files for Bankruptcy Amid Financial Distress.

Red Door Brands, a Del Taco franchisee and parent company of several other restaurant chains, has filed for Chapter 11 bankruptcy protection. The company cited financial difficulties due to rising operational costs, an unexpected decline in sales, and excessive fees from merchant cash advance loans. The filing indicates assets of less than $50,000 and liabilities between $1 million and $10 million.

Red Door Brands, a major franchisee of Del Taco and parent company of several other restaurant chains, has filed for Chapter 11 bankruptcy protection. The company cited financial difficulties stemming from rising operational costs, an unexpected decline in sales, and excessive fees from merchant cash advance (MCA) loans [3]. The filing indicates assets of less than $50,000 and liabilities between $1 million and $10 million.

The company's subsidiary, Matadoor Restaurant Group, which operates 22 Del Taco units, experienced financial distress due to company growth, an unexpected decline in sales, and rising operational costs. Matadoor took out multiple MCA loans to bridge its cash flow issues, but the excessive fees and aggressive payback schedules exacerbated its financial distress [3].

Red Door Brands also franchises Arby's, Little Caesars, and McAlister's Deli, and the company's financial difficulties could impact these other chains as well. The company's filing suggests that it is seeking to restructure its debts and reorganize its business to continue operating.

The filing comes amidst a broader trend of financial distress in the restaurant industry, with rising costs of operating driven by inflation, fierce competition, and consumer reluctance to spend in uncertain times [1]. Other major pizza chain franchisees, such as EYM Pizza L.P. and People First Pizza Inc., have also filed for bankruptcy protection in recent months [1].

Investors and financial professionals should monitor the situation closely, as the outcome of Red Door Brands' bankruptcy could have implications for the broader restaurant industry and its franchisees. The company's ability to reorganize its debts and restructure its business will be crucial to its long-term survival.

References:
[1] https://www.thestreet.com/restaurants/major-pizza-and-taco-chain-franchisee-files-chapter-11-bankruptcy
[3] https://www.nrn.com/quick-service/del-taco-franchisee-files-for-chapter-11-bankruptcy