Del Taco Franchisee Files for Bankruptcy Amidst Financial Struggles

Matador Restaurant Group, a Del Taco franchisee, has filed for bankruptcy due to financial struggles. The company reported assets and liabilities between $1m and $10m and over $2.7m in merchant cash advance debts. The Del Taco operations and MCA financing are cited as the root of the problems. The bankruptcy filing will halt collections and facilitate reorganization.

Matador Restaurant Group, a franchisee operating 22 Del Taco outlets, has declared bankruptcy due to significant financial difficulties. The company, based in Greenville, South Carolina, reported assets and liabilities each between $1 million and $10 million, alongside over $2.7 million in merchant cash advance (MCA) debts [1]. The Del Taco operations and the MCA financing are cited as the root causes of the problems. The bankruptcy filing aims to halt collections and facilitate reorganization.

The company's financial struggles began in late 2024, with Del Taco restaurants facing challenges due to "company growth, an unexpected decline in sales, and rising operational costs" [2]. To address cash flow issues, Matador took out multiple MCA loans, which ultimately exacerbated the company's financial distress. The excessive fees, interest rates, and aggressive payback schedules associated with these loans led to further financial difficulties [2].

Matador is owned by Red Door Brands, which also operates other food chains such as Little Caesars and Arby's. The company has not faced similar financial issues with these other operations, and each will undergo separate bankruptcy proceedings [2]. The MCA providers in the Matador case have recently intensified their collection efforts, with several creditors asserting their interests through UCC-1 financing statements and one placing a lien on the company's accounts [2]. This action has complicated the brand’s operations, prompting the bankruptcy filing to stop collections and facilitate reorganization.

The bankruptcy filing highlights some of the challenges facing the Del Taco brand and the current financing environment. The Mexican chain has about 600 locations and has struggled over the past year and a half, with same-store sales falling for five consecutive quarters [2]. The bankruptcy filing of a large and relatively new Del Taco operator in Colorado prompted the temporary closure of all but one of the chain’s restaurants in the state [2]. The company is now reopening those locations, and parent Jack in the Box is selling the brand, expecting to find a buyer by the end of the year [2].

The bankruptcy filing of Matador Restaurant Group underscores the financial challenges faced by some franchisees in the industry. The company's reliance on MCA financing, despite its risks, highlights the desperation some operators feel in the current environment. This situation may prompt other franchisees to seek alternative financing options to navigate the industry's challenges.

References:
[1] https://restaurantbusinessonline.com/financing
[2] https://finance.yahoo.com/news/matador-restaurant-group-files-bankruptcy-150210139.html