A major operator of a popular Mexican fast-food chain is seeking bankruptcy protection, putting dozens of restaurants under pressure. The franchisee has already closed many locations in recent years and is now seeking permission to shut down 16 more.
Quality Fresca, one of the largest franchisees of Moe’s Southwest Grill, filed for Chapter 11 bankruptcy protection on August 4 in the U.S. Bankruptcy Court for the Southern District of Florida. The company is seeking to reject leases at 16 additional restaurants as it restructures its finances.
16 more restaurants targeted
Quality Fresca operated 38 Moe’s restaurants when it filed for bankruptcy, down significantly from the 69 locations it once operated. The 16 restaurants targeted for closure include 14 in Florida, one in Virginia, and one in Georgia. At least 10 of those locations had already permanently closed by August 10, according to reporting on the bankruptcy case.
If the requested lease rejections are approved, Quality Fresca would be left with approximately 22 restaurants.
The franchisee employed about 603 people when it filed for bankruptcy and is seeking to preserve its profitable restaurants while exiting locations that have continued to lose money. Chapter 11 allows the company to continue operating while it attempts to reorganize its finances or potentially sell assets.
COVID-era issues lingered
The company has attributed its financial difficulties to declining customer traffic, rising food and shipping costs, labor shortages, and inflation. Those pressures have made it increasingly difficult for some restaurants to cover fixed expenses such as rent and debt payments.
Quality Fresca originally acquired 67 Moe’s restaurants in 2020, shortly before the COVID-19 pandemic disrupted the restaurant industry.
Importantly, the bankruptcy involves Quality Fresca, not Moe’s Southwest Grill itself. Moe’s parent company, GoTo Foods, has not filed for bankruptcy, and restaurants operated by other franchisees are not included in the case.
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