On The Border Files for Chapter 7 Bankruptcy
On The Border files for Chapter 7 bankruptcy amid continued operational struggles and closures.
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On The Border has filed for Chapter 7 bankruptcy, closing all company-owned restaurants and leaving only a few franchised locations. The decision comes after previous bankruptcy proceedings and efforts to stabilize the business, which have ultimately proven unsuccessful.
Why It Matters
This situation may significantly impact franchisees' operations and territories, as the brand is now limited primarily to independently operated franchises. Multi-unit operators should consider the ramifications on unit economics and demand within the franchise system.
On The Border has filed for Chapter 7 bankruptcy, marking its second insolvency in just over a year. The operating entity, OTB Hospitality, submitted the liquidation filing on June 19 after closing all of its company-owned restaurants earlier in June. This decision, as indicated by spokesperson Chris Pappas, was not taken lightly and underscored the necessity for substantial ongoing investment that would detract from the brand's core operations. At present, only a few independently operated franchise locations continue to operate under the On The Border brand.
The bankruptcy filing pertains solely to OTB Hospitality and does not affect the wider financial health of its parent company, Pappas Restaurants, which maintains a stable restaurant portfolio. Previously, On The Border had faced significant financial difficulties, including a Chapter 11 filing in March 2025 due to declining sales, rising labor costs, and liquidity issues, at which point around 40 poorly performing restaurants were closed.
Upon entering bankruptcy in 2025, On The Border operated approximately 80 locations, predominantly company-owned, across the U.S. and South Korea. Pappas Restaurants acquired the brand through a stalking horse bid of $15.9 million, with the intention to leverage operational expertise to revitalize the chain. Initial optimism for the brand's revival included plans for menu enhancements and operational upgrades, supported by Pappas CEO Mike Rizzo's confident statement about the company’s potential.
