Salad restaurants like Sweetgreen, Dig and Cava are gaining popularity in the U.S., but one of them is struggling.
The owner of Tender Greens and its sister brand Tocaya Modern Mexican has filed for Chapter 11 bankruptcy.
Customer numbers never recovered after falling significantly during the pandemic, One Table Restaurant Brands bosses said.
The company operates 24 Tender Greens and 15 Tocaya units in California and Arizona, and relies especially on customers in downtown Los Angeles.
That part of the city has never recovered from Covid, and both office workers and residents have not returned.
The growing reliance on delivery apps also caused problems. Sales for both brands shifted toward takeout during the pandemic, and it now accounts for 30 to 40 percent of orders.
Tender Greens, which started in Culver City in 2006, has filed for bankruptcy
But orders through Postmates and Uber Eats come with hefty commissions, which eat into profits.
Managing director Harald Herrmann wrote in the presentation: ‘A commission rate of between 15 and 18 percent, depending on the supplier, together with the related packaging costs of four percent, make these sales less profitable.
“It is not possible to pass on all this cost to the consumer because it would have a negative impact on restaurant demand.”
The company also blamed California’s $20-an-hour minimum wage. While the company is small enough (it has fewer than 60 locations) not to be forced to pay it, it has had to raise wages to compete with workers at larger chains.
The company hopes to secure $3 million in financing from Breakwater Management to continue operating while it tries to find a buyer.
“We pursued every possible option to avoid bankruptcy, but ultimately, restructuring our debt is the best decision for our team members, our valued supplier partners and our loyal guests,” Herrmann said in a statement.
“We look forward to emerging from this restructuring process stronger and better positioned to thrive in our hyper-competitive industry.”
Restaurants that serve fresh but quickly prepared salads, such as Tender Greens, have gained popularity in recent years. Sweetgreen, for example, has 205 restaurants and Cava, nearly 280.
Across the United States, restaurants have been struggling more and more this year. Faced with rising costs, they have raised menu prices, but that has led to a drop in customers.
A salad bowl at Tender Greens, with 24 locations in California and Arizona
Tocaya is also at risk
Larger chains like Applebee’s, TGI Fridays and Boston Market have recently closed restaurants, as have smaller chains like BurgerFi.
Red Lobster filed for bankruptcy in May and also closed nearly 100 restaurants.
Chains have been hardest hit in California, where the minimum wage for fast-food restaurants rose to $20 an hour starting April 1.
In early June, Mexican chain Rubio’s closed 48 branches in the state and also filed for bankruptcy.
Across the United States, family-owned businesses have also been closing.
Earlier this month, for example, Fargo’s Pit BBQ in Texas closed after more than two decades of serving brisket, ribs and other barbecue classics.