As consumers continue to cut back – and watch their waistlines – the nation’s largest full service Mexican food chain has filed for bankruptcy.
The Cypress-based owner of the Chevy’s, El Torito and Acapulco chains has been bleeding red ink for months, losing $75 million in third quarter of this year alone. On Monday, the company said it had requested protection under Chapter 11 of the federal bankruptcy code, and was also putting itself up for sale.
Real Mex has been struggling to right itself in the poor economy, revamping its menus to offer lower-priced and lower calorie options. It has also replaced key executives, bringing in a new chief executive, David Goronkin, in April, and a new chief operating officer in June.
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But business has remained slow. To make matters worse, the company is bogged down in debt accumulated by a series of corporate owners, said spokesman Rick Van Warner. Part of the reason for the bankruptcy filing, he said, would be to try to restructure some of that debt.
On Thursday, Van Warner said, Real Mex plans to reach out directly to consumers through full page advertisements in local newspapers. The ads will say that the restaurants remain open for business, and reaffirm the company’s commitment to California, where it has nearly 10,000 employees.
Layoffs for those employees are not currently in the works, Van Warner said.
In a press release, the company said that it planned to re-organize while in bankruptcy. Real Mex owns 166 restaurants, and has an additional 20 franchised locations. The firm is owned by a Florida-based investment group, Sun Capital Partners.
General Electric Capital Corporation has committed to loan money to Real Mex as it reorganizes, the company said in a press release. General Electric Capital is a unit of General Electric Company, a part-owner of NBC-Universal.