Mexican chain collapses into Chapter 7 liquidation

admin June 20, 2026

Sometimes death for a business comes in stages. That’s frustrating for customers and staff, who have to experience the loss multiple times.

For On the Border, the chain’s death march has been ongoing since 2024, when it unexpectedly closed a handful of locations. That spiraled into a Chapter 11 filing, which saw the size of the brand shrink dramatically.

When On the Border filed for Chapter 11 bankruptcy on March 5, the company immediately closed nearly 80 locations. That’s almost two-thirds of its stores, according to the Chapter 11 filing in U.S. Bankruptcy Court for the Northern District of Georgia.

That bankruptcy filing could have led to a complete shutdown, but Pappas Restaurant Group stepped in, buying the brand in May. For less than two months, that gave fans of the brand, and its employees, hope as the new owner pledged to invest in On the Border.

“Under Pappas ownership, On The Border has already undergone a sweeping menu overhaul rooted in the same culinary standards that have defined the Pappas name across Texas for decades. The team has enhanced food quality, strengthened operations and elevated the overall guest experience,” the new owner shared in a press release.

That investment ended abruptly on June 11 when all company-owned On the Border locations closed unexpectedly. Now, the chain has formally filed for Chapter 7 bankruptcy, according to documents filed on PacerMonitor on June 19.

Pappas Restaurants gives up on On the Border

OTB Hospitality, the operating company of On The Border Mexican Grill & Cantina, has voluntarily filed for liquidation under Chapter 7 of the United States Bankruptcy Code on June 19 after closing all company-owned locations earlier this month, the company shared in a June 19 press release.

OTB Hospitality is a separate legal entity wholly owned by Pappas Restaurants, and this filing applies only to OTB Hospitality, Pappas Restaurants is not part of the filing and continues to operate with financial stability and a continued focus on its core brands.

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“This was an incredibly difficult decision. Our teams worked hard over the past year to stabilize the business, but it became clear that OTB would require substantial ongoing investment that would pull focus and resources away from the core operations that define who we are,” said Chris Pappas, spokesperson for OTB Hospitality.

Franchise locations in South Dakota, Florida, Nevada, California, and South Korea continue to operate independently and are not included in the filing.

On the Border has struggled for years

As of its March 5, 2025, Chapter 11 filing, On the Border had 113 restaurant-location leases, a “significant number” of which are for locations “that aren’t operating,” the company said. The company wants “to reject the leases for non-operational restaurants as of the petition date,” it said.

The filing laid out a key source of the company’s financial struggles.

“In 2024 the company spent some $25.3 million on lease obligations, around $11.9 million of which relate to underperforming stores,” it said. “Given the company’s operational headwinds and financial position, payment of lease obligations associated with nonperforming leases has caused significant strains on the company’s liquidity.”

On the Border hired Hilco Corporate Finance in January 2026 to implement a marketing process for selling assets on a going-concern basis, or to close another strategic value-maximizing transaction that would resolve the company’s operational and financial challenges.

Pappas Restaurant Group was the winner of the process.

On the Border will be liquidated under Chapter 7 bankruptcy.Shutterstock

A Chapter 7 bankruptcy means liquidation

For now, the only remaining On the Border locations are the franchised restaurants. The company’s assets, however, will be sold, and a new buyer could acquire and reopen the brand.

In its original Chapter 11 filing, On the Border placed some of the blame for its struggles on inflation.

“In court papers, On the Border said customers dined out less in recent years as restaurant inflation outpaced grocery prices. The chain said rising minimum wages in many states also added to its costs, and it has struggled to recruit and retain workers,” the Associated Press reported.

Its problems, however, have deep roots.

“On The Border’s difficulties did not emerge suddenly. The brand began experiencing persistent sales declines as far back as 2008, according to Technomic data, a trend that continued through multiple ownership changes. The pace of deterioration accelerated sharply in more recent years,” according to reporting from Restaurant Association, a foodservice trade publication.

Sales fell nearly 33% while its unit count was cut by 42%, according to Technomic.

“At the time of the final closures, On the Border ranked as the fifth-largest Mexican casual-dining chain in the United States by total sales, with revenues of $152 million — a figure that reflects how far the brand had fallen from its position as one of the category’s defining names,” Restaurant Association added.

This story was originally published by TheStreet on Jun 20, 2026, where it first appeared in the Restaurants section. Add TheStreet as a Preferred Source by clicking here.

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