Rubio’s Coastal Grill, the fast-casual taco chain that has struggled with weak sales for years, last week closed 48 underperforming restaurants in California, more than a third of its total unit count.
The company in a statement blamed the problem on the operating environment in the state, which in April started requiring limited-service chain restaurants to pay workers a minimum of $20 per hour.
“Making the decision to close a store is never an easy one,” Rubio’s said in a statement, noting that it made that decision “after a thorough review of its operations and business climate.”
“The closings were brought about by the rising cost of doing business in California,” the statement continued. “While painful, the store closures are a necessary step in our strategic long-term plan to position Rubio’s for success for years to come.”
The news highlights the challenges of the business environment, both in general and for operators of mid-sized chains in California. But Rubio’s has been underperforming its cohorts for years.
Sales at Rubio’s started declining in 2017. That sales decline accelerated during the pandemic, prompting the company’s 2020 bankruptcy. The company has been closing units since.
Heading into 2024, according to data from Restaurant Business sister company Technomic, Rubio’s had closed more than one-quarter of its restaurants since 2018. That included a swath of closures in 2020. But the brand closed seven units last year.
The company has also struggled when compared with other fast-casual Mexican chains, according to Technomic. Rubio’s has averaged a 1.1% decline in system sales the past five years. On average, fast-casual Mexican chains averaged 10.4% growth over that period.
And another 14 locations have closed since the end of last year before this latest round of closures, based on company comments and Technomic data. Rubio’s now operates 86 restaurants—it began the year with 148. That is less than half the restaurants it operated five years ago.
But this has also been a tough few years in the restaurant space, an environment that has been hardest on mid-sized chains like Rubio’s.
The pandemic was brutal on such chains, forcing many of them into debt workouts or bankruptcy filings. The inflation-fueled aftermath was likewise tough, forcing many of them to raise prices dramatically to maintain margins and pay off debt and rent. But that’s hard on brands that are already losing sales, as Rubio’s had been struggling with going into the pandemic.
The addition of the $20 wage in California only made matters worse for such chains. Most of Rubio’s locations are in California. The brand operated 27 restaurants total in Arizona and Nevada entering 2024.
But there are reports that many of the company's locations were struggling long before the decision to close the restaurants. One location in El Dorado Hills, California, was months behind on rent and was about to be evicted before it closed its doors and tried to clearly the location of equipment, according to reports.
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