Beloved restaurant and Cava rival goes for bankruptcy following recent closure of 23 outlets in industry bloodbath.

A well-known Mediterranean fast-casual restaurant chain, Roti, has filed for Chapter 11 bankruptcy, marking another casualty in the struggling restaurant industry. The company submitted its bankruptcy documents last week, citing ongoing financial challenges that have persisted since the onset of the COVID-19 pandemic.

Roti, once a thriving chain with 42 locations, has seen its footprint shrink drastically over the past few years. The chain now operates just 19 locations across Illinois, Minnesota, and Washington, DC, according to court filings obtained by The U.S. Sun. This dramatic reduction from its peak, including the closure of 23 locations over four years, highlights the severe impact of the pandemic on the business.

The chain’s financial woes are largely attributed to difficulties in meeting rent obligations. During the pandemic, Roti’s landlords granted several rent deferrals, but as these agreements have expired, the restaurant has faced a steep rise in operational expenses. Roti’s CEO, Justin Seamonds, revealed in the bankruptcy filing that the company’s rental obligations now amount to approximately $350,000 per month, or $4.2 million annually, a burden that has strained the brand’s financial resources.

Despite the challenges, Roti has engaged in discussions with a national restaurant brand about the potential acquisition of eight of its 19 remaining locations. These talks could lead to a sale of those stores as part of the bankruptcy proceedings.

Roti is not alone in its struggles. Other restaurant chains have faced similar challenges with real estate costs contributing to their financial difficulties.

A Troubling Trend

Red Lobster, another well-known brand, encountered similar issues and filed for Chapter 11 bankruptcy in May. Since then, it has shuttered at least 100 locations across the country. The chain recently announced it would not renew leases for 23 additional underperforming locations across 14 states, with these restaurants set to remain open until August 31.

Hard Decisions Across the Industry

The fast-casual dining sector, in particular, has been hit hard this year by a combination of real estate pressures, rising debt, and other financial struggles. Outback Steakhouse, for example, closed 41 locations in February, surprising many customers. Despite declining foot traffic and sales, the company is working on a turnaround strategy that includes updates to its menu, new equipment, and technology investments, as well as leadership changes.

Rubio’s Coastal Grill, a California-based chain, also filed for bankruptcy earlier this year, closing 48 locations as it grappled with the rising cost of doing business in California.

Even Kuma’s Corner, a popular burger chain and competitor to Wendy’s, filed for Chapter 11 this summer, further illustrating the challenges faced by restaurants in today’s economic environment.