Restaurant chain facing familiar Red Lobster fate over sudden closures of 48 restaurants & Americans may see a payout
RUBIO’S Coastal Grill is facing worker complaints after it abruptly shut 48 locations.
The fast food taco restaurant declared bankruptcy earlier this month — the second bankruptcy for the chain in just four years.
As part of its restructuring, the company shut roughly a third of its stores.
One employee is seeking a class-action lawsuit against the company, according to Nation's Restaurant News.
The plaintiff is claiming workers were not given enough notice in advance of the mass layoffs.
Based in California, the chain is required to adhere to strict worker protections, including the state’s Worker Adjustment and Retraining Notification Act, or WARN.
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WARN requires that large companies give workers 60 days notice before a layoff of more than 50 people.
Now, the employee is seeking 60 days back pay and benefits through the suit.
CALI COSTS?
The company pulled out of 48 locations in California and blamed high costs there.
The Golden State implemented a new $20 minimum wage for fast food workers in April, sparking anger from the industry.
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McDonald’s and other fast food chains raised prices, apparently to make up the difference.
However, Rubio’s has been struggling for years.
The company filed for bankruptcy back in 2020.
By this year, they’d built up between $10 million and $50 million in debt, according to documents reviewed by The U.S. Sun.
The company had 152 locations as of January, according to data compiled by ScrapeHero.
How does bankruptcy work?
Bankruptcy is a specific legal process that helps companies eliminate debt they can't repay.
The process allows businesses to start fresh and gain access to new credit.
Supervised by federal courts, bankruptcies allow a company to sell off its assets more easily to pay off creditors, according to Investopedia.
Chapter 11, a common process for companies, is used to restructure a business with the goal of remaining open - even if it means selling off most of the company's properties.
Chapter 7, on the other hand, sells all of a company's assets, putting it out of business.
Chapter 15, alternatively, allows for collaboration between American and foreign courts to conduct bankruptcy proceedings with "parties of interest involving more than one country," per the United States Courts.
RESTAURANT RUMBLES
Red Lobster, a fellow bankrupt chain restaurant, is facing a WARN suit of its own.
The seafood chain shut 93 locations amid a bankruptcy.
The lawsuit says Red Lobster similarly failed to give 60 days notice to workers at closing California locations.
Red Lobster and Rubio’s are two major bankruptcies in a chain of filings across the industry this year.
Ohio-based Melt Bar and Grilled, a grilled cheese restaurant, recently filed Chapter 11.
The company’s owner said he “refused” to let the company go under.
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Illinois-based Wendy’s rival Kuma’s Corner has also declared bankruptcy.
BurgerFi is reportedly considering bankruptcy.