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One Mediterranean Restaurant Chain Files for Chapter 11, While Another Soars

Roti Seeks Bankruptcy Protection As Cava Posts Strong Fiscal Second-Quarter Results
Roti slashed its restaurant portfolio in 2021. (CoStar)
Roti slashed its restaurant portfolio in 2021. (CoStar)
CoStar News
August 26, 2024 | 10:02 P.M.

The same day one Mediterranean fast-casual restaurant chain said it had filed for bankruptcy protection, another one reported that its second-quarter revenue skyrocketed, illustrating the uneven fortunes of U.S. restaurants coming out of the pandemic.

Chicago-based Roti and Cava Group, headquartered in Washington, D.C., both released significant news Friday — separate announcements hot and cold like items on their menus. In Roti's case, it said it was seeking to reorganize, secure new investors and continue its operations across all its locations in the Chicago, Minneapolis and Washington metropolitan areas through a Chapter 11 process. Its website lists 19 restaurants.

By contrast, its direct competitor Cava said that its fiscal second-quarter revenue rose roughly 35%, to $231.4 million, as compared to the prior-year period. That increase was primarily driven by 78 net new restaurant openings during or subsequent to the second quarter last year, according to the company. In the most recent second quarter, Cava opened 18 net new restaurants, bringing its total to 341.

Roti has now joined an ever-growing list of restaurant chains that have sought Chapter 11 protection this year, a group that includes Red Lobster, Buca di Beppo, World of Beer, Tijuana Flats and Rubio's. BurgerFi, operator of its namesake chain and Anthony’s Coal Fired Pizza & Wings, recently warned it may have to file for bankruptcy or cease operations. A number of those chains have cited ongoing woes from COVID-19 pandemic closings for their financial difficulties, as well as some consumers cutting back on discretionary spending and soaring costs.

Cava is opening new restaurants. (CoStar)

"The COVID pandemic disproportionately affected Roti, as 50% of its restaurants were based in downtown business districts — but Roti made it through with the support of investors and consumers only to find itself in a current restaurant climate mired in a consumer spending downturn," the company said in a statement.

But even in a challenging macroeconomic environment, other restaurant operators are thriving and seeing double-digit revenue increases, not only Cava but also Shake Shack and Chipotle Mexican Grill.

Roti didn't respond to an email from CoStar News on Monday requesting comment.

Closing Locations

The chain, founded in 2006, in 2021 shuttered about a third of its roughly 40 locations.

“Our vision to create happier, healthier and more flavorful lives comes to life by providing our guests with exceptional food experiences — even in the face of current headwinds,” Roti CEO Justin Seamonds said in a statement. "After careful consideration, filing for bankruptcy protection was the best way to address our challenges — including financial performance, higher costs, mixed location performance and tough market conditions — while staying open and focused on delivering 'Food For A Full Life' to each and every guest."

As Roti "navigates this restructuring process, the plan is to collaborate with landlords and suppliers to keep locations open and the team employed," the chain said.

“Bankruptcy is a process designed to provide companies like us with the tools to stay open, keep our exceptional team members employed and explore future prospects for Roti," Seamonds said.

The Chapter 11 process "will accelerate the process of attracting a transformational event to Roti and address the demands of a challenging consumer environment for smaller restaurant chains," according to the company.

Cava's Growth Trajectory

Cava, in turn, touted its second-quarter results and expansion Friday.

"Our results in the second quarter continued to demonstrate the strength of our category-defining brand and our unique and compelling value proposition,” Brett Schulman, co-founder and CEO, said in a statement. “During the quarter, traffic grew 9.5%, we opened 18 net new restaurants and, driven by the power of our unit economic engine, generated average unit volume of $2.7 million."

Cava also launched a new steak offering in the quarter.

"Grilled steak is significantly outperforming our expectations and giving guests another reason to visit Cava and come back more often,” Schulman said.

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