Restaurants have taken a hit in recent years with rising food costs hurting their already tight margins, and several big names have succumbed to bankruptcy as a result.
Wholesale food prices were up 7% annually in December 2024, according to the National Restaurant Association. But the days of casual eateries being able to pass rising costs onto customers may be behind us.
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In its 2024 Holiday Outlook, PwC found that consumers are becoming more selective in their spending, with 55% looking to cut back on dining out in the next six months.
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Persistently elevated inflation has forced many consumers to rethink their priorities. And with restaurant prices up 3.6% annually, per December's Consumer Price Index, in the coming months, we could see a shift toward more food prep at home.
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Heavy competition in the Mexican restaurant space
At a time when consumers may not be as quick to spend their money, oversaturation is a problem in any given market. And it’s certainly impacting Mexican eateries on a national scale.
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A number of Mexi-casual chains continue to dominate the market. With an estimated 3,636 store footprint, according to data company ScrapeHero, Chipotle (CMG) continues to dominate. Other big players like Qdoba and Moe's Southwest Grill, with 757 and 628 locations, respectively, have squeezed out chains with smaller store counts.
In 2024, casual chain Tijuana Flats filed for bankruptcy and is now launching a menu makeover in an attempt to regain steam. And Uncle Julio's, another casual Mexican chain, has faced its share of financial challenges as well.
In March 2024, Uncle Julio's Lincoln Park, Chicago store closed abruptly, citing rising rent costs as the reason. And many feared the beloved chain would continue to shutter locations.
Restaurant giant Sun Holdings acquires Uncle Julio’s
Sun Holdings, which already maintains a diverse portfolio of quick-service restaurants, or QSRs, recently acquired almost all of Uncle Julio's assets through its affiliate, Next Restaurants, in a foreclosure auction. The deal came more than six months after Sun Holdings bought Uncle Julio's debt at a discount on the secondary market. Uncle Julio's, which has about 37 locations, itself never filed for bankruptcy.
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The acquisition, which took place in December 2024, aligns with Sun Holdings’ strategy to strengthen its foothold in the casual Mexican space.
Through its affiliates, Sun Holdings already operates Taco Bueno, a quick-service Mexican chain. It also acquired Freebirds World Burrito, a fast-casual chain known for its customizable burritos, in August 2024.
“Uncle Julio’s is an iconic brand with a storied legacy and a loyal following,” said a Sun Holdings spokesperson. “This acquisition reflects our ongoing commitment to identifying opportunities where we can combine operational excellence with strategic growth to deliver value to customers and stakeholders alike.”
The company said it intends to use its "extensive resources, operational expertise, and industry-leading capabilities" to position Uncle Julio’s for long-term success. The casual chain can benefit from Sun Holdings' leveraging shared supply chains, which could help address the financial pressures that have been plaguing restaurants in recent years.
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With this acquisition, Sun Holdings now has a prime opportunity to distinguish its brands and carve out a niche for each restaurant chain it owns at a time when consumers are being more choosy. And revisiting the Irving, Texas-based chain's menu may be a move worth contemplating in an age where casual Mexican food has become increasingly easy to come by.
One area to focus on could be Uncle Julio's drink selection, which features the selection one would expect — a smattering of margaritas with some creative additions. A foray into tequila and cocktail flights could help Uncle Julio's emerge as a more grown-up, sophisticated player in the Mexi-casual space.
And in an age where consumers are increasingly looking for non-alcoholic alternatives, the chain could also look to expand on its liquor-free offerings which, right now, are limited to a modest three choices.
Menu revamps have been a popular strategy for struggling restaurants of late. An overhaul of Uncle Julio's menu could lead to steady growth for the chain and help secure its place as a polished casual dining destination.
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