Razzoo's - Case Summary

Business Description

Razzoo's, Inc. (d/b/a Razzoo's Cajun Café), along with its Debtor affiliates (collectively, "Razzoo's" or the "Company"), is a casual dining restaurant chain specializing in Cajun cuisine with a 30-year operating history.

• Headquartered in Texas, the Company has established a significant presence and loyal customer base in the Dallas-Fort Worth Metroplex and believes the brand is positioned for further expansion throughout the Southeast.
• The Company attributes its success to its "6-2-101" corporate culture and its ability to achieve a sector-leading per-person average spend in the casual dining space.

In 2024, the Company generated total sales of $76.6 million, with Store-Level EBITDA of $9.6 million and Adjusted EBITDA of approximately $3.3 million.

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Corporate History

The first Razzoo's Cajun Café opened in Dallas, Texas, in 1991 to address a market need for Cajun-inspired food and culture. Supported by positive cash flow and customer demand, the Company initiated a period of steady expansion.

• By 1996, Razzoo's had grown to six locations within Texas.
• By 2001, the footprint expanded to 14 restaurants, including its first out-of-state location in Concord, North Carolina.
• The Company eventually reached a peak of 24 locations across Texas, North Carolina, and Oklahoma.

In response to market pressures and liquidity constraints, the Company has since closed four underperforming locations, with one closure in 2024 and three in 2025.

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Operations Overview

Following recent closures, the Company operates 20 restaurants in free-standing and end-cap locations. As a Cajun-inspired brand, Razzoo's experiences seasonal sales fluctuations, with revenue typically peaking during crawfish season.

Leased Real Estate Model

• The Company does not own any real estate and operates its entire portfolio through long-term lease agreements.
• Total monthly lease obligations are approximately $650,000. The recent closure of three locations is expected to reduce recurring monthly rent expenses by approximately $110,000.

Workforce

• Razzoo's employs approximately 1,042 individuals, including 101 salaried and 941 hourly employees.
• The workforce comprises corporate staff, area and multi-unit managers, and store-level personnel such as managers, servers, bartenders, and kitchen staff.
• Payroll and employee benefit plans are administered by Paycom, a professional employment organization.

Supply Chain and Key Expenses

• The Company's critical vendors primarily consist of suppliers for food and produce; liquor, beer, and wine (LBW); and essential restaurant supplies. On a rolling basis, the Company estimates ordinary course payments of approximately:
  • $300,000 to food and produce suppliers.
  • $25,000 to LBW distributors.
  • $60,000 to other restaurant suppliers.
• Razzoo's maintains 26 insurance policies with approximately 20 carriers, covering general liability, property, workers' compensation, and other operational risks. Annual aggregate costs include:
  • $2.1 million in insurance premiums.
  • $75,000 for its Workers' Compensation Program.
  • $1,200 for a surety bond.
• The Company spends approximately $170,000 per month on utility services, noting that most of its utility providers do not hold any security deposits.

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Prepetition Obligations

As of the Petition Date, the Debtors' capital structure was primarily composed of secured debt obligations, along with unsecured trade and lease-related liabilities.

Secured Debt

• The Debtors have approximately $9.7 million outstanding under a prepetition credit agreement with First Horizon Bank as the prepetition lender.
  • The facility, originally dated May 19, 2022, was amended three times between June 2023 and September 2024.
  • The obligations are secured by a lien on all assets of the Debtors.

Unsecured Debt

• The Debtors estimate approximately $3.1 million in unsecured trade debt owed to various service providers and vendors.
• Due to liquidity issues, the Company was unable to meet all of its lease and trade payable obligations leading up to the filing.
• As of the Petition Date, approximately $170,000 was owed for prepetition utility services, with no other known defaults on undisputed utility invoices.

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Events Leading to Bankruptcy

The Company's Chapter 11 filing was precipitated by a combination of declining sales amid intense market competition, burdensome lease obligations, and an inability to service its secured debt.

Sales Decline and Competitive Pressures

• Razzoo's experienced a significant decline in sales driven by shifts in consumer behavior toward convenience and affordability, as well as broader macro-economic pressures such as inflation and higher interest rates, which caused customers to "trade down" to fast-casual or quick-service options.
• The Company's guest traffic was negatively impacted by aggressive marketing and value-oriented promotions from key competitors in the casual dining sector, including Chili's and Applebee's.
• These competitive pressures also affected the 2025 crawfish season, where increased competition for crawfish drove down retail selling prices and resulted in lower-than-expected sales for the Company.

Burdensome Leases and Store Optimization

• As sales volumes declined, the Company's long-term lease obligations became increasingly burdensome, consuming a sizable portion of its monthly cash flow.
• In the months prior to filing, management conducted a store-by-store analysis to identify underperforming locations. This led to the closure of three unprofitable restaurants in Pasadena, Texas; Corpus Christi, Texas; and Oklahoma City, Oklahoma, in September 2025.
• The Debtors intend to use the Chapter 11 process to conduct further analysis of their store portfolio and potentially reject additional unprofitable leases to right-size operations.

Inability to Service Secured Debt

• The terms of the prepetition loan agreement with First Horizon proved too costly for the Company to maintain. The agreement required multiple amendments and waivers to address certain specified defaults.
• Although the outstanding principal was reduced from $11.9 million in September 2024 to approximately $9.7 million by the Petition Date—partially due to accelerated amortization and an $850,000 shareholder contribution—the debt service remained unsustainable.
• The immediate trigger for the bankruptcy filing was an impending principal and interest payment of approximately $500,000 due to First Horizon on Oct. 1, 2025, which the Debtors could not afford to make.

Faced with these financial circumstances, the Debtors filed for Chapter 11 protection to obtain access to the automatic stay while pursuing a sale or financing transaction to reorganize their financial affairs and preserve the business as a going concern.