Many of the sector’s key players have contracted or disappeared. | Restaurant Business image using AI
When On the Border Mexican Grill abruptly closed 28 restaurants last month, it left the onetime 166-unit Tex-Mex powerhouse with just five locations in the U.S., and dealt a body blow to a restaurant genre in decline.
The once lively full-service Mexican category has been plagued for years by sales declines, closures, and bankruptcies. It has seen many of its biggest players, including Chi-Chi’s, El Torito, and now On the Border, wither or disappear.
In 2025, total sales at casual-dining Mexican chains on Technomic’s Top 500 declined 1.2%, to $1.9 billion, while casual-dining grew by 2.9% on the whole. The segment’s largest brand is Chuy’s, with just over 100 locations. It is one of the only restaurant categories that has yet to see sales return to pre-pandemic levels.
And yet Mexican restaurants remain an essential part of the American restaurant ecosystem. There are nearly 32,500 sit-down Mexican places in the U.S., most of them mom and pops. That’s 8,000 fewer than 2019, but still more than the number of sports bars, Italian restaurants, and steakhouses, per Technomic data.
As with the gradual fall-off of any restaurant segment, there are numerous reasons for the struggles of full-service Mexican chains. Full-service restaurants in general have been under pressure for years. Rising costs and weaker demand for sit-down dining have led to a wave of bankruptcies, including Red Lobster and Hooters.
But the problems in full-service Mexican predate this particular economic moment, and even the pandemic, said Bryan Lockwood, the former CEO of Real Mex Restaurants and current CEO of Artistry Restaurants. He places the breaking point somewhere prior to 2015, the year he joined Real Mex.
“You’re now just seeing a can that got kicked down the road coming to fruition,” he said.
‘As American as egg foo yung’
Mexican food has been a part of the American diet for about as long as the hamburger. The first south-of-the-border import to take root here was the tamale, which crossed over into Texas and was common by the 1870s, according to the book “Taco USA: How Mexican Food Conquered America” by Gustavo Arellano.
Tacos arrived in the ’20s, and were later propelled into the mainstream by Taco Bell and other fast-food chains, which helped tame spicy Mexican fare for milder American palates. Sit-down Mexican concepts soon followed, bringing a more immersive experience than taco stands could offer.
The first of these was El Torito. Founded in 1954 in Los Angeles by Larry Cano, the son of a Mexican immigrant and a Texan, the restaurant specialized in California-Mexican cuisine like burritos, enchiladas, and guacamole, and catered to the city’s upscale residents. It aimed to give customers both good food and good times, and claims to have helped invent or popularize a number of hallmarks of Mexican dining, including mariachi brunches, Taco Tuesday, and margaritas, according to “Taco USA.”
El Torito would help give rise to similar concepts across the U.S., including Chi-Chi’s, Casa Gallardo, and Garcia’s. They helped spread Mexican food from the border states to the middle of the country, appealing to consumers with novel flavors and affordable prices. Eventually, the growth attracted the interest of Wall Street investors, corporate owners, and later, private-equity firms, which added fuel to their expansion.
In 1976, the 20-unit El Torito was acquired by the chemical company W.R. Grace and Co. for about $20 million, and Cano was ordered to ramp up development. At its height, the chain opened 54 locations in one year, peaking at nearly 250 and absorbing several competitors along the way.
By the early 1980s, burritos and tostadas had become “as familiar and as American as egg foo yung,” according to a 1982 Time Magazine article about the explosion of Mexican chains. It noted that Mexican restaurant sales had tripled since 1977, and suggested that the cuisine was here to stay.
“Is pizza a fad?” William Trainer, a restaurant analyst for Merrill Lynch, told the magazine. “I think Mexican restaurants have lots of room to grow.”
A closed On the Border in Lakewood, Colorado, 2022. | Photo: Shutterstock
‘Tacos are tacos’
The article wasn’t wrong. Mexican is now considered one of the “big three” ethnic cuisines in America, along with Italian and Chinese. But the proliferation of full-service Mexican chains decades ago also led to problems for the sector that are still reverberating today.
For many brands, the growth-at-all-costs mentality had diminishing returns. By the mid-’90s, El Torito was shrinking, and 10 years later, the onetime segment leader Chi-Chi’s was gone completely, a victim of bankruptcy and then a devastating hepatitis A outbreak that sickened more than 600 people and led to four deaths. (The brand was revived last year by restaurateur Michael McDermott, the son of co-founder Marno McDermott.)
In one sense, these chains were a victim of their own success. They’d helped make Mexican food mainstream, paving the way for more refined competitors in the process. Chi-Chi’s failed, in part, because “it was no longer needed,” Arellano writes in “Taco USA.”
The relative simplicity of Mexican food made it easier for others to get in the game. It’s like the old Jim Gaffigan joke that every Mexican dish is some combination of the same five ingredients. These days, you can expect to find nachos, tacos, and quesadillas at many sports bars, diners, and other ostensibly American restaurants.
“[Mexican restaurants] are not hard to run, so you get a lot more competition,” said Judson Holt, CEO of 33-unit Lupe Tortilla. “And [customers] go, ‘Well, tacos are tacos, right?’”
That may be true for what we now think of as mainstream Mexican food. But go a level deeper, and the Mexican restaurant market is diverse and regional. Ingredients, cooking styles, and customers’ spice tolerances are different in California than they are in Texas, Chicago, New York, and so on. Even within a single state or region, tastes can differ. When Houston-based Lupe Tortilla entered the San Antonio market, “I got a lot of hate mail,” Holt said. “We had to do some tweaking and some time to win the hearts and minds of the customers.”
So while Mexican food may be ubiquitous, it is also harder than ever for any one brand to get too big.
“Hispanic food has become much more regionalized,” said David Henkes, senior principal with Technomic. “The consumer and the demographics of the U.S. mean that there’s less of a cohesive demand for Americanized, sit-down Mexican food.”
But as full-service Mexican chains grew and consolidated over the years, the result was often just that: Homogenization.
In the early 2000s, El Torito was acquired by Acapulco, another old-guard Mexican chain out of Southern California, creating the private-equity-owned Real Mex group. Real Mex later added Chevys and other concepts, making it the largest operator of full-service Mexican restaurants in the country.
The company would file for Chapter 11 bankruptcy twice in the 2010s, first in 2011, following the Great Recession, and then again in 2018. Bryan Lockwood led the company for three years ahead of the second restructuring. In some cases, he said, Real Mex was its own biggest competitor.
“There were Chevys virtually across the street from El Toritos, with an Acapulco down the road from that, and you’re buying the same oil and chips and fajita meat and taco meat,” he said. “You kind of lose your identity.”
On top of that, ownership had loaded the restaurants with debt, he said, which made it difficult to invest in improvements. Lockwood pushed back, and between food and service upgrades and strategic store closures, same-store sales improved dramatically during his first year at the helm. But ultimately, “they just collapsed from the weight of private-equity ownership,” he said.
Following the 2018 bankruptcy, Real Mex changed its name to Xperience Restaurant Group under new owner Z Capital. It still owns El Torito, Chevys, and Acapulco, but these former giants of casual Mexican are down to about 40 units combined. Sales at El Torito and Chevys declined 7% and 8% last year, respectively, per Technomic data, and Acapulco has just one remaining location.
The Chipotle effect
As El Torito and its fellow full-service Mexican concepts entered the new millennium, another force was emerging to slow their progress: Chipotle Mexican Grill.
Founded in 1993, the brand helped create the fast-casual restaurant category, promising casual-dining-level food with service and prices akin to a QSR. Mexican cuisine lent itself to this new format, particularly Chipotle’s assembly-line production process. The explosion of Chipotle and other fast casuals in the 2010s, along with the Great Recession, helped speed the decline of many full-service Mexican brands during that time.
Today, Chipotle is the seventh-largest restaurant chain in the U.S., with nearly $12 billion in sales last year, and limited-service Mexican is a healthy category, with sales growth of 2.8% in 2025, per Technomic data. Though Chipotle has slowed a bit, brands like Qdoba, Velvet Taco, and Bubbakoo’s Burritos have enjoyed strong sales, and Taco Bell continues to be a juggernaut.
“It’s not that there’s not demand for [Mexican], but it shifted over to the limited-service side,” Henkes said. “That’s part and parcel of what we’re seeing in the restaurant industry in general, where full-service restaurants have just struggled.”
Lupe Tortilla has been a bright spot in the FSR Mexican landscape. | Photo: Shutterstock
The future is regional
If there’s any hope for the full-service Mexican segment, it may be in small, regional brands like Lupe Tortilla.
Unlike some of its counterparts, the 43-year-old chain has taken a measured approach to expansion, limiting new openings to two or three a year and funding them with cash flow. It has remained entirely Texas-based and has no plans to move beyond the state.
“The culture is the big problem, right? If you grow too fast, dilution occurs,” said Holt, whose parents opened the first Lupe in 1983. “We’re trying to avoid that at all costs.”
It helps that Lupe serves a slightly more upscale clientele, a group that has generally continued to dine out no matter what the economy has thrown at them recently.
That formula has worked: Lupe’s sales rose 8% last year, per Technomic, making it the fastest-growing full-service Mexican chain on the Top 500. With the demise of On the Border, Lupe is also the second-largest Mexican FSR in the U.S. by sales with just 33 locations — a sign of both how the category has changed and where it might be headed.
“What you’re going to probably end up seeing is a fair number of small to mid-size chains that are servicing different parts of the country and can cater to the demographics of those parts of the country,” Henkes said.
Lockwood’s Artistry Restaurants hopes to be one of those. The Florida-based group is planning to add a Mexican brand to its portfolio of seven full-service concepts. But it will do so on a modest scale, with a target of 20 locations in five years, all within the Southeast.
“[Customers] still want what you can deliver in a local, regional way,” Lockwood said. “We’re not gonna get out of our space. We’re gonna just stay in our lane here and do what we do and do it the best we can.”
