Razzoo's Cajun Cafe: Texas Chain Pursues Going-Concern Sale

Razzoo's, Inc. and affiliate Razzoo's Holdings, Inc. filed chapter 11 petitions on October 1, 2025, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. The cases are jointly administered under case number 25-90522. The filing followed sustained sales pressure in the casual dining sector, lease obligations totaling approximately $650,000 monthly, and an inability to continue servicing approximately $9.65 million in secured debt owed to First Horizon Bank. Less than three months after filing, ThirtyThree97 LLC—an affiliate of Dallas-based M Crowd Restaurant Group—emerged as the winning bidder with an approximately $18.8 million credit bid, positioning the company for a going-concern sale of its 20 remaining locations.

The 34-year-old Texas-based restaurant chain, which describes itself as "unapologetically Cajun", filed amid a restaurant industry restructuring wave that has affected mid-sized regional chains facing competition from national value-oriented operators. With a sale hearing scheduled for December 23, 2025, the timeline shows the pace of the Section 363 process and consolidation in the casual dining sector.

Operating Footprint and Business Model

Razzoo's is a regional casual-dining brand founded in June 1991 in Dallas, Texas, by entrepreneur Mike Leatherwood with approximately $120,000 in seed capital, with a core footprint concentrated in the Dallas-Fort Worth metroplex and prior expansion into North Carolina and Oklahoma. Over three decades, the company grew to a peak of 24 restaurants before closing locations. In 2024–2025, management closed four locations—one in 2024 and three in September 2025 (Pasadena, TX; Corpus Christi, TX; Oklahoma City, OK). After these closures, the debtors operate 20 locations across Texas and North Carolina. Management estimates recurring monthly rent obligations decreased by approximately $110,000 following the prepetition exits.

The debtors maintain an operating model centered on Cajun cuisine and guest service. Its business model exhibits significant seasonality tied to crawfish availability and pricing. In 2025, increased competition for crawfish supply depressed retail selling prices and contributed to a year-over-year sales decline during what should have been peak season. This commodity exposure coincided with value-oriented promotions by larger competitors.

Liquidity and Capital Structure

Prepetition financing was provided under a credit agreement with First Horizon Bank, which operates a restaurant finance group and reports a 160-year operating history. The credit facility was amended multiple times through September 2024. In September 2024, outstanding principal stood at approximately $11.93 million. By the petition date, the balance was reduced to approximately $9.65 million (consisting of $9.57 million in principal and $79,264 in accrued interest), reflecting paydown and $850,000 in shareholder contributions. The obligations are secured by substantially all assets of both debtor entities. The debtors also estimate approximately $3.1 million of unsecured trade obligations owed to various vendors and landlords.

Court filings reveal the concentration of unsecured claims among landlords for closed or underperforming locations. Largest prepetition creditors identified in the Schedules of Assets and Liabilities include:

The schedules list landlord claims among the largest unsecured claims.

Razzoo's does not own any real estate, operating instead under long-term lease agreements for all 20 locations. Aggregate monthly rent approximates $650,000 across the store base, translating to approximately $7.8 million in annualized lease obligations.

Immediately before filing, the debtors projected a ~$500,000 principal-and-interest sweep due October 1, 2025, under the First Horizon facility. Management concluded the payment was not feasible while maintaining operations and preparing a restructuring; the petitions were filed the same day.

Competitive Pressures and Industry Context

The October payment deadline came after several pressures on Razzoo's operating position. CEO Philip Parsons said the bankruptcy decision was driven by declining sales, shifts in consumer spending habits, and increased competition from larger chains with deeper marketing budgets.

Aggressive discounting and marketing by national casual-dining chains created competitive pressure. Court filings identify Chili's and Applebee's as competitors whose "heavy media presence" and "value-oriented promotions" negatively influenced Razzoo's guest traffic. Chili's, in particular, has found success with its "3 for Me" deal, offering a non-alcoholic beverage, appetizer, and full-sized entrée starting at $10.99. The chain's chief marketing officer emphasized that these combos deliver "better quality," "bigger portions," and "more variety than what you'll find in fast food."

In fiscal Q4 2025, Chili's same-store sales surged 24%, driven by a 16% traffic increase—the chain's fifth consecutive quarter of double-digit same-store sales growth. Two-year same-store sales growth reached 39%. CEO Kevin Hochman noted that "our cohort growing the fastest is actually now households with income under $60,000."

Razzoo's business model also exhibits seasonality tied to crawfish availability and pricing. The 2024 crawfish season was historically poor, with drought limiting supply. Retail prices spiked as high as $16.99 per pound before production rebounded in 2025, with approximately 65% more crawfish harvested compared to the prior year—driving live crawfish prices down to $3.64 per pound. Razzoo's reported sales declines during the 2025 crawfish season.

The company implemented cost-saving initiatives prepetition, including a reduction in force estimated to deliver approximately $1 million of year-over-year savings in 2025 and supply chain optimization yielding approximately $1 million in savings across 2024 and 2025 combined.

Razzoo's filing follows broader distress across the casual-dining sector. Major operators including Red Lobster, TGI Fridays, and Hooters of America declared bankruptcy in 2024-2025.

Nearly 350 full-service chain restaurants closed amid bankruptcy in 2024, mostly at TGI Fridays and Red Lobster, ending a three-year streak of unit growth for FSR chains. Razzoo's joins a growing list of 2025 restaurant bankruptcies, including TGI Fridays (its second filing), Hooters, Pinstripes, and Abuelo's.

Debtor-in-Possession Financing

The debtors moved quickly to secure DIP financing to stabilize operations during the restructuring. Initially, the company proposed a facility with third-party lender TJF Financial LLC, which would have provided approximately $1 million in interim financing and up to $4 million total. However, following negotiations with stakeholders, First Horizon Bank—the debtors' existing prepetition secured lender—stepped in to provide the DIP facility. On October 7, 2025, the bankruptcy court entered an Interim DIP Order authorizing up to $3.3 million in new-money financing, with an initial draw of $1.8 million available immediately.

On November 7, 2025, the Final DIP Order established the complete financing structure: up to $3.3 million in new-money DIP commitment plus an incremental $700,000 facility, for an aggregate maximum of $4 million. The facility carries interest at 10% per annum (plus an additional 3% upon default) and matures on March 31, 2026. The DIP structure includes a roll-up provision whereby the $9,571,410 in prepetition principal owed to First Horizon was incorporated into the DIP obligations, giving the lender superpriority administrative expense status and first-priority priming liens under Sections 364(c)(1) and 364(d)(1) of the Bankruptcy Code. The DIP Order also established a $300,000 carve-out for professional fees.

Key milestones govern the facility: the Challenge Period for prepetition liens expired on December 7, 2025 (60 days after committee formation), and the DIP matures on March 31, 2026. All DIP proceeds must be used in accordance with an Approved Budget, with material deviations constituting an event of default. First Horizon subsequently assigned its position to ThirtyThree97 LLC, the M Crowd affiliate, enabling the buyer to use its combined prepetition and DIP debt as a credit bid in the sale process. (TJF Financial, the initially proposed lender, filed an administrative expense claim for its commitment fee, which remains pending.)

Alongside the DIP financing, the debtors obtained first-day relief including joint administration, engagement of Donlin, Recano & Company, LLC as claims and noticing agent, authority to continue cash management practices, and authority to pay prepetition wages and continue employee programs for the approximately 1,042 employees across corporate and store operations. The Court also authorized approximately $385,000 in payments to critical vendors on a rolling basis, including food and produce suppliers ($300,000), liquor, beer, and wine distributors ($25,000), and essential restaurant supplies (~$60,000).

The M Crowd Acquisition: A Credit Bid Exit

The sale process moved after the October 13, 2025 filing of the Sale and Bidding Procedures Motion. On November 4, 2025, the Court approved bidding procedures establishing a framework for marketing substantially all of the debtors' assets, including stalking horse protections, assumption and assignment procedures for executory contracts and unexpired leases, and a competitive auction timeline. The stalking horse designation deadline of November 4, 2025 was extended to November 28, 2025.

On December 2, 2025, ThirtyThree97 LLC—a Delaware limited liability company affiliated with M Crowd Restaurant Group—was selected as the stalking horse bidder. The offer, valued at approximately $18.8 million, is structured primarily as a credit bid pursuant to Section 363(k) of the Bankruptcy Code. Under this structure, ThirtyThree97 offsets the Senior Secured Prepetition Obligations and DIP Obligations it acquired from First Horizon Bank against the purchase price, rather than paying cash. The bid also includes payment of cure costs for assumed contracts and leases, assumption of certain liabilities tied to ongoing operations, and cash sufficient to cover the Stout Capital transaction fee.

M Crowd Restaurant Group is a Dallas-based multi-concept restaurant company whose portfolio includes Mi Cocina—the 10th-largest Mexican casual-dining chain in the United States with total sales of $91.6 million in 2024—as well as The Mercury, Sushi at the Mercury, Monkey Bar, and Vaqueros Texas Bar-B-Que. The group was founded in 1991 by Michael "Mico" Rodriguez, Ray and Dick Washburne, and Bob McNutt. The acquisition of Razzoo's would expand M Crowd's portfolio into the Cajun cuisine category.

The stalking horse bid included protections: a $340,000 breakup fee (approximately 3% of the estimated purchase price) and expense reimbursement of up to $50,000, payable if a higher or better bid were to prevail at auction. When the December 8, 2025 bid deadline passed without any competing qualified bids, the scheduled December 12 auction was cancelled and ThirtyThree97 was designated as the winning bidder on December 9, 2025.

The sale contemplates transfer of substantially all assets, including accounts receivable, intellectual property related to the "Razzoo's Cajun Cafe" brand, assigned contracts and leases marked for assumption, and operating permits. Excluded from the sale are cash in most bank accounts (except petty cash), good faith deposits, professional fee accounts, adequate assurance deposits, sales tax escrow funds, and the three closed restaurant locations (Pasadena, Corpus Christi, and Oklahoma City). M Crowd will determine which employees and restaurants it will retain post-closing; the company reported about 1,000 employees at filing.

Pending Disputes and Outlook

Several stakeholder disputes require resolution before the sale can close. On December 11, 2025, the Court authorized rejection of unexpired leases for the three closed locations—Pasadena, Corpus Christi, and Oklahoma City—effective retroactive to the petition date. However, multiple landlords at continuing locations filed objections to cure amounts and adequate assurance of future performance, including Simon Property Group, AZHP2 Development, Matco Investments, DRP Market Heights Property Owner, and UTC Realty. Key landlord disputes center on the proper characterization of October 2025 rent as pre- or post-petition obligations and the adequacy of proposed cure payments. AZHP2 Development and Matco Investments filed witness and exhibit lists in advance of the December 23 sale hearing.

Oracle America, Inc. filed a detailed objection and reservation of rights on December 5, 2025, raising concerns about the proposed assumption and assignment of its software licenses. Oracle is a licensor of computer software and cloud-based services used by Razzoo's, specifically MICROS workstations and Oracle Hospitality/Simphony point-of-sale systems. Oracle argues that under Section 365(c) of the Bankruptcy Code, its non-exclusive copyright licenses cannot be assigned without licensor consent, as applicable law and the underlying license agreements prohibit transfer without Oracle's approval. Oracle also objects to any provision in the Asset Purchase Agreement or Transition Services Agreement that would authorize simultaneous or "split" use of Oracle software by both the debtors and the buyer during a transition period. Oracle requests that the Court deny the sale motion to the extent it seeks assignment without consent and require specific contract identification.

Texas taxing authorities, including the Texas Comptroller of Public Accounts and various county tax assessors, filed a joint objection raising concerns about unpaid taxes—including trust fund taxes that the debtors collected but may not have remitted—and questioning whether the proposed budget adequately provides for outstanding tax liabilities. The taxing authorities also object to the "free and clear" nature of the sale to the extent it purports to extinguish valid tax liens. The Official Committee of Unsecured Creditors, represented by Dykema Gossett PLLC, has raised concerns about potential administrative insolvency if the secured lender's credit bid does not leave sufficient proceeds to cover administrative expenses—implicating the "pay the freight" principle that requires sale proceeds to satisfy priority claims before secured debt.

With ThirtyThree97 LLC designated as the winning bidder and the sale hearing scheduled for December 23, 2025, the case now centers on resolving these outstanding objections and securing Court approval of the transaction. The landlord cure disputes, Oracle license assignment issues, and tax authority concerns must be addressed either through consensual resolution or contested hearing. If approved, the sale would close by March 31, 2026—the DIP maturity date—with M Crowd assuming control of the 20 operating locations and determining which employees and restaurants to retain.

According to the October 2025 Monthly Operating Report, the business reported total cash receipts of $6.67 million, cash disbursements of $4.68 million, and a cash position of approximately $3.6 million as of early November. The debtors reported a net loss of $1.24 million for the month and negative shareholders' equity of $7.26 million, while operating cash flow was positive.

The Committee has raised concerns about administrative insolvency if the secured lender's credit bid does not leave sufficient proceeds to cover administrative expenses.

Frequently Asked Questions

Who is buying Razzoo's?

ThirtyThree97 LLC, an affiliate of Dallas-based M Crowd Restaurant Group (owner of Mi Cocina and other concepts), emerged as the winning bidder with an approximately $18.8 million credit bid.

How much debt did Razzoo's have?

Approximately $9.65 million in secured debt owed to First Horizon Bank and approximately $3.1 million in unsecured trade payables at the time of filing.

Why did Razzoo's file for bankruptcy?

A combination of declining casual dining traffic, competition from national chains offering value promotions (particularly Chili's "3 for Me"), lease obligations of approximately $650,000 monthly, and commodity exposure tied to crawfish availability and pricing.

How many locations will remain after the sale?

The sale contemplates transfer of 20 operating locations across Texas and North Carolina. M Crowd will determine which locations to retain post-closing. Three locations were already closed prepetition (Pasadena, Corpus Christi, and Oklahoma City).

What is a credit bid?

Under Section 363(k) of the Bankruptcy Code, a secured creditor can offset its debt against the purchase price rather than paying cash. ThirtyThree97 acquired First Horizon's secured position to utilize this structure.

How many employees are affected?

Approximately 1,042 employees (101 salaried and 941 hourly) across corporate and store operations. M Crowd will determine retention post-closing.

Who provided DIP financing?

First Horizon Bank (the prepetition lender) provided up to $4 million in DIP financing, which was subsequently assigned to ThirtyThree97 LLC.

Were there competing bidders?

No qualified competing bids were received by the December 8, 2025 deadline, so the scheduled auction was cancelled and ThirtyThree97 was designated the winning bidder.

What are the largest unsecured claims?

Landlord claims dominate: The Pointe II CC LLC ($4.2M), Corpus Christi Retail Venture ($3.8M), and Crown HTV Agent (~$1.2M disputed). Sysco Food Services of Dallas holds approximately $1.37M in supplier claims.

When is the sale expected to close?

The sale hearing was scheduled for December 23, 2025, with target closing by March 31, 2026 (the DIP maturity date).

Who is the claims agent for Razzoo's Cajun Cafe?

Donlin, Recano & Company, LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For comprehensive analysis of restaurant industry restructurings and other chapter 11 cases, visit the ElevenFlo bankruptcy blog.