Key highlights
- True Food Kitchen filed for bankruptcy on October 5, 2026, owing roughly $42.1 million, including some merchant cash advance (MCA) agreements with multiple lenders. It closed 12 restaurants and has 34 left.
- Restaurant Business reports two franchisees, a 43-unit Subway operator and a Del Taco operator, blamed MCAs for their filings.
- MCAs take daily or weekly cuts of sales. That drains cash flow for operators who already have cash flow problems.
What happened at True Food Kitchen?
True Food Kitchen announced its bankruptcy filing on October 5, 2026, according to FSR magazine. The better-for-you chain closed 12 restaurants with the filing and now operates 34 across 14 states. It owes about $42.1 million, including some MCA agreements with multiple lenders.
While MCAs weren’t the only issue, court documents point to heavy management turnover, expansion outside core markets, concepts that drifted from the brand, and some locations in areas with low foot traffic. That said, MCA agreements are on the list of what the company owes. That’s worth noting for any operator who thinks they’re only a short-term bridge.
Is True Food Kitchen the only restaurant company dealing with MCAs?
No. Restaurant Business has reported on several large operators using them:
- MTF Enterprises, a 43-unit Subway franchisee, took $1.4 million in advances from two companies, at rates of 59.39% and 94.54%. Weekly draws drained its cash flow. One lender then placed liens on its payment channels, including Stripe, Square, and American Express, which prompted the filing.
- Matador Restaurant Group, a Del Taco franchisee, took $2.7 million in advances from nine different entities before filing.
- Fat Brands, which operates 16 restaurant chains including Twin Peaks, used at least $6 million and as much as $15 million in advances, according to legal filings. Restaurant Business notes its filing had more to do with $1.5 billion in secured debt.
Restaurant Business’s Jonathan Maze describes the problem plainly: When weak sales and rising costs hit profitability, operators that struggle to find traditional lenders turn to MCAs to buy time, and “more often than not, they buy a disaster.”
Why do restaurants turn to merchant cash advances?
Speed and access. If you’ve been turned down by a bank, or you need money for payroll or a repair this week, MCAs promise fast cash and often skip a hard credit check.
The problem is the structure. Repayment comes out of your sales every day or week, regardless of how the week went. A slow Tuesday and a packed Saturday get the same treatment. For an operator already running tight on cash flow, that daily pull can turn a short-term gap into a long-term one.
How can restaurants close a cash flow gap without taking on debt?
Many cash crunches come down to timing. Sales are coming in, but the money isn’t in the bank yet. Weekend revenue can sit for days before it clears, and payroll and vendors don’t wait.
Rapid Fund from SpotOn is built for that gap. It moves card sales into an operator’s bank account within 30 minutes of batching, any hour of any day, for a 0.2% fee per deposit.
How much does a merchant cash advance cost?
More than the headline number suggests. MCAs often use a factor rate instead of an interest rate. On a $100,000 advance with a factor rate of 1.4, you owe $140,000, a $40,000 fee. Many MCAs don’t disclose an APR up front, and SpotOn has seen effective rates as high as 581%.
Here’s a typical example of an MCA in practice. A borrower takes $20,000 and owes $29,725 back, a fee of $9,275. She also pays nearly $1,000 in deposit, processing, and withholding fees before the money arrives.
What should operators check before signing an MCA agreement?
Ask for every item below in writing. If the lender won’t give a straight answer, that tells you something.
- Factor rate and total payback. What will you actually repay, in dollars?
- Effective APR. Ask for it, even though MCAs aren’t required to disclose it in all states.
- Every fee. Origination, administration, processing, deposit, late, and legal fees add up.
- Repayment schedule. Daily and weekly draws hit cash flow hardest. Check what happens after one missed payment.
- Reconciliation clause. This lets you adjust payments if sales drop. Confirm it exists and how it works.
- Personal guaranty and liens. Find out whether your personal assets are on the line and whether the lender can place a UCC lien on your business.
- Confession of judgment. Some states allow lenders to get a judgment against you without notice or a hearing.
- Overwithholding. If you overstate your sales to get more money, your daily payment rises to match. If sales slow, you’ll need to ask for a refund, often every month.
Are there better options than a merchant cash advance?
Often, yes. The right fit depends on what’s squeezing your cash. Here’s how SpotOn’s restaurant financial tools line up:
- Need working capital? SpotOn Capital is built around business health, an easy application, and fast funding, with repayment tied to sales so you pay less when sales are slow.
- Waiting on your own sales? Rapid Fund puts card sales in your account within 30 minutes of batching.
- Staff asking for pay sooner? DayCheck lets employees reach approved tips before payday. Teamwork calculates the tips, managers approve them, and payroll runs as usual. You don’t prefund payouts, and it’s included with SpotOn Teamwork for restaurants at no extra cost. (Subject to employer participation, individual eligibility, and state availability)
“I got a really great capital loan from SpotOn, and it helped me consolidate everything into one easy payment,” said Brian Seo, General Manager and Partner at Ruby Chow’s. “It saves me about 40% compared to what I had with Toast.”
The industry has had a few hard years. Plenty of good operators are one slow quarter from a tough call. Knowing what a financing product costs before you need it is the best protection. Ask questions early, get the terms in writing, and compare options before the pressure builds.
FAQ
What is a merchant cash advance?A merchant cash advance buys a portion of your future sales at a discount in exchange for a lump sum today. Repayment comes out of your daily or weekly receipts.
Is a merchant cash advance a loan?Lenders typically structure it as a purchase of future receivables, not a loan. That structure is why MCAs generally fall outside federal regulation and state usury laws.
Why did True Food Kitchen file for bankruptcy?FSR magazine reports management turnover, inconsistent strategy, expansion outside core markets, and low foot traffic at some locations all played a role. The company’s $42.1 million in debt includes some MCA agreements with multiple lenders.
Can a merchant cash advance lead to bankruptcy?Two franchisees reported by Restaurant Business, MTF Enterprises and Matador Restaurant Group, blamed MCAs for their filings. Repayment drains cash flow, and liens on payment channels can cut off an operator’s access to its own sales.
What’s the alternative to an MCA for a restaurant?Options include term financing and other restaurant-focused programs. SpotOn Capital is one. Compare total cost, repayment schedule, and what happens in a slow month.
How can a restaurant get faster access to its card sales?Rapid Fund from SpotOn moves card sales into an operator’s bank account within 30 minutes of batching, 24 hours a day, 7 days a week. The fee is 0.2% per deposit.
Can restaurant staff get their tips before payday?Yes, with SpotOn’s DayCheck. After managers approve tips in SpotOn Teamwork, employees can access them through a digital wallet. Payroll still runs through the normal process, and restaurants don’t prefund payouts. Availability depends on employer participation, individual eligibility, and state.
DISCLAIMER: Everything here is just for informational purposes. The links and graphics may not be accurate and we encourage you to do your own research. Also, we can't guarantee results from following our advice. Always consult a professional for your specific situation.
