There’s a persistent myth that 90% of restaurants fail in the first year. It is not true.
It would be interesting to know how the myth started, but it probably has something to do with the fact that large restaurant chains often close underperforming locations.
This is often not a sign of failure, but a strategic move to maintain a chain’s economic health.
In 2023, there were around 759,000 restaurants nationwide, out of which 349,000 were chain-restaurant businesses, according to data from Food Industry. Imagine how many closings occurred among so many restaurants.
According to the National Restaurant Association, the first-year failure rate for restaurants is between 14% and 30%, while a study by economists at the University of California, Berkeley, found that rate to be 17%, writes RestWorks.
Without a doubt, in today’s harsh economic climate, breaking into the restaurant industry is a real battle. Owners must find creative ways to manage many challenges, including high labor costs, rising food costs due to inflation, shifts in consumer behaviors, and aggressive competition.
Even some highly popular restaurants have succumbed to these challenges and gone bankrupt, including:
- Red Lobster
- TGI Fridays
- Fernando’s Mexican Cuisine
- Bertucci’s
- Bar Louie
More recently, one popular Mexican restaurant made a difficult strategic move and closed several locations.
JHVEPhoto/Shutterstock.com
Taco Cabana quietly closes several underperforming locations
Taco Cabana confirmed the closure of five restaurants in its hometown market of San Antonio, Texas, reported Nation’s Restaurant News.
“As part of our ongoing efforts to optimize operations and position the brand for sustained growth, Taco Cabana has made the strategic decision to close five underperforming San Antonio locations,” a company spokesperson stated. 7
The strategic decision to shutter five locations comes about a year after Taco Cabana rolled out a franchising program and introduced a new restaurant prototype.
Closed Taco Cabana locations:
- 2403 Babcock Rd.
- 8516 Fredericksburg Rd.
- 1130 N. Loop 1604 W.
- 15925 San Pedro Ave.
Source:MySanAntonio
“We really appreciate our loyal guests and it has been our pleasure serving you. Unfortunately, we’ve made the decision to close this Taco Cabana restaurant on September 28th, 2025,” reads the notice at Taco Cabana restaurants at 2403 Babcock Road and 8516 Fredericksburg Road.
While the chain is mostly based in Texas, it also has presence in New Mexico, and its franchising plan aims for the chain to reach Arizona, Arkansas, Colorado, Missouri, Oklahoma, and Tennessee.
“With a robust franchise development plan underway, we’re entering an exciting new era of expansion, fueled by a commitment to sharing our bold, authentic flavors with guests across the country,” the spokesperson added.
From a taco stand to 146 locations and 47 years of tradition
Taco Cabana was founded by Felix Stehling in 1978, and its first restaurant opened at the corner of San Pedro and Hilderbrand Avenue in Midtown San Antonio.
Stehling acquired the empty Dairy Queen location, because his family needed extra parking space for their bar across the street. He came up with the idea to open a taco stand, which further developed into the well known “patio cafe” concept.
Related: Fast-casual restaurant chain closes all locations in major makeover
Stehling’s wife took part in the business development by designing the decor and interior theme for the restaurant chain, writes MySanAntonio. When the patio furniture was stolen on the first night of business, Stehlin chose to run the place 24 hours daily.
As operations scaled up, Stehling’s two brothers joined to help expand the chain through San Antonio. Quickly, there were nine restaurants. In 1986, however, the brothers left the company following disagreements over business management strategies.
According to a March 2025 report from the Journal Record, Taco Cabana operated 146 locations in Texas and New Mexico. This suggests that it currently runs around 141 locations.
More Restaurants
- Mexican restaurant chain makes comeback after 20-year hiatus
- Mexican chain files Chapter 11 bankruptcy; 24 restaurants closed
- Chick-fil-A launches a new drinks-based restaurant brand
John Ramsay, director of franchise sales and development at Taco Cabana, told the outlet that since the pandemic, the restaurant saw a change in customers’ preferences, adding that 70% of their business is either through delivery, takeout, or drive-thru.
“That convenience factor is a big part,” Ramsay said. “People know they can come to us and get a full variety of Mexican-inspired food in a convenient format that they could take home or have brought to their home.”
Ramsay also announced that Taco Cabana plans to return to Oklahoma, after closing its last location there about a decade ago.
Taco Cabana: “We continue to redefine Mexican fast-causal dining experience”
In 2021, Taco Cabana was sold for $85 million to YTC Enterprises, an affiliate of Yadav Enterprises, Inc., a Jack in the Box, El Pollo Loco, and Denny’s franchisee.
The Taco Cabana menu still features a variety of breakfast, lunch, and dinner options including: flame-grilled fajitas, burritos, quesadillas, flautas, Cabana Bowls, Cabana Salads, freshly-made flour tortillas, made-from-scratch salsas, and signature margaritas.
Related: Coca-Cola adds new way to drink soda nationwide
Its restaurants feature open-display cooking, open-air patio dining, and convenient drive-thrus. Taco Cabana also has its own loyalty rewards program.
“We continue to redefine the Mexican fast-causal dining experience through ongoing culinary, service, and operations enhancements,” reads the About page on Taco Cabana’s official website.
Taco Cabana customers blame closings on new management
In a Reddit thread discussing the closures, many customers voiced disappointment, citing what they believe is a decline in food quality and management since the chain changed ownership.
“Taco Cabana has always been the McDonald’s of Tex Mex,” wrote filmerdude1993.
According to other Redditors, there was a noticeable reduction in Taco Cabana’s quality over the last two decades.
Some commenters on the thread alleged that the restaurants experienced a drop in standards when they were sold to YCT industries, while another group said the decline began even earlier, back in 2001, when it was acquired by Carrols Restaurant Group.
“This is a great chain that has suffered from severe quality [decline]. The biggest beef for me is that they water down their beans to make them looser. Their beans used to taste great, but now they just taste like water,” wrote Sdguppy1966.
