The Associated Press (AP) reported that the Dallas-based chain filed for bankruptcy in a Texas federal court on Saturday, Nov. 2. TGI Fridays Executive Chairman Rohit Manocha said in a statement that the restaurant's financial woes stemmed from the pandemic and its capital structure. The business is looking for ways to "ensure the long-term viability" of its brand following its decision to close many of its branches last year, AP continued.
Meanwhile, the Wall Street Journal (WSJ) reported that TGI Fridays "has lost business over the years as diners gravitated to newer restaurant options." As per data from market research firm Technomic, the company had $728 million in U.S. sales last year – 15 percent lower than from 2022. TGI Fridays operated 292 U.S. locations last year, 11 percent fewer than it had in 2021.
In a June statement, the independent auditor for TGI Fridays said the company was running out of funds to meet its debt obligations. Earlier this year, the chain said it was closing 36 underperforming locations across the United States. Hundreds of employees affected by the closures received transfers.
"In 2017, TGI Fridays signed a financial arrangement known as whole business securitization, where a company issues bonds secured by cash-generating assets, such as franchisee royalties paid to the company. Other restaurants have also employed the arrangement, which relies on a steady stream of franchisee income," the WSJ remarked.
"TGI Fridays was focused on reviving its bar business and updating its brand when the pandemic hit, impeding its ability to serve customers indoors. The company pushed forward with delivery and other to-go options, and wound up closing fewer restaurants than initially anticipated. Still, declining customer traffic and financial challenges persisted."
Other restaurants also calling it quits
TGI Fridays also has overseas locations, but the bankruptcy would only affect its 39 company owned and operated branches. Domestic and international franchised locations will operate as usual, according to Game Rant.
Months before the filing, a British restaurant operator sought to merge with the beleaguered chain. In April, U.K.-based restaurant operator Hostmore announced a $220 million deal to merge with TGI Fridays. "The move was meant to stabilize the chain’s finances, revitalize the brand and bring it to the public markets in the U.K.," the WSJ said.
Unfortunately, the deal failed to materialize. Hostmore sought debt protection in September and abruptly closed locations throughout the U.K., mirroring the subsequent fate of TGI Fridays.
The chain is not alone in this predicament, however, as many other restaurants have called it quits. In August, Italian American food chain Buca di Beppo filed for bankruptcy protection. The month after, a U.S. bankruptcy judge approved a reorganization plan for seafood chain Red Lobster after years of mounting losses.
Last month, 24/7 breakfast chain Denny's announced that it is closing 150 of its underperforming restaurants. The sit-down joint said the closures sought to turn around its flagging sales. (Related: Denny’s is shutting down 150 stores to boost cash flow amid declining sales.)
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