TGI Fridays Inc has filed for bankruptcy protection in the United States, citing financial challenges stemming from the COVID-19 pandemic and a collapsed sale.
The filing covers the company’s 39 US-based restaurants, which will remain operational under a secured financing commitment.
Financial Pressures and the Pandemic’s Impact
The COVID-19 pandemic exacerbated the financial strain on TGI Fridays, affecting its revenue and leaving the company with a capital structure that became unsustainable.
The company’s executive chairman, Rohit Manocha, acknowledged these challenges, stating that restructuring was necessary to support future growth.
He said:
“This restructuring will allow our go-forward restaurants to proceed with an optimized corporate infrastructure that enables them to reach their full potential,”.
In its filing with the US Bankruptcy Court for the Northern District of Texas, TGI Fridays Inc. reported assets and liabilities between $100 million (£77 million) and $500 million (£387 million).
Declining Sales and Restaurant Closures
The company’s footprint in the US has been shrinking in recent years.
The company now operates 163 restaurants domestically, down from 269 last year.
After closing 36 locations in January, the company closed several more in recent weeks. Sales have declined sharply, with 2023 revenue reported at $728 million (£563 million). This is a 15 percent drop from 2022.
Sit-down restaurants have been under increasing pressure as consumer habits shift toward fast-casual and delivery options. Many diners now favor chains like Chipotle and Shake Shack over traditional casual dining.
Need Career Advice? Get employment skills advice at all levels of your career
Failed Sale to UK Arm and Franchise Ownership
Earlier this year, a planned $177 million sale of TGI Fridays Inc. to Hostmore, which operates the UK TGI Fridays franchises, fell through.
The collapse of the deal occurred after the US company lost control over TGIF Funding. This hit its ability to collect royalties from franchise agreements and intellectual property rights.
The failed acquisition left the firm without expected revenue from franchise royalties, adding to its financial strain.
Hostmore itself recently entered administration. However, a sale of 51 restaurants and 2,400 jobs to private investment firms Breal Capital and Calverton preserved part of its UK operations.
The bankruptcy filing does not impact the global TGI Fridays brand. This is franchised to 56 independent operators in 41 countries.
These franchises are overseen by TGI Fridays Franchisor. The owners hold the intellectual property rights to the brand and are unaffected by the financial restructuring in the US.
The 39 US-based locations involved in the bankruptcy filing represent a small fraction of the 461 TGI Fridays locations around the world. Many of these will continue operations uninterrupted.
A Legacy Brand Faces Industry Challenges
Founded in 1965, TGI Fridays once dominated the American casual dining scene. Its popularity peaked in 2008, with 601 locations and an annual revenue of $2 billion (£1.5 billion).
However, the shift toward fast-casual dining and the growing preference for delivery has led to a decline in sit-down restaurant use.
Kevin Schimpf, director of industry research at Technomic, said changing consumer preferences have driven diners away from traditional casual dining toward fast-casual brands.
This trend has been a significant factor in TGI Fridays’ struggle to maintain its foothold in the competitive dining landscape.
Looking Ahead: Restructuring for Survival
As TGI Fridays Inc. works through bankruptcy protection, its restructuring plan aims to secure a sustainable financial future for its remaining US locations.
The company is expected to focus on optimizing operations and adapting to industry trends to align with evolving consumer preferences.
