TGI Fridays Prepares To Join Growing List Of 2024 Restaurant Bankruptcies
TGI Fridays is the latest chain restaurant grappling with financial distress as fewer people eat out and costs rise.
The casual sit-down restaurant chain with about 200 remaining locations is preparing to file for Chapter 11 bankruptcy protection in coming weeks, Bloomberg reports, citing unnamed sources. TGI Fridays is meeting with lenders to secure new financing and hopes to emerge as an operating company, according to Bloomberg.
The restaurant has struggled to compete with fast-casual restaurant chains like Chipotle, Cava and Sweetgreen, which have eaten into its market share. The restaurant industry as a whole has suffered since customers have pulled back on dining out, and restaurants face rising expenses from factors including high interest rates, The Wall Street Journal reported.
Those factors have piled onto operators that saw business interrupted for months during the pandemic, then dealt with soaring food and wage costs. Budget chains have been particularly vulnerable, Bisnow previously reported.
Going back decades, this year is set to come second to only 2020 for the number of restaurant chains and operators declaring bankruptcy, according to BankruptcyData.com records reported by the WSJ. Traditional chain restaurants like Red Lobster and Buca di Beppo have had to resort to a court-facilitated restructuring, but so have fast-casual chains Roti, Tijuana Flats and fast-casual taco chain Rubio's.
Same-store sales traffic at U.S. restaurants was down 3.3% year-over-year this month, according to Black Box Intelligence, and casual dining restaurants saw visits fall 4.5%.
Cava CEO Brett Schulman told the WSJ that he has had more than a dozen distressed restaurant companies pitched to him as acquisition or investment targets over the past year.
But private equity firms and banks have become more cautious toward the restaurant sector, Morgan McClure told the WSJ. McClure is the managing director for Fortress Investment Group, which leads the ownership group that has bought Red Lobster, Krystal Restaurants, Logan’s Roadhouse and more out of bankruptcy since 2020.
McClure said he has looked at nearly 100 restaurant companies available for purchase this year and passed on most of them.
“There’s going to be pain for a while,” McClure told the WSJ.
TGI Fridays’ struggles aren’t new. The company closed half of its U.S. restaurants in the past decade. It announced the closure of 36 locations earlier this year, and another dozen closures happened in the past six weeks, according to Restaurant Business.
The company lost day-to-day control of many management functions in September after it failed to file documents to bondholders on time, Restaurant Business reported. This blow came as a $220M acquisition deal fell through with U.K.-based Hostmore, TGI Fridays' largest global operator.
TGI Fridays now hopes to secure a loan to fund its operations through the Chapter 11 process, Bloomberg reported.
The first TGI Fridays, short for “Thank God it’s Friday,” opened in Manhattan in 1965, serving American fare, bar food and alcohol. Founder Alan Stillman hoped to position the business as a singles bar where women were welcome to come alone. The restaurant went on to popularize concepts like happy hour and ladies nights.
