Restaurant chain TGI Fridays filed for bankruptcy protection on 2 November, following the actions of Red Lobster and other chains that have filed for bankruptcy this year.
Despite attempts to revamp its brand, including increasing seafood and sushi offerings, making itself a hub for ghost kitchen operations during the Covid-19 pandemic, and other strategic efforts, Dallas, Texas, U.S.A.-based TGI Fridays filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Northern District of Texas.
Seafood suppliers and distributors were not named in the company’s list of its top 23 debtors, but some are still expected to file claims since the company features numerous seafood appetizers and entrees on its menu.
"The next steps … are difficult but necessary actions to protect the best interests of our stakeholders, including our domestic and international franchisees and our valued team members around the world," TGI Fridays Executive Chairman Rohit Manocha said. ”The primary driver of our financial challenges resulted from Covid-19 and our capital structure.”
The Chapter 11 restructuring process will allow the company’s restaurants “to proceed with an optimized corporate infrastructure that enables them to reach their full potential,” Manocha said, adding that the filing allows the company to “explore strategic alternatives in order to ensure the long-term viability of the brand.”
“The company is soliciting bids for [some of its] assets and has said that it is in active discussions with a potential buyer, which is a strategy employed by fellow restaurant chain debtors BurgerFi, Rubio’s, and Buca di Beppo,” Debtwire Global Head of Legal and Restructuring Sarah Foss said in a statement emailed to SeafoodSource.
The move also includes a potential reduction in its restaurant footprint, Foss said.
“Chapter 11 can provide many benefits to the company as it navigates a restructuring, including the ability to reject financially burdensome leases and contracts and to use these rejection rights as leverage in negotiating more favorable terms. Reducing or eliminating costs associated with expensive contracts and leases may prove important as the company looks toward maintaining profitable operations,” she said.
The casual dining chain has already begun putting this plan in action, reportedly closing 50 locations last week. TGI Fridays had 269 U.S. restaurants at the end of last year, according to Restaurant Business, and has closed around 100 restaurants total year. Its restaurant locator showed only 163 open in the U.S. as of 4 November.
It also operates hundreds of restaurants around the world.
TGI Fridays’ bankruptcy follows other restaurant bankruptcies and restaurant closings this year, including Red Lobster, Rubio’s Restaurants, and BurgerFi International. Denny’s has also announced it will close up to 150 restaurants by 2025, according to Restaurant Business, and several other casual restaurant chains, including Shari’s, Hooters, and Bloomin’ Brands, have closed locations due to lackluster traffic and sales, the publication said.
"The situation with TGI Fridays highlights the broader challenges facing many legacy restaurant brands today. Increased costs from inflation, changing consumer spending patterns, and debt burdens left over from the pandemic have created a difficult environment for fast-casual chains to thrive,” John Bringardner, the executive editor of leveraged capital markets at ION Analytics, said in a statement to SeafoodSource. “While Fridays and similar brands like Red Lobster and Hooters were household names, they now face an uphill battle as consumers shift toward newer, fast-casual options offering fresher experiences and often better value.”
TGI Fridays said its franchised restaurants under TGI Fridays Franchisor LLC – which comprise 56 franchisees in 41 countries – are independently owned and, therefore, are not included in the Chapter 11 process.
TGI Fridays Franchisor has negotiated a transition services agreement with and has provided interim funding to TGI Fridays Inc. to maintain support services for franchisees, while the independent franchisees work to implement a long-term support structure, according to the company.
