Casual Dining Chain Opts for Chapter 11 to Shield from Creditors as Competitors Face Similar Struggles
TGI Fridays has filed for Chapter 11 bankruptcy. TGI Fridays Seeks Bankruptcy Protection after closing over 50 U.S. locations. Executives at the popular casual dining chain hope this move will allow the company to restructure its finances and secure a path to long-term stability.
Restaurant exterior with a “T.G.I. Friday’s” logo and striped red and white awnings. A sign reads, “In here, it’s always Friday.
Longstanding Restaurant Files for Bankruptcy in Texas
TGI Fridays Inc., known for its burgers, wings, and loaded potato skins, officially filed for Chapter 11 bankruptcy in Texas. The restaurant aims to continue operations while reorganizing its finances. Founded over 50 years ago, the company now operates 39 U.S. locations. In its filing with the Northern District of Texas, TGI Fridays listed assets and liabilities ranging from $100 million to $500 million. However, the filing does not cover the brand’s intellectual property, which is used by 56 franchisees in 41 countries.
Executive Chairman’s Statement on the Bankruptcy
Executive Chairman Rohit Manocha called the bankruptcy filing “a difficult but necessary decision to protect our stakeholders.” He noted that the filing benefits franchisees and employees in the U.S. and abroad. COVID-19 and the company’s capital structure, he explained, drove the financial challenges. The restructuring will allow core locations to operate with an optimized infrastructure.
Economic Pressure on Casual Dining
TGI Fridays’ bankruptcy filing reflects financial challenges that casual dining establishments face across the U.S. The Dallas-based chain’s location count dropped from 213 to 163 over the past week. At the start of the year, Fridays had 270 U.S. locations. Globally, the brand still has more than 461 restaurants.
Potential Opportunities for Retail Real Estate
Mike Geisler, co-founder of retail real estate firm Venture Commercial, said the casual dining industry has faced ongoing challenges. This issue existed even before the pandemic. Changing consumer preferences have led to more interest in fast-casual dining and quick-service restaurants. These trends have impacted established brands like TGI Fridays, Chili’s, and Applebee’s.
Chili’s Success Amid Changing Consumer Trends
According to Geisler, Chili’s has found success by rebranding and using social media to reach a younger audience. In contrast, other chains struggle to adapt to changing trends. Many, like Fridays, seek bankruptcy protection to restructure. TGI Fridays owes millions to its largest creditors, including Brookfield Properties, Continental Realty Corp., DLR Properties, Amherst Properties, and Simon Property Group.
TGI Fridays’ Remaining Presence in Dallas-Fort Worth
The company’s only remaining presence in Dallas-Fort Worth is at Dallas-Fort Worth International Airport, where it owes over $260,000 in rent.
Using Bankruptcy to Reorganize and Renegotiate
Chapter 11 allows TGI Fridays to renegotiate leases and exit undesirable locations. Other brands, like Denny’s, have used similar strategies, closing about 10% of their locations. Red Lobster is also expected to exit bankruptcy with fewer U.S. restaurants.
Other Casual Dining Brands Filing for Bankruptcy
This year, Buca di Beppo and World of Beer Bar & Kitchen filed for Chapter 11 to reorganize their businesses. These restaurants, like TGI Fridays, attribute financial strain to pandemic losses, inflation, rising food and labor costs, and reduced consumer spending.
