The popular American restaurant chain TGI Fridays, known for its casual dining and lively ambiance, has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Northern District of Texas. According to the Chapter 11 filing, the firm's assets and liabilities were listed between $100 million and $500 million.
This announcement, made on November 2, 2024, is part of the company’s attempt to reorganize and tackle mounting financial challenges. The Dallas-based operator aims to continue operating its franchise and corporate-owned restaurants during the restructuring period.
TGI Fridays Bankruptcy: Financial Challenges and Declining Sales
The Chapter 11 filing comes after years of declining sales and an ongoing struggle to adapt to shifting consumer preferences. TGI Fridays has faced increased competition from fast-casual dining options and rising costs, which have made it difficult for the chain to sustain its traditional sit-down dining model.
The COVID-19 pandemic exacerbated these challenges, as many sit-down restaurants saw drastic declines in foot traffic and struggled to recover fully even after restrictions eased. "The primary driver of our financial challenges resulted from COVID-19 and our capital structure," said Rohit Manocha, executive chairman of TGI Fridays.
As a result, the chain has been forced to close approximately 100 locations in 2024 alone, leaving it with around 164 U.S. locations, down from nearly 300 at the beginning of the year.
Sales for the chain dropped by about 15% last year, and the company has faced a revolving door of leadership, with four CEOs since early 2023, each attempting to revive the brand. Amid growing financial strain, TGI Fridays lost control over several assets due to a “manager termination event” related to its $375 million securitization loan.
The Hostmore Deal Collapse
Adding to TGI Fridays’ bankruptcy issue was the collapse of a much-anticipated acquisition deal with U.K.-based Hostmore PLC. Earlier in 2024, TGI Fridays announced plans to merge with Hostmore, its U.K. franchise operator, hoping to stabilize its operations and strengthen its international presence.
However, by September, the deal had fallen apart, largely due to TGI Fridays’ internal struggles with its securitization agreement. This agreement is a complex financing structure that gave the company funding in exchange for future revenue streams, but the debt-related restrictions ended up hurting the company’s flexibility.
Following the deal’s collapse, Hostmore also filed for the U.K. equivalent of bankruptcy protection and closed 35 TGI Fridays locations overseas. This setback severely impacted TGI Fridays' global presence and thwarted its goal of leveraging the merger to improve cash flow and pay down debt.
The Road Ahead For TGI Fridays
Despite these financial challenges, TGI Fridays intends to continue operating through its bankruptcy proceedings and has obtained debtor-in-possession financing to help maintain its current restaurant locations.
The restructuring aims to offload debt, close underperforming stores, and streamline operations to focus on more profitable areas, especially international franchises and newer store formats.
The future remains uncertain, as TGI Fridays must balance debt repayments with the operational costs of hundreds of franchise locations.
While several brands have filed bankruptcy in 2024, TGI Fridays’ management is optimistic. The company is expressing a commitment to reinvent the dining experience and secure a stronger financial footing in the long term.