TGI Fridays, a casual-dining chain going through bankruptcy proceedings, could get new life with the sale of nine of its corporate-owned restaurants.
Restaurant operator Mera Corp., based in Mexico, submitted a winning bid for five corporate-owned eateries at Dallas Fort Worth International Airport, as well as four additional restaurants in Maryland in a deal totaling $34.5 million. Mera edged out the so-called stalking-horse bidder, Sugarloaf Concessions LLC, led by former TGI Fridays CEO Ray Blanchette, that made an initial bid of $30.5 million ahead of the auction.
The auction results, approved by U.S. bankruptcy judge Stacey Jernigan during a hearing and subject to change, came at the conclusion of an extensive marketing process conducted by Hilco for TGI Fridays' 39 corporate-owned U.S. restaurants. There were 40 potential buyers that executed confidentiality agreements for those restaurants, according to court documents.
There are 19 of the 30 remaining corporate-owned eateries that have garnered attention from potential buyers, an attorney on behalf of TGI Fridays told the court Thursday. If they sell to a new owner that wants to operate them, the restaurants could continue operating as TGI Fridays. If not, the company plans to close those locations by the end of the month to save funds, according to an attorney representing TGI Fridays in the bankruptcy case.
TGI Fridays filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Texas in November to restructure its operations after closing nearly 80 locations across the country. The move was a stark difference from the days when TGI Fridays gained popularity in the 1980s after scenes of the movie "Cocktail" were filmed at a New York City location.
The bankruptcy filing does not include any of its 122 franchised U.S. locations or 316 franchised restaurants in other countries because they are independently owned. TGI Fridays, Sugarloaf and Mera did not immediately return interview requests from CoStar News.
Bidding process
Mera's winning bid was initially placed in a joint offer with a restaurant franchisee, Anil Yadav, according to court documents, but Yadav decided to pull out of the offer, leaving Mera as the sole winning bidder. According to Mera's website, the restaurant operator already has locations in airports and has ties to the Fridays' brand.
In the bidding process, Blanchette's Sugarloaf increased its bid to $32.5 million but was unable to outmatch the winning Mera bid. Blanchette became founder and CEO of Sugarloaf Hospitality in November 2023, according to his LinkedIn profile. He stepped down from his role as CEO of TGI Fridays in May 2023. Sugarloaf will be paid a total of $690,000, including a $640,000 break-up fee and up to $50,000 of reasonable out-of-pocket expenses tied to being the stalking-horse bidder, once the deal is finalized.
Judge Jernigan said she was glad that TGI Fridays will continue as a business.
"The increase in value to the estate justifies the break-up fee with the stalking-horse bidder," the judge told the courtroom. "The evidence has further shown that this was a reasonable and necessary expense with sound business justification for the break-up fee. The court does approve for it to be paid of the sales proceeds."
TGI Fridays' attorneys say they expect about $8 million of net proceeds will remain available in the estate after the debtor pays back its debtor-in-possession loan for creditors. Mera is buying the four corporate-owned restaurants at undisclosed locations in Maryland as well as the majority ownership stake in TGI DFW Partners LLC, a joint venture, pending approval of its minority owner, Dallas Fort Worth International Airport.
The airport locations are some of the most profitable in the restaurant chain, according to executives. The deal is expected to go before the airport's board for approval on Feb. 13.
TGI Fridays was also able to sell 10 liquor licenses, including two in Pennsylvania and eight in California, garnering another $1.4 million to the estate. Hilco is still marketing additional liquor licenses and other restaurant locations.
Even though Blanchette will walk away without a winning bid on the corporate-owned restaurants, it appears he won't walk away empty-handed. The restaurant executive is taking on the role as manager of the franchised TGI Fridays brand, taking over for FTI Consulting, which stepped in to manage the TGI Fridays' franchises when the parent company filed for bankruptcy protection, according to The Wall Street Journal. The disclosure of Sugarloaf's potential involvement was made ahead of the bid auction in which Sugarloaf was the stalking-horse bidder.