TGI Fridays Inc., a casual restaurant chain known for its burgers, wings and loaded potato skins, filed for Chapter 11 bankruptcy in Texas in hopes of continuing its operations.
The half-century-old eatery that owns and operates 39 of its U.S. locations filed for bankruptcy protection in the Northern District of Texas on Saturday, listing both its assets and liabilities as between $100 million and $500 million, according to documents filed with the court. The bankruptcy filing does not include TGI Friday's intellectual property, such as its brand, as it is used by 56 franchisees in 41 countries.
Rohit Manocha, executive chairman of TGI Fridays, said in a statement the filing was "difficult but necessary actions to protect the best interests of our stakeholders" such as the U.S. and international franchisees and its team.
"The primary driver of our financial challenges resulted from COVID-19 and our capital structure," Manocha added. "This restructuring will allow our go-forward restaurants to proceed with an optimized corporate infrastructure that enables them to reach their full potential."
Friday's bankruptcy filing comes as sit down, casual dining restaurants throughout the United States have been hit hard financially. The Dallas-based chain's number of eateries diminished on the website's restaurant locator from 213 about a week ago to 163 locations as of Tuesday. At the beginning of the year, Fridays had 270 U.S. locations. In all, the brand has more than 461 restaurants throughout the world.
Mike Geisler, founding principal and managing partner of retail real estate services firm Venture Commercial Real Estate who is not affiliated with Fridays but has been following its real estate over the past decades, said he's seen a "funk" around the casual dining industry even before the onset of the pandemic.
Changing consumer behavior
Prior to the pandemic, big fast-casual dining brands including Chili's, Fridays and Applebee's were losing market share as competition rose from quick-service restaurants like Panera, chains investing in the customer experience, Geisler said. The new casual dining concepts are coming in at more expensive price points, a change from the casual dining of 25 years ago, he said.
Chili's is one of those concepts doing a better job of reinventing themselves and remaining popular, Geisler told CoStar News. During last week's earnings call for Chili's parent Brinker International, executives noted that efforts to invest in the Chili's brand were paying off at bringing the next generation to their restaurants locations through social media efforts and investing in its food so the burger "looks just like the ad" in offering a great experience to guests, executives told investors.
Other concepts that are failing to adapt, he said, are having to file for bankruptcy protection in hopes of restructuring their businesses. Some of its top unsecured creditor claims comes from multiple U.S. landlords, with millions in total owed to real estate firms, such as Brookfield Properties, Continental Realty Corp., DLR Properties, Amherst Properties and Simon Property Group.
In its home market of Dallas-Fort Worth, Fridays eateries only remain at Dallas-Fort Worth International Airport, where it owes the airport more than $260,000 in rent, according to documents filed in bankruptcy court.
In filing for bankruptcy protection, it could give Fridays the ability to renegotiate its real estate leases and exit undesirable locations. This happened with Denny's closing about 10% of its locations and Red Lobster expected to exit bankruptcy with fewer restaurants in the United States, as reported by CoStar News.
Buca di Beppo and World of Beer Bar & Kitchen filed for Chapter 11 bankruptcy protection in August to reorganize their businesses, as CoStar News has reported. The restaurants said their financial woes stem back to the onset of the pandemic with higher food and labor costs, inflation and consumers cutting back on discretionary spending all impacting their businesses.