A Texas bankruptcy judge approved the sale of more than a dozen TGI Fridays and the rejection of eight of the restaurant chain's leases, representing most of the corporate-run eateries left standing in the court restructuring.
U.S. Bankruptcy Judge Stacey Jernigan said in a signed order on Friday the purchase agreement represented the highest and best offer brought to the court for TGI Fridays' remaining leased U.S. real estate that are not franchises.
In a declaration to the bankruptcy court, Hilco Senior Managing Director Richard Klein said TGI Fridays agreed to sell 15 of its leased restaurants to Yadav Enterprises and Table Turn Acquisitions LLC in a deal totaling $3 million. Hilco is representing TGI Fridays as its real estate adviser in the bankruptcy proceedings.
TGI Fridays also agreed to a letter of intent from Sugarloaf Concessions LLC to buy three restaurants in New York and Florida in a deal totaling $100,000, Klein said in the declaration. In an email clarifying the deal to CoStar News, Klein said one of the restaurants in Sugarloaf's acquisition is not actually owned by TGI Fridays but is managed by the corporate entity. Sugarloaf is led by TGI Fridays' former CEO Ray Blanchette III, who bid on a prior group of restaurants through the bankruptcy court.
Klein also told CoStar News that Yadav Enterprises was seeking to buy an additional restaurant from TGI Fridays for an undisclosed sum. Details of the location were not immediately shared with CoStar News.
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 bankruptcy filing does not include any of its franchised locations.
New owners
Anil Yadav, who founded and leads Yadav Enterprises, is no stranger to the TGI Fridays brand — with his company being a franchisee of the casual restaurant brand. In all, the company has more than 400 restaurants.
In Sugarloaf's letter of intent, Chief Financial Officer Eric Easton said, "We are very excited about the opportunity and look forward to a favorable reply so that we can proceed toward completing our due diligence process and working closely with the company and Hilco Corporate Finance to execute a purchase agreement and close the transaction."
Once finalized, the real estate acquisitions by Yadav Enterprises and Sugarloaf will ensure the continued survival of the TGI Friday's brand that gained popularity in the 1980s after scenes of the movie "Cocktail" were filmed at a New York City location. The buyers also help keep the number of restaurant closures tied to TGI Fridays' Chapter 11 bankruptcy proceedings to a minimum.
Judge Jernigan also approved last week the rejection of eight of the restaurant chain's corporate-owned leases, including three locations in Maryland, three locations in New York and one location each in Nashville, Tennessee, and Wayne, New Jersey. The emergency hearing was requested by TGI Fridays, which didn't have the funds to pay its February rent or operating costs at these locations, company officials told the court.
Over the decades, TGI Fridays made good decisions at picking its real estate and selected meaningful locations for its customers, said Mike Geisler, a partner at Dallas-based Venture Commercial. Geisler is not directly involved with TGI Fridays' real estate but specializes in retail deals and has been in the industry for decades.
Landlords impacted by TGI Fridays' lease rejection order include Vornado Realty Trust and FrontView REIT, a Dallas-based real estate investment trust that filed for an IPO last year. Landlords of those properties will find "something better" to take the vacated space, Geisler said.
Last week, Chili's parent company Brinker International reported an earnings boost helped by the restaurant chain's popular triple dip menu item that brought a younger generation of foodies to its locations with the help of social media. Both Chili's and TGI Fridays have Dallas roots where they opened their first locations in the 1970s.
"I grew up in Dallas and I can show people where the first Fridays was located and where the first Chili's restaurant was," he added. "Dallas was such a creative place for concepts. Hopefully, these new owners can help drive traffic and keep the brand relevant."
TGI Fridays also noted with the bankruptcy court it plans to exit four corporate-leased locations in Las Vegas this week as part of separate termination notices sent by landlords prior to the bankruptcy case.