TGI Fridays’ Chapter 11 bankruptcy filing Saturday capped off a tumultuous 12 months for the casual-dining chain known for its fried appetizers and colorful cocktails.
And like most of the chains that have filed for bankruptcy this year, the Dallas-based franchisor said the pandemic was to blame.
The chain has had a difficult few years since COVID-19 turned the restaurant industry upside down in 2020. Since then, nearly half of TGI Fridays’ U.S. locations have closed, including about 100 so far this year, leaving it with just over 160 units nationwide. (It has more than 300 locations overseas.)
Domestic revenue declined by more than 25%, from more than $1 billion in 2019 to about $727 million last year, according to data from Restaurant Business sister company Technomic.
The trouble only intensified this year after the franchisor was terminated as the manager of its whole business securitization in September, causing it to lose control of many of its assets, including its franchise business. The issue stemmed from an overpayment of a management fee from the securitization to Fridays.
Days later, a deal that would have fused the company with U.K.-based franchisee Hostmore fell apart because of uncertainty over the termination.
This all led up to the bankruptcy, which affects only Fridays’ 39 company-owned restaurants. TGI Fridays said those restaurants will continue operating as it works through the Chapter 11 process. It reported both assets and liabilities of between $100 million and $500 million.
"The situation with TGI Fridays highlights the broader challenges facing many legacy restaurant brands today,” said John Bringardner, head of debt tracker Debtwire, in an email. “Increased costs from inflation, changing consumer spending patterns, and debt burdens left over from the pandemic have created a difficult environment for [casual-dining] chains to thrive.”
Indeed, TGI Fridays is the third major casual-dining chain to file for bankruptcy this year, following Red Lobster and Buca di Beppo.
And though both blamed the pandemic at least in part for their financial woes, all three were victims of problems that have been brewing for over a decade in casual dining.
TGI Fridays, which debuted in 1965 as a hip New York City singles bar and later evolved into one of the first casual-dining concepts, grew quickly throughout the 1980s and ’90s, both in the U.S. and around the world. A pioneer in the emerging bar and grill segment, it was soon joined by Applebee’s, Ruby Tuesday and Chili’s. But it was Fridays’ theatrical bartenders, flair-bedecked servers and lively atmosphere that would become shorthand for the golden age of casual dining.
Despite rising competition in the segment, the chain continued to expand steadily through the first part of the millennium, and was regularly recognized for its food and beverage innovation and its leadership. In 2002, Fridays' systemwide revenue broke $2 billion.
But the 2008 financial crisis proved to be a turning point. That year, TGI Fridays’ domestic unit count peaked at 601 locations, while systemwide sales fell 6.7%, according to Technomic.
While most full-service restaurants felt the impact of reduced consumer spending, Fridays never fully recovered. It has generated negative sales and unit count every year since, except for 2021, when sales rose by about 32%.
During those 15 years, casual dining faced a new competitor in the form of fast-casual chains like Chipotle Mexican Grill and Panera Bread, which catered to consumers’ demand for convenience and affordability. At the same time, online shopping was transforming the retail landscape, siphoning foot traffic away from malls and movie theaters that traditionally fed casual-dining chains like TGI Fridays.
Those challenges were only exacerbated by the pandemic and the inflationary environment that followed.
“TGI Fridays was beloved,” said Burt Flickinger, owner of retail consultancy Strategic Resource Group (SRG). “But a couple things happened.”
Before COVID, he said, SRG’s research indicated that consumers ate about 11 of their 21 weekly meals away from home. “After COVID, everything got so expensive and crazy cost-wise that only one to four meals a week were eaten away from home.”
Not only that, he said, but consumers were also spending less when they did go out, particularly on high-margin items like beverages that can make up a significant portion of a restaurant’s operating profits—especially concepts with a big bar business like Fridays.
Consumers also continued to shift more of their visits toward limited service and takeout. According to data from the National Restaurant Association and Circana, off-premise—which includes pickup, delivery and drive-thru—now accounts for 74% of industry traffic, up from 61% in 2019.
TGI Fridays needed to change if it wanted to grab a share of that shrinking appetite for in-person dining. “TGI Fridays lacks relevance,” former CEO Brandon Coleman said in an interview with Restaurant Business last October. “We need to bring relevance back to the brand.”
Coleman worked to freshen up Fridays’ menu with trendy items such as sushi, small plates, hard seltzer and sake. He also planned to bring back some of the experiential elements the brand was once known for, such as flair bartending and televised sports. His goal was to make Fridays “more fun than your phone.”
But less than two weeks after that interview, Coleman stepped down, citing personal reasons. He was replaced by board member Weldon Spangler, who was charged with guiding the chain through a new, growth-focused strategy.
Spangler’s tenure ended in August, according to his LinkedIn profile. And the growth that was promised did not materialize this year.
From January through October, TGI Fridays’ same-restaurant traffic was down more than 10% year over year, according to data from consumer intelligence firm Placer.ai.
And then there were the aforementioned closures, beginning with 36 restaurants in January and another 50 or so over the past two months.
“TGI Fridays—like most full-service restaurants—has faced an increasingly challenging environment in 2024,” said R.J. Hottovy, head of analytical research for Placer.ai, in an emailed statement. “Visitation trends are down year-over-year–due to a combination of store closures and fewer visits per existing location—at the same time food, labor, and other restaurant operating costs remain high.”
The chain will likely have to sell or close more unprofitable locations as part of the restructuring process, said Bringardner of Debtwire.
“That’s the usual playbook for restaurant bankruptcies,” he said, “and it’s what we saw its U.K. arm do in September when it went under.”
It is also likely that Fridays itself will be sold out of bankruptcy. And though that should stabilize its finances, its long-running traffic and sales challenges will remain. The buyer of the company will have a lot to do with how the chain handles those obstacles, Flickinger said.
“The biggest thing is the new buyers can’t be private equity and a bunch of Harvard hot shots from business school that just run spreadsheets and one page in the playbook,” he said.
He is in favor of an existing franchisee or other seasoned operator taking over.
“It can be tremendously successful in a turnaround,” he said, “but the best and brightest operators and franchisees need to be on the board.”