TGI Fridays has been struggling to pay its bills this year, another sign of financial problems at the casual-dining chain that appears headed for bankruptcy.
According to data from credit report provider Creditsafe, the company’s payment activity fluctuated in recent months as the chain seemed to make progress on its bills and then fall behind again.
In January, for instance, the chain’s days beyond terms (DBT)—a measure of how late it was on paying bills—was 13. But that spiked to 23 the next month. It dropped to 15 for the next four months, then jumped to 27 in July, when more than half of its outstanding bills were at least 91 days late.
“This kind of volatility is a strong sign that cash flow is tight and the company is having trouble making on-time payments,” Creditsafe wrote in a press release sent to Restaurant Business.
Meanwhile, the Dallas-based chain was closing underperforming restaurants and scrambling to pay debt. In May, it sold its licensing rights to Kraft Heinz to pay off debt. It later put up its remaining company-owned locations for sale as part of its plan to merge with U.K.-based franchisee Hostmore PLC.
In September, it was terminated as the manager of a $375 million whole business securitization, in part because it overpaid itself a management fee from the securitization. Days later, Hostmore called off the acquisition.
The chain has also struggled to generate sales growth in recent years as consumers shift from casual dining to limited service and takeout. Last year, TGI Fridays’ systemwide sales declined 15%, according to data from Restaurant Business sister company Technomic.
All of this seemingly made it difficult for TGI Fridays to stay on top of its bills.
“If other debts are piling up and it’s a matter of choosing between paying operating expenses, employees and suppliers, suppliers may be lower on the priority list,” Creditsafe wrote.
The chain has closed nearly 100 locations this year, including about 60 since September, and is reportedly preparing to file for Chapter 11 bankruptcy.
Its problems paying bills could make it harder to find financing for a bankruptcy proceeding, Creditsafe said. Companies going through Chapter 11 typically find a lender that allows the business to continue operating during the restructuring process.
“Its creditworthiness could become a sticking point for potential financial backers as it doesn’t paint a strong picture of the company’s ability to pay on time,” Creditsafe wrote.
Dallas-based TGI Fridays is one of a number of casual-dining chains facing financial problems this year. Red Lobster and Buca di Beppo have both filed for bankruptcy, and a number of others appeared to be on the brink of doing so.
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