TGI Fridays Closes 50 Stores as It Prepares for Bankruptcy

TGI Fridays Is on the Brink of Bankruptcy After Acquisition Falls Through

The exterior of a TGI Fridays restaurant | ©Image Credit: TGI Fridays
The exterior of a TGI Fridays restaurant | ©Image Credit: TGI Fridays

TGI Fridays may be filing for bankruptcy. With dwindling customer traffic and following the collapse of a planned acquisition, the casual-dining chain is reportedly exploring bankruptcy options in a bid to restructure and stay afloat. Keep reading to learn how the company’s financial struggles have intensified in recent months, leading to this potential Chapter 11 filing.

TGI Fridays Weighs Bankruptcy Options Amid Financial Turmoil

According to a report by Debtwire, TGI Fridays was in discussions with advisers late last week to evaluate its next steps, including a potential bankruptcy filing. This development comes after the chain lost its position as the manager of its whole business securitization last month.

Then over this past weekend, Bloomberg revealed that TGI Fridays was also in talks with lenders to secure financing to support the company through a Chapter 11 bankruptcy process. The goal would be to restructure and emerge as a viable operating entity.

According to Bloomberg, the filing could occur within the next few weeks, with Debtwire reporting that it could happen in Texas. These plans, however, are not yet final and remain subject to change.

Both Debtwire and the Bloomberg reports cited anonymous sources familiar with the situation. As of the time of publication, TGI Fridays has not provided an official comment.

If TGI Fridays proceeds with a bankruptcy filing, it would mark the third major casual-dining chain to declare bankruptcy this year. As pointed out by Restaurant Business, the company would follow in the footsteps of Red Lobster and Buca di Beppo, which both filed for Chapter 11 protection earlier this year.

What Drove TGI Fridays to the Brink of Bankruptcy

Dallas-based TGI Fridays has been grappling with declining sales for years, and the recent inflationary environment has only exacerbated these challenges. The iconic chain has been forced to shutter approximately 50 restaurants across the United States this year, including a dozen since September. According to the location finder on its website, TGI Fridays now operates 213 restaurants nationwide.

In addition to these operational setbacks, the company has experienced a series of financial missteps. A failed acquisition by U.K. franchisee Hostmore PLC and the loss of control over its assets have further strained TGI Fridays’ position. This financial instability can be traced back to the company’s $375 million whole business securitization (WBS) deal in 2017, which involved issuing bonds backed by future revenue streams, such as royalties from franchisees.

According to bond-rating agency KBRA, this manager termination marks a rare occurrence in the WBS landscape since the financial crisis. The uncertainty created by this event prompted Hostmore to abandon its acquisition plans and ultimately file for the U.K. equivalent of bankruptcy.

Bankruptcy filings related to whole business securitizations are uncommon, as noted by Debtwire. However, TGI Fridays’ current situation highlights the potential risks and challenges associated with this type of financing.

Sources: Debtwire, Bloomberg, Restaurant Business