The restaurant industry continues to face financial challenges in 2024, with several prominent chains seeking bankruptcy protection. This trend may soon include TGI Fridays, as reports suggest the popular bar and grill chain is preparing to file for Chapter 11 bankruptcy.
According to sources familiar with the situation, TGI Fridays is currently in discussions with lenders to secure debtor-in-possession financing. This type of funding would allow the company to continue operations while navigating the bankruptcy process. The filing could occur within days, marking another significant development in the ongoing struggles of casual dining establishments.
TGI Fridays operates approximately 600 franchise locations across 55 countries, including 213 restaurants in 29 U.S. states. The company’s financial difficulties have been evident for some time, with U.S. sales declining by 15% in 2023, as reported by data provider Technomic.
The potential bankruptcy filing follows a series of setbacks for TGI Fridays. In September 2024, a planned sale to its U.K. franchisee, Hostmore, fell through. The deal would have involved selling corporate-owned units and transitioning to a fully-franchised model. After the collapse of this agreement, Hostmore itself entered administration and is now seeking to sell its assets.
Further complications arose when Citibank, acting as the whole business securitization trustee, terminated TGI Fridays’ management authority over most of its assets. This action was precipitated by a $2 million overpayment of a management fee, which the company had used to settle outstanding vendor accounts before the error was discovered.
TGI Fridays is not alone in its struggles. The restaurant sector has seen several high-profile bankruptcies in 2024. Red Lobster filed for Chapter 11 protection in May, resulting in the closure of over 120 locations. The chain now operates approximately 545 units. In September, BurgerFi International, which owns and franchises 144 burger and pizza restaurants nationwide, also sought bankruptcy protection after a failed turnaround attempt.
The financial distress has extended to franchisees as well. EYM Pizza, operating 127 Pizza Hut locations across five states, filed for Chapter 11 in July. Similarly, Miracle Restaurant Group, an Arby’s franchisee with 25 units in five states, sought protection in June, citing the lingering effects of the COVID-19 pandemic and inflationary pressures on commodity and labor costs.
International operations have not been immune to these challenges. In June, SouthRock Capital, a Brazil-based franchisee operating eight TGI Fridays locations, filed for Chapter 15 bankruptcy protection in the U.S. This move was aimed at safeguarding its rights to the TGI Fridays brand and other U.S.-based assets while its Brazilian bankruptcy case proceeds.
As TGI Fridays prepares for a potential bankruptcy filing, industry observers speculate that the company may also pursue an asset purchase agreement as part of its restructuring strategy. This approach could allow for a more streamlined sale process of its remaining
company-owned restaurants.
The ongoing wave of restaurant bankruptcies underscores the persistent challenges facing the industry, including changing consumer
preferences, rising operational costs, and the long-term impacts of the pandemic. As more chains struggle to adapt to these pressures, the landscape of casual dining in America continues to evolve, with established brands fighting to maintain their foothold in an increasingly competitive market.