The TGI Fridays restaurant chain has gone down in history for popularizing happy hour, $10 cocktails, and being one of the first singles bars in the US. And this year it has entered the long list of bankrupt restaurant businesses along with other illustrious firms such as Red Lobster and Rubio’s Coastal Grill. Excluding 2020, such a horrible year for the hospitality sector has not been remembered for decades.
TGI Fridays took advantage of the Chapter 11 bankruptcy in November with a very precarious financial situation. It had to vacate its Dallas headquarters in a panic. The computer equipment and many boxes with documentation are currently in the homes of its employees, according to The Wall Street Journal.
Your number of restaurants in the United States It has been reduced to less than 200, when in 2008 they had 600 establishments throughout the country. Since the pandemic hit, the chain has not recovered. Venture capital investors’ complex financial plans to stabilize the company failed when the chain was unable to meet its financial obligations. Franchise owners became so frustrated with the lack of communication and direction from company leaders that some stopped paying royalties and royalties directly, franchisees and their advisers said.
The company’s former CEO, Ray Blanchette, was until 2023, continues to serve drinks in some owned locations and has posed as the company’s rescuer. He has offered $30 million for nine restaurants to keep the brand and its spirit alive.. Blanchette says she knows what it takes to bring back TGI Fridays.
Not long ago the chain became a meeting point for families for dinner on Friday or a place to have drinks with co-workers.. But restaurants are not going through their best moment to take families out of the house. Fast food, home delivery and the fact that Americans are increasingly cooking more leave little chance of success for TGI Fridays’ survival.
The first bar to hook up after work
The history of TGI Fridays dates back to 1965. New York restaurateur Alan Stillman opened the first location in Manhattan as one of the first singles bars. Entrepreneur Dan Scoggin, who started as a franchisee and then served as the chain’s CEO for 15 years, is credited with developing distinctive touches, such as its Tiffany-inspired lamps, memorabilia on the walls and bartenders who tossed their cocktail shakers into the air. air while preparing drinks. TGI Fridays contributed to the bartending and cocktail culture with an Olympics. Even Tom Cruise has put drinks in his stores. Several scenes from Cocktail (1988) were filmed behind the bar of a TGI Fridays.
The company even went public. It made the jump to Wall Street in 1983, but quickly returned to private ownership in 1989 when the hotel and investment conglomerate Carlson Companies bought the chain for about 52 million dollars. Carlson, the parent of the Radisson hotel chain, said at the time that it planned to keep Fridays as it was. At that time it operated approximately 150 restaurants in the United States, the United Kingdom and Mexico.
Blanchette, the future savior of the company, He started working at Fridays in 1989 as a training manager in Philadelphia.to. He was 23 years old and about to become a father. The year before, Tom Cruise had channeled the network’s vibe with his juggling tricks in the hit movie “Cocktail”; some scenes were filmed at the TGI Fridays Upper East Side location in Manhattan.
During the golden years of Fridays It registered 2,000 diners a day and $140,000 in weekly sales. “The casual dining scene I grew up in was bursting at the seams,” explains Blanchette. “When someone got up to leave, the table was immediately occupied by other customers.”
Fridays sales peaked in 2008, with $1.97 billion in U.S. revenue at 600 locations, according to Technomic. In part through franchise and licensing agreements, the brand expanded to 60 countries and generated $2.7 billion in business globally in 2013.
happy hour is over
TGI Fridays soon began to feel pressure: its U.S. sales fell throughout the 2010s, and in 2017 were 36% below the 2008 level. Casual restaurant chains were generally losing customers to newer restaurants in fast food, such as Chipotle Mexican Grill, where customers ordered fresh food at the counter and could take it to go.
Carlson sold the chain to private equity firms in 2014. Sentinel Capital Partners and TriArtisan Capital Partners in deal that valued Fridays at around $800 million. It had about 900 owned and franchised restaurants around the world, employing 70,000 people.
Its new owners sold the company-owned restaurants to franchisees to help reduce debt, getting rid of most of the locations by 2015. By that year, TGI Fridays sales in the United States had decreased 24% from 2008 levels to $1.5 billionand its number of national stores had sunk to 480 locations.
Blanchette went through a series of executive positions at restaurant chains before the company’s financial managers and some franchisees called him in 2018 to ask him to return to TGI Fridays as CEO, “my dream job“, remember.
The manager bought franchised restaurants that needed attention. He revamped the menu with whiskey-covered steak and dollar cocktails. Blanchette did not hesitate to participate in The Undercover Boss to promote TGI Fridays. He donned a wig and layers of makeup to visit restaurants as “Keith,” a trainee.
Blanchette found many things that needed improvement, but by then the company’s finances needed improvement too. The last sale of the company had allowed it to reduce debt, but the sale of premises to franchisees left little room for maneuver on the balance sheet for future crises, the experts at Moody’s Investors Service indicated at the time.
bad move
TGI Fridays borrowed $450 million in 2017, collateralizing the entire business, which aimed to reduce the company’s borrowing costs by using its assets to back new debt. Fridays issued these bonds backed and financed by royalty payments from its franchisees. Domino’s Pizza, Dunkin’ and other chains also adopted the practice in the 2000s and 2010s.
One of the conditions of the financing was that TGI Fridays committed to achieving at least $1.5 billion in annual sales. If the company were to breach the terms of the deal, investors in the deal could claim royalties from TGI Fridays and other cash flows in the future.
The cracks began to show the following year, when S&P Global Ratings lowered its view on TGI Fridays’ debt after seven quarters of declining same-store sales and one of the lowest ratios of funds available to pay down debt among similar companies considered by the rating agency.
A failed rescue plan
Sentinel Capital withdrew from its investment in TGI Fridays in 2019, leaving TriArtisan as the majority sponsor. Then, in 2020, the pandemic hit. Blanchette and her team set up tents in the parking lots to serve takeout and cocktails. Sales rebounded and the company closed fewer restaurants during the pandemic than Blanchette originally predicted. But total sales were still below the level required by the company’s securitization deal in 2020.which triggered financial consequences. Millions of dollars in royalties and other payments in subsequent years went to the company’s debt investors rather than supporting the brand.
In May 2023, Blanchette resigned as CEO and subsequently purchased seven company-owned Fridays locations.. Store sales at American restaurants and franchisees that year fell 9% and 7.1%, respectively.
Its owner, the TriArtisan fund, announced a lifesaving plan last April. It wanted to merge TGI Fridays with its largest UK franchisee, Hostmore, to go public on the London Stock Exchange. The roughly $220 million deal would stabilize the chain’s finances and revitalize the brand, which would then generate $1.4 billion in total global annual sales. But in June, TGI Fridays’ independent auditor warned that the chain was running out of funds to meet its debt obligations. The company was already condemned to bankruptcy.
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