After plans for a merger with its largest franchisee fell through earlier this year, TGI Fridays filed for Chapter 11 bankruptcy.
The 461-unit casual dining chain filed in the Northern District of Texas November 2 to restructure the company. TGI Fridays owns 39 corporate units. The remaining 422 restaurants, owned by 56 franchisees in 41 countries, aren’t involved in the filing and are operating as usual. Last year the company touted about 700 restaurants in its portfolio.
Executive Chairman Rohit Manocha said TGI Fridays experienced financial issues from the Covid-19 pandemic.
“The next steps announced today are difficult but necessary actions to protect the best interests of our stakeholders, including our domestic and international franchisees and our valued team members around the world,” Manocha said in a press release. ” This restructuring will allow our go forward restaurants to proceed with an optimized corporate infrastructure that enables them to reach their full potential.”
In the filing, TGI Fridays estimates between 1,000 and 5,000 creditors. It lists between $100 million and $500 million in assets and the same range in liabilities.
Most of the money owed is for rent payments, but a lot of it is owed to digital marketing agencies, like Digitas, Active Media Services, MiQ Digital USA and DoorDash. Those four entities are owed a total of nearly $7.5 million.
Hostmore, a United Kingdom-based TGI Fridays franchisee, was going to acquire the franchisor, but called off the deal in September after the company lost control of most of its assets. On September 3, Citibank ended TGI Friday’s role as manager of its 2017 whole business securitization, a form of debt financing to secure debt. Citibank oversaw the 2017 securitization.
In the September 9 announcement, Hostmore said, “the termination compromises the control over the royalty stream of TGI Fridays and also potentially impairs the future revenue of the business. The predictable and highly cash generative royalty stream of TGI Fridays was the primary attractive feature for the group in pursuing the acquisition.”
Hostmore initially announced the plan to buy TGI Fridays in April, but reported in August that the deal would be delayed. The collapsed deal led Hostmore to file for the UK equivalent of bankrupty, closing 36 stores and selling the other 51 to private equity firms.
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Last year, TGI Fridays appointed a new CEO, Weldon Spangler, after former CEO Brandon Coleman resigned after a couple of months in the role.
TGI Fridays appointed Kyle Richter, of consulting firm Berkeley Research Group, as chief restructuring officer.