Restaurant bankruptcy filings have been ticking higher this year as budget-conscious consumers cut back on eating out, and many eateries struggle with high debt loads in a toxic environment of high interest rates. TGI Fridays is the latest casual dining chain preparing a bankruptcy filing.
People knowledgeable of TGI Friday’s bankruptcy plans told Bloomberg that the US casual dining restaurant chain, with 600 locations in 55 countries, including 233 in the US, will file for bankruptcy protection in the coming weeks.
TGI Fridays executives have been in multiple discussions with lenders searching for a loan to ensure operations run smoothly through the Chapter 11 process, the people said, who asked not to be named in the report.
The people said Ropes & Gray LLP lawyers are advising TGI Fridays on bankruptcy preparations but noted plans have not yet been finalized.
Bloomberg pointed out:
The chain’s obligations include asset-backed securities, which were the source of some drama last month after the company’s management breached their terms by failing to file documents to bondholders on time. As a result of that breach, they had to turn over control of some assets to an outside manager.
Credit rating agency KBRA recently reported that the chain lost control of much of its business functions through a manager termination event because of TGI Fridays’ “failure to furnish a report of the independent auditors or back-up manager summarizing the findings of certain agreed-upon procedures within a certain time period.”
Add TGI Fridays to the list of restaurant bankruptcies piling up this year as the space becomes extremely challenging in a period of thrifty consumers:
- Red Lobster Management
- Rubio’s Restaurants
- Melt Bar & Grilled
- Kuma Holdings
- Tijuana Flats
- Sticky’s Finger Joint
- Boxer Ramen
CRE news website Bisnow added more color on the restaurant downturn:
Going back decades, this year is set to come second to only 2020 for the number of restaurant chains and operators declaring bankruptcy, according to BankruptcyData.com records reported by the WSJ. Traditional chain restaurants like Red Lobster and Buca di Beppo have had to resort to a court-facilitated restructuring, but so have fast-casual chains Roti, Tijuana Flats and fast-casual taco chain Rubio’s.
Same-store sales traffic at US restaurants was down 3.3% year-over-year this month, according to Black Box Intelligence, and casual dining restaurants saw visits fall 4.5%.
Other headlines in the space:
- Subway Calls ‘Emergency’ Meeting With Franchisees As Fast-Food ‘Value Wars’ Potentially Claim First Casualty
- Fast-Food Restaurants Fight To Keep Customers As Food And Wage Costs Spike
- KFC Unveils ‘Finger-Lickin Good’ Meal Deal As Value Wars Heat Up
Yet corporate media and the White House say the US economy is humming along and nothing to worry about with consumers.