The restaurant sector has struggled in 2024 with lingering effects from the Covid-19 pandemic, rising costs spurred by inflation, increased interest rates, and consumers becoming more discriminating about their dining choices.
Several restaurant chains have closed underperforming locations to reduce costs and expenses, and some have taken more drastic measures, such as filing for bankruptcy protection to reorganize, sell assets, or liquidate.
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The most prominent restaurant chain to face economic hardship this year was Red Lobster, which filed Chapter 11 on May 19 and closed over 120 locations.
Popular fast-food burger chain BurgerFi International, owner and franchisor of 144 burger and pizza restaurants, on Sept. 11 filed for Chapter 11 bankruptcy and closed 19 locations.
Related: Distressed retail chains file for Chapter 11 bankruptcy
Several restaurant franchisees filed for bankruptcy as well, as EYM Pizza, which operates 127 Pizza Hut locations in Illinois, Indiana, Ohio, Texas, and Wisconsin, filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Eastern District of Texas on July 22.
Arby's franchisee Miracle Restaurant Group, which operates 25 units in Illinois, Indiana, Texas, Mississippi, and Louisiana, in June filed for Chapter 11 protection after the effects of the Covid-19 pandemic and inflationary pressures in commodity and labor expenses caused financial distress.
Casual dining chain TGI Fridays had planned to sell its corporate-owned locations to its U.K. franchisee Hostmore, but the deal collapsed in September 2024.
Hostmore, which owned 87 U.K. franchises, and TGI Fridays decided instead to sell all of their owned and operated restaurants to franchise operators and transition to a fully-franchised model.
After the TGI Fridays deal with Hostmore fell through, the U.K. company was placed into administration as it sought to sell its assets.
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The U.S. franchisor also on Sept. 3 lost management control of most of its assets after its whole business securitization trustee Citibank terminated the company's management authority of its franchise agreements and its company-operated restaurant royalties.
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After these events, TGI Fridays began lining up debtor-in-possession financing for a potential Chapter 11 filing.
TGI Fridays faced another financial issue overseas earlier this year as Brazil-based restaurant chain franchisee SouthRock Capital, which operated eight TGI Fridays units, on June 12 filed for Chapter 15 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas seeking recognition of its Brazilian bankruptcy case as a foreign proceeding.
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TGI Fridays files for Chapter 11 bankruptcy
Finally, the time came for TGI Fridays Inc. to seek bankruptcy protection as on Nov. 2 the company filed for Chapter 11 seeking to reorganize its business, which could include a sale of certain company assets, further reduction of its restaurant footprint, and rejection of unfavorable leases and contracts.
TGI Fridays' 122 franchised locations in the U.S. and 316 franchised units outside the U.S. did not file for bankruptcy.
The debtor asserted that lingering effects from the Covid-19 pandemic, a volatile macroeconomic environment, global inflation, significant interest rate increases, and rising costs have led to the financial distress that forced a bankruptcy filing, according to a declaration by Chief Restructuring Officer Kyle Richter.
The Dallas-based restaurant chain, which operates 39 corporate-owned locations in the U.S., listed $100 million to $500 million in assets and liabilities in its petition filed in the U.S. Bankruptcy Court for the Northern District of Texas.
The debtor listed $46.8 million in funded term-loan and revolving-credit debt and interest obligations. It also reported $104 million owed to unsecured creditors, including Digitas Inc., owed $3.4 million; Active Media Services, owed $1.97 million; and MIQ Digital USA, owed $1.25 million.
The restaurant chain is seeking approval of up to $23.9 million in debtor-in-possession financing to fund its company operations and its bankruptcy case, including $5.9 million in new money and a rollup of $18 million in prepetition debt.
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