A combination of distress factors, including rising labor and food costs from inflation, higher interest rates, and lingering effects from the Covid-19 pandemic have inflicted financial hardship on restaurant chains nationwide and forced some to close locations and file bankruptcy.
The list of nationwide fast-food and casual restaurant chains that have filed for Chapter 11 bankruptcy in 2024 is lengthy, and in most cases, debtors need to close underperforming locations for reorganization plans to make economic sense.
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National and regional chains that filed Chapter 11 and closed restaurants this year include Mexican fast-casual chain Tijuana Flats on April 19, seafood giant Red Lobster on May 19, Mexican restaurant Rubios Coastal Grill on June 5, Italian chain Buca di Beppo on Aug. 4, and Burger Fi on Sept. 11.
Related: Distressed fast-food chain closes locations, no bankruptcy yet
Red Lobster closed over 120 locations and now operates 545 restaurants after exiting bankruptcy Sept. 16. BurgerFi, which lists 144 of its burger and Anthony's Coal Fired Pizza locations, closed 19 corporate-owned burger locations and kept 17. It also has 50 pizza restaurants.
The company's 77 franchised burger and pizza locations did not file for bankruptcy.
Rubios, which had 134 locations in California, Arizona, and Nevada, closed 48 California locations because of financial hardship that a new Golden State minimum wage law was causing.
Tijuana Flats, which at one time had as many as 123 locations, sold the company to a new ownership group and closed 11 of its locations.
Buca di Beppo closed 13 underperforming locations in the days before its Chapter 11 filing and would continue operating 44 locations in 14 states.
Another major national casual restaurant chain, however, has been busy lately closing its locations but hasn't filed for bankruptcy yet.
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TGI Fridays closing dozens of locations
Popular casual restaurant chain TGI Fridays, which is reportedly planning to file for Chapter 11 bankruptcy in the next several days, has closed 50 restaurant locations in the last week, according to the company's store locator on its website.
Related: Another doomed trucking company files Chapter 7 bankruptcy
The restaurant company, which has about 550 franchise locations in 55 countries, on Oct. 21 listed 213 locations in 29 states on its website locator, but by Oct. 29 it had adjusted the list to 163 U.S. locations on the locator site.
TGI Fridays has been negotiating debtor-in-possession financing with its lenders ahead of a Chapter 11 bankruptcy filing, people with knowledge of the situation said over the last two weeks.
The Dallas-based franchisor is seeking a DIP loan to fund its operations and bankruptcy case with hopes of emerging as a going concern. It could also negotiate an asset purchase agreement under a bankruptcy filing, as it had been seeking a sale of its company-owned units until the sale to U.K. franchisee Hostmore fell through in September.
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Originally, Hostmore, which owned 87 franchises, planned to buy TGI Fridays corporate-owned units, but the two companies decided to sell all of their owned and operated restaurants to franchise operators and transition to a fully franchised model.
Hostmore was placed into administration in the U.K. as it sought to sell its assets after the TGI Fridays deal fell through.
TGI Fridays operated about 92 corporate-owned restaurants until it lost management control of most of its assets after its whole business securitization trustee Citibank terminated the company's management authority.
The restaurant operator had fallen into financial distress after it received an overpayment of a management fee from the securitization that it could not repay. The company did not notice the overpayment until after it used the funds to pay off past-due accounts to certain vendors.
The company has since repaid $228,000 of the overpayment, but it wasn't enough to prevent Citibank's action.
TGI Fridays has struggled this year to pay its bills, according to data from credit report provider Creditsafe, Restaurant Business reported. The company's days beyond terms, which measures how late bills are paid, jumped to 27 days in July after being steady at 15 from March through June.
Over half of the company's bills were at least 91 days late in July, the report said.
The restaurant chain has struggled financially over the last two years since its U.S. sales declined 15% in 2023, according to data provider Technomic.
TGI Fridays faced financial distress earlier this year in Brazil, as restaurant chain franchisee SouthRock Capital, which operated eight TGI Fridays units in the South American country, 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.
The São Paulo, Brazil, restaurant operator filed its Chapter 15 petition to protect its rights to the TGI Fridays brand and any other assets it has in the U.S. A Chapter 15 filing places an automatic stay on any legal actions against the debtor while the case proceeds.
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