By Haddon Libby
TGI Friday’s, the Dallas-based chain, is entering bankruptcy. The chain was purchased by private-equity firms TriArtisan Capital Advisors and Sentinel Capital Partners in 2014. Recent reports show that TGI Friday’s has $728 million in revenues across its 292 locations for sales of nearly $2.5 million per location. The chain was originally started by Alan Stillman in New York City in 1965.
Outside of the pandemic period, the last year has seen the most failures for chain operators in history. Earlier this year, Red Lobster, Buca di Beppo, Roti Mediterranean Grill and BurgerFi declared bankruptcy.
While a franchisor may be okay financially, many franchisees are failing. Just last week, an Applebee’s franchisee shuttered eight locations around the Kansas City area. At the time of these closings, the franchisee listed assets of up to $10 million and debts of up to $50 million owed to at least 200 creditors. Another franchisee, Louisiana Apple, with 14 Applebee’s locations filed for bankruptcy.
Other franchisees that have gone bankrupt over the last year for restaurants including Burger King, Carl’s Jr/Hardee’s, Wendy’s, Arby’s, Subway, Popeyes, Denny’s and Howard Johnson’s. At the same time, many company-owned stores are closing underperforming locations.
Red Lobster recently exited bankruptcy protection with its sale to an investor group headed by Fortress Investment Group. The former CEO of PF Chang’s was brought in to run the company and given $60 million to invest in the company. Red Lobster’s finances were challenged by declining sales along with an unfavorable sale/leaseback deal on restaurant locations from a prior owner. With a new management team and restructured finances, the chain is looking to revamp its menu away from all-you -can-eat shrimp specials that tend to lose money and attract diners back to its locations.
Last week, BurgerFi was sold out of bankruptcy to one of its lenders – TREW Capital Management. TREW Capital is run by Jeff Crivello, the former CEP of Famous Dave’s. TREW acquired Rubio’s out of bankruptcy last year.
Roti Mediterranean is a Chicago-based chain with 19 locations. The chain is scheduled to go to auction on the 11th with a minimum bid of $3.5 million.
Buco di Beppo has received a $27 million offer from one of its creditors. As some of the other creditors do not like the deal, it is being challenged in court.
Some of the restaurant chains that are scaling back locations to eliminate money-losing locations include Appleby’s, Buffalo Wild Wings, Boston Market, Fuddrucker’s, Steak ‘n Shake, and Subway.
Subway is the largest restaurant chain in the United States with 37,435. McDonalds comes in second with 13,400 locations followed by Starbucks (15,000), Dunkin’ (9,200), Burger King (7,200), Taco Bell (7,100), Domino’s (6,400), Pizza Hut (6,100), Wendy’s (5,900) and Little Caesars (5,500).
Restaurant chains first came into existence with the Harvey House begun in 1876. Fred Harvey offered restaurants and hotels along railroad lines in the Western United States. At the time of the company’s sale in 1968, it was the 6th largest food retailer. To give you an idea as to how much times have changed, the Harvey House paid its female serving staff $18.50/month along with room and board. Servers had a house mother who required them to be in their rooms by 10pm each night.
Some of the earliest chains include White Castle (1921), A&W Root Beer and Howard Johnson’s (both 1925).
White Castle started in Wichita, Kansas in 1921. Walt Anderson started the business in a converted streetcar. He had been a cook at food stands prior to starting the venture. Today the company has $660 million in revenues across its 330 locations that employ 10,000. Like In-N-Out Burger, the founding family refuses to franchise or bring in investors.
In-N-Out Burger stands apart from the pack in that it has only closed one location in its history. The closure was in Oakland back in March due to theft and violence at the location.
