TGI Fridays finds itself still in the throes of a turnaround effort, which dates back to the hiring of Blanchette in October 2018. About a year later, the chain announced its intentions to go public with special purpose acquisition company Allegro Merger Corp. as part of a $380 million deal. At the time, the restaurant had roughly 840 restaurants, including 396 in the U.S. In Q4 2019, corporate and franchise same-store sales dropped 9.4 percent and 12.8 percent, respectively, and traffic declined by 5.9 percent and 11.4 percent.
When COVID hit, sales dropped roughly 80 percent. Because of those challenges, the merger agreement was canceled in April 2020.
In 2021, same-store sales rose 2.4 percent against two years ago, but that’s in comparison to a poor 2019, which saw systemwide comps declines of 8.2 percent, 7.9 percent, 7.8 percent, and 11.3 percent. The brand earned $73.2 million in average monthly volume in 2021, up from $50.8 million in 2020 and $72.5 million in 2019. Since the pandemic began, TGI Fridays has permanently shut down close to 150 stores systemwide.
A Look at TGI Fridays' Turnaround Effort
During its comeback, TGI Fridays has focused on elevating its digital business. Amid the pandemic, the restaurant upgraded its online ordering platform and saw improvements in conversions, upsells, and average order value. Additionally, the brand has continued to invest in its rewards program, which includes members who visit four times as much and spend 12 percent more than nonloyalty guests.
“The majority of our invested capital is being spent in the digital arena to continue to maximize and optimize these e-commerce channels, as well as deepening the relationship that we have with our stakeholders, as well as improving some execution both in-restaurant and for our off-premise experience,” said Chief Experience Officer Sara Bittorf.
To bolster its digital presence even further, TGI Fridays executed two key virtual restaurant partnerships in 2021. In September, the casual-dining chain signed an agreement with REEF Kitchens to launch 300 ghost kitchens globally in a little more than four years. From this deal, TGI Fridays expects annual royalty between $10 million and $25 million after 2025.
The restaurant then announced a joint effort with digital kitchen operator C3 (Creating Culinary Communities) to insert the company’s virtual brands in 170 corporately run stores nationwide. TGI Fridays is currently testing ghost concept Krispy Rice in 14 California and Maryland/Washington, D.C. locations, and early results show $40 in average check, $4,000 to $10,000 in sales per unit per week, and high consumer acceptance. At these pilot restaurants, Krispy Rice is also available in the dining room and through TGI Fridays web and app platforms.
“They have some really sexy, some really cool brands that interestingly enough, we can run these without making them subject to our current bottleneck,” Blanchette said. “And so it truly does expand theoretical capacity.”
Fridays on the Fly, which will also offer these virtual concepts, is one of five growth vehicles. The other four being U.S. franchisees, international units, company-run stores, and consumer-packaged goods.
There are 154 franchised stores in the U.S. in 25 states, led by franchisees with an average tenure of 15 years. The locations earn $2.7 million in AUV and saw double-digit same-store sales growth in the back half of 2021 against 2019. Meanwhile, there are 157 company-run restaurants in 14 states with an AUV of $3 million.
Internationally, TGI Fridays operates 379 stores in 53 countries, and Blanchette believes there’s opportunity to return to 30 openings per year and more than double the footprint, with much white space in Europe and Asia.
Global markets are also responsible for the chain’s growth in consumer-packaged goods. The channel’s compound annual growth rate was 7 percent in recent years, but has now increased to 12 percent after identification of new growth markets, like the U.K., which represents 10 percent of royalty streams after only one year.