Two renowned American dining places, Red Lobster TGI Fridays Closing have opened space for fast food outlets to take over the places. Though, the closure was not shocking for the landowners.
After the hit of COVID-19, most of the locations were facing challenges with a significant decrease in daily footfall and monthly revenue. But what reasons contribute to the closure of the once-popular dining places?
Let’s find out how these two popular restaurant chains filed for bankruptcy and what the locations’ next targets are. Will they shut down more restaurant locations around the world?
Red Lobster TGI Fridays Closing Backstory
For most American families, a night with loved ones often meant a meal together at Red Lobster or TGI Fridays. Both the restaurant chains started their journey with the commitment to target low to medium-income households.
Before COVID-19 arrived, these chains served as an anchor location for family dining. The CEO Kelli Valade of Denny said “Family dining has had its worst post-pandemic”. It was the downtime for these businesses.
Reports show that some other restaurant store sales are down by almost 3.3% compared to last year. Here is how Red Lobster TGI Fridays Closing hit:
For Red Lobster:
- The executive changes between 2021 and 2022 lead Red Lobster to mismanagement.
- Post-covid they closed down a few locations and auctioned many of the furniture and equipment.
For TGI Fridays:
- Due to financial challenges and dining preferences during COVID-19, TGI Fridays filed for bankruptcy.
- The restaurant chain closed many locations including 50 stores in October 2024.
- Gossip spread that TriArtisan Capital Advisors own TGI Fridays privately.
How Chapter 11 Bankruptcy Affected Both Restaurants?
The food service industry is large and there is less debate about whether the pandemic Covid-19 really damaged the restaurant industry or not. Though the foot traffic in restaurants dropped, the demand for online delivery has increased.
Sit-in restaurant setups like Red Lobster TGI Fridays Closing did not have a sunny time after the pandemic. While Red Lobster and TGI Fridays have already closed 175 locations combined, fast-casual restaurants increased by 3.2% and fast-food restaurants by 0.6% (research by wtvr.com).
Chapter 11 Bankruptcy in 2024
The report by CNN shows that the restaurant companies blame the pandemic as the primary driver for the significant financial challenges. The bankruptcy in 2024 also affected TGI Fridays patent company which operated 39 locations.
The Chapter 11 process allows Red Lobster and TGI Fridays to potentially close underperforming locations, restructure debts, and attempt to regain financial stability. Though the bankruptcy offered opportunities to regain their stability, Red Lobster and TGI Fridays had to close numerous stores that were not profitable.
The executive chairman of TGI Fridays, Rohit Manocha called these bankruptcy processes “difficult but necessary actions”. The authority stayed silent by only replying “The other restaurants will remain open and continue to serve customers as usual”.
5 Prior Reasons for Red Lobster TGI Fridays Closing
Alex Wolf said in an interview that “Red Lobster’s bankruptcy in May was the most spectacular restaurant chain collapse in 2024”. But their collapse was far from alone! The trend might deepen with TGI Fridays and Applebee’s.
Here are the top 5 reasons for the Red Lobster TGI Fridays Closing:
- Covid-19 hangover and labour cost
- High interest rates that prior growth over profit
- Families have pulled back on dining out
- High debt, financial struggle, and bankruptcy
- Mismanagement and Underperformance
Replacement by the Drive-thru
The major reason for the Red Lobster TGI Fridays Closing is due to high competition. They are struggling as the customers of sitting-up restaurants like Red Lobster and TGI Fridays have squeezed.
Drive-thrus became preferable among most Americans. On a recent visit to a TGI Fridays running location, the staff shared “It is smaller and a little flatter than what I remember”. Here are the factors that contribute to the replacement of renowned sit-down restaurants with drive-thrus:
✅ Drive-thrus are more profitable as they require less staff and low maintenance.
✅ Fast-food chains supply quality foods at low prices.
✅ Drive-thrus breakfast chains are taking over the vacant locations of former Red Lobster and TGI Fridays stores.
✅ Landlords of these sitting-down restaurants are eager to replace drive-thrus as they are more profitable tenants.
Will They Shut More Locations?
Red Lobster TGI Fridays Closing due to bankruptcy has faced more than 175 restaurant closures combined. However, there are no latest reports of closing more locations in the coming days.
The famous US seafood chain Red Lobster survived bankruptcy thanks to the new CEO Damola Adamolekun. In an interview with CNN, Adamolekun admits “There were certainly big mistakes made over the last few years”.
Adamolekun was rather true in this matter. The previous owner Union mismanaged the restaurant chain. Their decisions and actions contributed to Red Lobster’s financial challenges, eventually filing bankruptcy.
Damola Adamolekun was quite confident about his experience with his leadership role saying “We intend to be done closing restaurants. Intent to grow from here”. They will restructure the menu and quality of the food to grow the business further.
Whereas TGI Fridays’ CEO Weldon Spangler decided to keep silent on the closure yet. As researches indicate that the company is privately owned by TriArtisan Capital Advisors, the current financial results are not public.
Next Target?
In 2024, Red Lobster TGI Fridays Closing process included the shutdown of dozens of locations all over the USA and even the United Kingdom. It caused thousands of job losses. The Chapter 11 bankruptcy process trapped the restaurant chains completely.
Both Red Lobster and TGI Fridays have restructured their menu to keep up with their rivals. TGI Fridays added sushi and refreshed the cocktail menu. Whereas, Red Lobster omitted their popular deal “unlimited shrimp” from the menu. The CEO decided to discontinue this saying “never coming back”.
All signs point to the fact that both Red Lobster and TGI Fridays’ target is to grow from here. Though some locations are still not out of the question, both restaurant chains are seeking a way out of this financial mess.
FAQs
Q1. Why is Red Lobster TGI Fridays Closing?
Ans: The financial challenges, high debt, and underperformance of the restaurant chains are the core reasons for Red Lobster TGI Fridays Closing.
Q2. Did Thai Union sell Red Lobster?
Ans: After facing financial challenges, Thai Union decided to sell the major stake in the company. By following the complete bankruptcy process, Damola Adamolekun took responsibility for the restaurant chain as the CEO of Red Lobster.
Q3. Why is Red Lobster struggling?
Ans: Red Lobster is struggling with financial issues, owner turnover, and low foot traffic.
Q4. Who is the current owner of TGI Fridays?
Ans: There is news that TriArtisan Capital Advisors privately owns TGI Friday now.
Q5. How many TGI Fridays restaurants are still open?
Ans: There are around 133 restaurant locations of TGI Fridays that are still open and operating in the United States.
Q6. How many Red Lobster stores are still open?
Ans: According to the last report of August 2024, there were around 500 restaurant locations of Red Lobster opened in the United States. There are no such reports of closing further locations afterwards.
Q7. What is the current revenue of Red Lobster?
Ans: The current revenue of Red Lobster is $28.6M per year as of the report of growjo.com.