In this FDD Talk 2016 post, you’ll learn the following:
- Section I – Background information on the TGI Fridays franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a TGI Fridays franchise, based on Item 7 of the company’s 2016 FDD
- Section III – Presentation and analysis of TGI Fridays’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
- 2015 average sales, cost of sales, gross profit, labor cost, controllable operating expenses, profit after controllable expenses, management training expenses, marketing expenses, rent, other occupancy costs, restaurant operating profit, and EBITDA for the 47 company-owned TGI Fridays restaurants open for the entire 2015 fiscal year
- 2015 average, high, and low net sales for the upper 25%, mid-level 50%, lower 25%, and all 407 franchised TGI Fridays restaurants open for the entire 2015 fiscal year
Section I – Background Information
From Singles Bar to Suburban Hangout
The first TGI Fridays was opened by Alan Stillman in Manhattan in New York City in 1965. According to Stillman, TGI Fridays was one of the first singles bars opened in the U.S.
To open TGI Fridays, Stillman used $5,000 of his own money and borrowed another $5,000 from his mother to purchase a bar he frequented called The Good Tavern. Stillman renamed the bar TGI Fridays after the expression “Thank God It’s Friday!”.
The bar and restaurant was immediately successful and two years later, in 1967, TGI Fridays opened a second location in Memphis, Tennessee and began franchising.
In 1971, Daniel R. Scoggin acquired the rights to open TGI Fridays in 8 major cities. A year later, in 1972, Scoggin opened a TGI Fridays in Dallas that would become the new prototype for the changing restaurant. By opening this TGI Fridays in suburban Dallas, the restaurant began attracting families during the day. By this time, TGI Fridays had transformed from a singles bar to a casual eatery.
Motivated by Scoggin’s success, Stillman merged with the Dallas franchise forming TGI Fridays, Inc. Scoggin became the company’s CEO and remained in the position for 15 years. Scoggin is credited with creating the restaurant’s iconic potato skins, frozen drinks, and Bartender Olympics.
In 1975, Stillman sold the company to Carlson Companies who remained the owners until 2014. Stillman kept the original location and continued as CEO until 1986.
In 1983, when TGI Fridays had 100 locations, the company did a Public Offering with Goldman Sachs. Around the same time period, Stillman opened the first international TGI Fridays location in the U.K. The company went private again in 1989 and continued to focus on becoming a family-friendly establishment.
Sentinel Capital Partners and TriArtisan Capital Partners bought TGI Fridays in 2014. Today, TGI Fridays has over 900 locations throughout the world.
Refranchising Domestic Locations
TGI Fridays announced in late 2014 that the company would eventually sell most of its company-owned U.S. locations to franchisees. Of TGI Fridays’ 247 company owned domestic locations, the company sold 175 locations by the end of 2015.
TGI Fridays completed its refranchising goal ahead of schedule and says that the company can now focus on growing the business. The company has retained about 54 locations. Today, about 90% of TGI Fridays’ U.S. locations are franchisee-owned.
In addition to selling most of the company-owned locations in the U.S., TGI Fridays plans to sell all of its 63 U.K. locations.
Remodeling and Redoing the Food and Drink Menu
Along with the refranchising, TGI Fridays has plans to remodel 122 of the refranchised locations. The plan is to modernize the interior and exterior of the restaurants. The new layout will remove the divider walls between the dining and bar areas. The bars in all remodeled locations will be expanded.
With the new emphasis on the bar, staff are being retrained to seat guests either closer or farther from the action by learning to read what the customer wants. The new bar menu will emphasize craft cocktails, feature higher end liquor brands, and place a premium on bartender skills.
TGI Fridays also plans to continue reworking its food menu to go along with the new bar menu. Since 2012, TGI Fridays has shifted from reheating frozen foods to cooking fresh food from scratch.
New Company President
In early 2016, TGI Fridays announced that Robert Palleschi would take over as President and CEO of the company. Palleschi is taking over from Nick Shepherd who stepped down in October 2015.
Palleschi says that TGI Fridays’ recent remodeling and refranchising strategy is what attracted him to the position. He hopes that his experience as the global head of Full Service Brands for Hilton Worldwide will help him aid TGI Fridays in its new growth push.
Section II – Estimated Costs
- Please click here for detailed estimates of TGI Fridays franchise costs, based on Item 7 of the company’s 2016 FDD (updated).