FDD Talk 2018: TGI Fridays Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk 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 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a TGI Fridays franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned TGI Fridays outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of TGI Fridays’ financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average, median, high, and low gross sales for the upper 25%, mid-level 50%, lower 25%, and all 46 company-owned TGI Fridays restaurants open for the entire 2017 fiscal year

• 2017 average, median, high, and low gross sales for the upper 25%, mid-level 50%, lower 25%, and all 376 franchised TGI Fridays restaurants open for the entire 2017 fiscal year

Section I – Background Information

14 Things You Need to Know About the TGI Fridays Franchise

Announces Chief Executive Officer Transition

1.  In early October 2018, TGI Fridays announced an executive-level transition that will accelerate the company’s growth trajectory and performance across its entire system. Restaurant industry veteran Ray Blanchette was named chief executive officer following the appointment of Aslam Khan to vice chairman of the board.

2.  Khan, an accomplished entrepreneur and long-time restaurant executive who joined TGI Fridays in April 2017, assumed the role of vice chairman immediately at the time of the announcement. Under Khan’s leadership, TGI Fridays more than doubled its earnings from the previous year and is poised for further growth and expansion.

3.  Khan said, “I’m honored that our Board has entrusted me with the great responsibilities of vice chairmanship. My time as CEO has been incredibly rewarding, but this is both the next logical step for me, and the right time to take it. Our foundation is strong, our processes and protocols are sound, and our team is the best in the business. I am genuinely proud and pleased to turn over my officer responsibilities to Ray, an outstanding business leader whose business acumen, drive, and operational knowledge will help Fridays in the years to come.”

4.  Blanchette comes to TGI Fridays from Ruby Tuesday, where he served as CEO. Prior to his tenure at Ruby Tuesday, Blanchette served as CEO of Au Bon Pain and Ignite Restaurant Group, the parent company of Joe’s Crab Shack and Brick House Tap & Tavern Brands. Blanchette is a seasoned executive with over 25 years of leadership experience in the restaurant industry.

5.  Blanchette said, “I am privileged to become the CEO of TGI Fridays. I started my career at TGI Fridays, where I worked for 18 years. I have great passion for this brand, and it is my dream job. As we move forward and continue our focus on being the best Bar & Grill in the world, I see great things ahead for our guests, team members, and this company.”

Launches New Fridays Five Bar Menu

6.  At the end of June 2018, TGI Fridays launched what the brand is calling “America’s longest ever happy hour” with the release of the Fridays Five menu at participating restaurants. With the Fridays Five menu, customers can choose, day or night, from a variety of $5 beer, wine, and clean-label premium cocktails, and a variety of $5 bar bites including wings, sliders, and warm pretzels.

7.  The Fridays Five summer menu included the following new cocktails: the Shimmering Diva, Frozen Blue Hawaiian, Fridays Long Island Tea, and Fridays & Rita. Other drinks on the menu included: 23 oz. Light Drafts, 16 oz. Leinenkugel Summer Shandy, 16 oz. Local Drafts, 6 oz. Cupcake Rosé, and 6 oz. Canyon Road Cabernet Sauvignon. The Fridays Five menu had the following appetizers: boneless wings in two flavors, cheeseburger sliders, giant onion rings, warm pretzels, and chicken quesadillas.

8.  The launch of the Fridays Five menu is part of TGI Fridays’ ongoing evolution strategy of enhancing its menu as a whole, introducing in June new freshly-crafted pasta dishes and shareable appetizers, plus a completely redesigned menu which still includes Fridays favorites.

9.  Stephanie Perdue, chief marketing officer of Fridays, said, “Bars and restaurants can make Happy Hour confusing with inconsistent specials, and we don’t think it should be one or two hours only. As the inventors of Happy Hour, we wanted to make Happy Hour just that – fun, simple, and on your terms. We have created a bar menu with great bar pairings, and as seasons change, so will we so Guests can count on Happy Hour anytime.”

Company History

10.  The first TGI Fridays was opened in 1965 by Alan Stillman in New York City. Stillman opened his new bar/restaurant in a neighborhood where many models, flight attendants, secretaries, and other young, single people lived. According to Stillman, there were no public places at the time for young men and women to meet up, as all the bars in the area mostly catered to men. Stillman wanted TGI Fridays to have a comfortable cocktail party atmosphere and the first TGI Fridays is often considered to be one of the world’s first singles bars.

11.  Two years after the first TGI Fridays opened, Stillman started franchising the concept. The first TGI Fridays franchise opened in Memphis, Tennessee. TGI Fridays continued to expand across the United States and in 1971, Daniel R. Scoggin acquired the rights to open TGI Fridays in eight major Midwest cities.

12.  The following year, Scoggin opened the first of a new prototype restaurant in Dallas, Texas. This TGI Fridays location featured a raised square bar and multilevel dining, which became the company’s standard. Scoggin kept opening TGI Fridays locations in suburban neighborhoods and after Stillman noticed Scoggin’s success, he merged the rest of the company with the Dallas franchise system to form TGI Fridays, Inc.

13.  Stillman sold TGI Fridays in 1975 to Carlson Companies, while Scoggin stayed on as CEO. Scoggin is credited with inventing many TGI Fridays staples, including the large from-scratch menu, potato skins, bartender Olympics, and frozen drinks. Scoggin also developed the first international franchise and the template for future international development. Scoggin left TGI Fridays in 1986 and three years later, the company officially switched its focus from singles to families.

Entrepreneur’s Franchise 500

14.  TGI Fridays did not rank on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of TGI Fridays franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on TGI Fridays’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  300
• Outlets at the End of the Year:  424
• Net Change:  +124

2016

• Outlets at the Start of the Year:  424
• Outlets at the End of the Year:  415
• Net Change:  -9

2017

• Outlets at the Start of the Year:  415
• Outlets at the End of the Year:  385
• Net Change:  -30

Company-Owned

2015

• Outlets at the Start of the Year:  200
• Outlets at the End of the Year:  58
• Net Change:  -142

2016

• Outlets at the Start of the Year:  58
• Outlets at the End of the Year:  54
• Net Change:  -4

2017

• Outlets at the Start of the Year:  54
• Outlets at the End of the Year:  53
• Net Change:  -1

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

Part 1 – Historic Gross Sales for Company-Operated Fridays Restaurants

• Part 1 includes 46 company-owned Fridays Restaurants operated and/or managed by TGIF Inc. for the full 2017 fiscal year. Part 1 excludes 8 company-owned Fridays Restaurants, being those: 1) operated at non-traditional locations (e.g. airports and stadiums), and 2) open for less than the full 2017 fiscal year.

• During 2017, 1 company-owned Fridays Restaurant that was open for more than 12 months closed.

• Different assumptions and results may apply to Fridays Restaurants TGIF Inc. operates at non-traditional locations.

• As of December 25, 2017, the average length of time that the company-operated Fridays Restaurants included in Part 1 have been open is 18.23 years.

• Typically, company-operated Fridays Restaurants are located in areas with population densities in excess of 250,000 and in close proximity to regional shopping centers.

• The location of a Fridays Restaurant (whether company-operated or franchisee-operated) and the demographics of the geographic area can have a material impact on sales and expenses. Franchised Fridays Restaurants operated in areas with population densities less than 250,000 and/or with less favorable demographic profiles are likely to experience lower sales than the average company-operated Fridays Restaurant.

• All of the company-operated Fridays Restaurants offer substantially the same products and services to the public that franchised Fridays Restaurants are expected to offer.

• The company-operated Fridays Restaurants use a uniform accounting system and the data pertaining to these Fridays Restaurants was prepared by the company’s in-house accountants on a basis consistent with generally accepted accounting principles during the covered periods. The information contained in Part 1 has not been audited.

Gross Sales for 52 Weeks Ending December 25, 2017