TGI Fridays’ closings could make some prime real estate available in tight retail market
Posted By: CoStar on October 29, 2024. For more information, please click here to read the source article.
Fast-casual restaurant chain TGI Fridays Inc. has closed about 50 of its U.S. locations in the past week as the nation’s dining industry grapples with inflation and customers trimming their spending.
The Dallas-based chain’s number of eateries has diminished on its website’s restaurant locator from 213 about a week ago to 163 locations as of Tuesday. Fridays had 270 U.S. locations at the beginning of 2024 when the company announced plans to close 36 “underperforming” locations and sell eight of its corporate-owned restaurants to former CEO Ray Blanchette as it streamlined operations.
The recent closings of Fridays’ locations spanned the country from California to New York with some shut locations marking an exit from cities such as Columbus, Ohio, and Buffalo, New York, according to local media reports. The moves come as media reports, citing unidentified sources, say the restaurant chain is getting ready to file for bankruptcy protection. Fridays has not returned emails seeking a comment from CoStar News.
The continued abrupt closings of Fridays’ restaurants could make some “damn good real estate” available amid an extremely tight U.S. retail market, said Jack Gosnell, a senior vice president at CBRE and decades-long real estate executive specializing in the retail sector.
“I think those properties will be snapped up in a heartbeat,” Gosnell told CoStar News. “A lot of them will be redeveloped completely.”
The vacated restaurants could also give new eateries a space to occupy quickly and cheaper than building a location from scratch, Gosnell said.
“The idea of starting a new restaurant from the dirt is not achievable right now and this gives space to a lot of talented restaurants looking for opportunities,” he said.
Tight retail market
Even with the sharp uptick of retailer bankruptcies and store closings, CoStar market analysts said in the latest national market report, the U.S. retail space market remains “historically tight” heading into the final months of the year.
The U.S. retail vacancy rate is at 4.1% with the country expected to continue to face a shortage of high-quality available space as the total amount of retail construction falls to new multi-decade lows in the third quarter, according to CoStar’s market analysts. There is only 46 million square feet of new retail space in the construction pipeline as costs remain elevated for new construction.
“Fridays has been sliding down the slope for a long time,” said Gosnell who is not directly involved with Fridays’ real estate . “If you look at the volumes, there’s been a steady decline. At one time, Fridays was one of the hottest places in town and everyone couldn’t wait to go there, but they didn’t evolve.”
In Texas, where Fridays has been based and serving margaritas and loaded potato skins for decades, the only remaining locations are at Dallas-Fort Worth International Airport, according to the restaurant locator.
If Fridays files for Chapter 11 bankruptcy protection, it will only add to the bevy of fast-casual restaurants seeking to protect their financially struggling businesses from creditors and landlords.
A filing for bankruptcy protection from creditors often gives companies the ability to renegotiate their real estate leases and exit an undesirable lease. For example, Red Lobster is expected to exit bankruptcy with fewer restaurants in the United States, as previously reported by CoStar News. Denny’s is also closing about 10% of its locations.
In August, Buca di Beppo and World of Beer Bar & Kitchen filed for Chapter 11 bankruptcy protection to reorganize their businesses, as CoStar News has reported. The restaurants said their financial woes stem back to the onset of the pandemic with higher food and labor costs, inflation and consumers cutting back on discretionary spending all impacting their businesses.
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