The Journal. - The Epic Mess at TGI Fridays

Episode Date: January 24, 2025

An iconic chain that became known for its fun cocktails and family dining, TGI Fridays has seen a sharp decline in recent years, leading to a bankruptcy filing in November. WSJ’s Heather Haddon explains the company’s unraveling and a former CEO talks about his plans to keep the chain alive. Further Listening: - Red Lobster's New CEO Plots Its Comeback  - McDonald’s Wants To Offer Quality And Value. Can It Do Both?  Further Reading: - The Epic Mess at TGI Fridays  - TGI Fridays Ex-CEO Blanchette to Take Over Chain’s Management  Learn more about your ad choices. Visit megaphone.fm/adchoices

The story of how the casual restaurant chain TGI Fridays has shifted in American culture can, in some ways, be told through two movies. First, the 1988 film Cocktail. A young Tom Cruise, at the height of his cool, starred as a college dropout who becomes a bartender. You know how to make a red eye, Mr. What's your name? Brian. Flannigan.

No, I'm sorry I haven't had the pleasures yet. Tom Cruise's character learns how to mix drinks like a pro, doing flashy tricks as he makes cocktails. And some scenes were filmed at a Friday's, which at the time was considered a gold standard of mixology. The second film came out over a decade later, Office Space. Part of the movie takes place in a restaurant that's a lot like TGI Friday's, called Chachki's. It sits in a nondescript strip mall and has a big wooden bar and antique Tiffany lampshades.

But there's never many customers, and the staff is totally annoying. So can I get you gentlemen something more to drink, or maybe something to nibble on, some pizza shooters, shrimp poppers, or extreme fajitas? Just coffee. Okay. Sounds like a case of the Mondays. One of the characters, a server played by Jennifer Aniston, hates working there.

If you want me to wear 37 pieces of flair like your pretty boy over there, Brian, why don't you just make the minimum 37 pieces of flair? But between these two extremes, TGI Fridays earned a solid place in American culture. TGI Fridays is known for its bar, for its comfort food, for its appetizers, stuffed potato skins, and a place to meet people, maybe have a happy hour after work, maybe bring your kids. That's our colleague Heather Haddon, who covers restaurants.

Sum up for us what's happening at TGI Fridays today. Yeah, so TGI Fridays is, to some degree, emblematic of a lot of casual dining restaurants right now we're going through, which is tough times. These vintage, historically very popular restaurants now just aren't popular like they were previously. And TGI Fridays is a particularly egregious example of that. Now, after cycling through multiple CEOs

and running behind on millions of dollars in bills, TGI Fridays has declared bankruptcy. It's down to about 150 restaurants, from a high of about 800 more than a decade ago. And the company is struggling more than a decade ago. And the company is struggling to find a way forward. So it's pretty safe to say TGI Fridays is not in a good place right now. TGI Fridays is definitely not in a good place.

It is not a happy, happy hour place right now. Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Friday, January 24th. Coming up on the show, will TGI Fridays survive to see more Fridays? is. life. You'll be solving customer challenges faster with agents, winning with purpose and showing the world what AI was meant to be. Let's create the agent first future together. Head to salesforce.com slash careers to learn more. TGI Fridays often gets credit as one of the first singles bars in New York City.

It opened in 1965, and its founder, Alan Stillman's, original idea was to create a place where single people, people like him, could go for drinks after work and mingle. Here's Stillman years later in an interview on CBS. Is it fair to say you got into the business because you wanted to meet women? Absolutely fair. Not only fair, but accurate and true. And it worked. But the Fridays that we know today comes from when the company had already started expanding and opening up franchises. Fridays created its iconic look in the 1970s. Faux antique Tiffany lamps, a big raised wooden bar at the center of the restaurant, and a focus on cocktails that evolved into what was known as a, quote, drink bible.

The bartenders learned tricks, and they hosted regular bartender Olympics. Fridays also claims to have invented the Long Island iced tea. The food was classic bar fare. Cheeseburgers, Caesar salad, onion rings. Out here, it's Monday. In here, it's Friday! One of its restaurants was in Philadelphia. That's where a man named Ray Blanchett developed an obsession with TGI Fridays.

I still remember vividly the first time I saw a platter of baby back ribs. Right? I mean, it's like the length of the entire platter and then you got this big pile of fresh cut French fries, you had this big pile of coleslaw, and then you get the apple butter barbecue sauce. And I just, I remember watching it go by and I thought, my God, that is one of the

most beautiful plates of food I've ever seen. Ray was hired in 1989 as TGI Fridays was on the rise. Ray would go on to become CEO, but when he started out, he was a 23-year-old manager in training. And when he walked in the door to that Philadelphia restaurant, he couldn't believe what he saw. People are yelling back and forth. Everybody had to be where they were supposed to be at the right time, where you drop the ball.

And so it was like a Cirque du Soleil show back there in the kitchen. I mean, it was crazy. And we would have people literally lined up down the entire front side of the building. We had theater ropes and you'd have to go out there at 1.15-ish usually and say, you know, from this point in the line back, you're not going to get in tonight. You know, being three and four deep was an everyday occurrence.

Ray was hooked. He climbed up the ranks, eventually leading the company's expansion into Europe and other overseas locations. Back when I was running Europe, it was literally six years or seven years after the wall came down. Like the Berlin Wall. All the former Soviet bloc countries were emerging markets for us. I opened three restaurants in Poland in 12 months.

Opened the first restaurants in Russia, in the Czech Republic, in Hungary, and it was just fascinating. For the record, as a kid in the Philippines, I loved going to Fridays. It's funny because I grew up in Manila and my family and I would go to TGI Fridays. It's funny because I grew up in Manila and my family and I would go to TGI Fridays. It was one of the restaurants on our rotation after church. And I used to, as a kid, order the cup of dirt a lot. Oh, yeah. It was the one with the like, it was like a mudslide with like gummy worms. I thought

it was so cool that it looked like dirt. Chocolate pudding, Oreo crumbs, and gummy worms, kind of leeching out a little bit. Exactly. Right? Yeah. What's your favorite meal or favorite cocktail at the restaurant? Long Island Ice Tea. Yeah.

You know, I can't say that I drink a lot of Long Island Ice Teas, but I think if I was going to tell somebody what cocktail should you have if you're going to Fridays for the first time, well, you've got you have if you're going to Fridays for the first time? Well, you got to have an LIT. Ray's passion for TGI Fridays kept him at the company for nearly 20 years, though he would step away in 2007. By then, Fridays was at its peak,

hitting $2 billion in US sales alone in 2008. The company's rapid growth caught the attention of two private equity firms, Sentinel Capital Partners and Triartisan Capital Advisors. Together, they bought TGI Fridays in 2014. Why are private equity investors interested in companies like TGI Fridays? Well, one great thing about restaurants

is they generate a lot of cash. So they have steady cash flows, companies like TGI Fridays from an ownership model of its restaurants to having franchisees run its restaurants. And that's really helpful for the company in that it makes for this asset light model. Companies that rely on franchisees are enticing a private equity because it reduces the risk for the owners. So the franchisees are taking on a lot of the potential reward and also risk of running these restaurants and they pay royalties to the owners. So it helps kind of reduce some of the risk and liability for the company that owns them and helps them to grow.

You know, hopefully these franchisees are invested in their restaurants and growing their restaurants, making them successful and that benefits the parent company. But by the 2010s, the market was shifting. Chains like TGI Fridays were losing customers to fast casual restaurants, like Chipotle, where people could order fresh food at the counter and take it to go. And that change was bad news for TGI Fridays. By 2018, sales at existing locations

were in a nearly two-year funk. It was then that Friday's financial managers turned to the old guard and called up Ray Blanchett. When Ray got the offer, he couldn't have been more excited. The private equity group that had bought Fridays called me and said, hey, do you want to, would you be willing to come back to TGI Fridays? We're in kind of a situation.

And I mean, to me, it was the job of a lifetime. It was my dream job. So I was happy to come back. But Ray quickly saw that the Fridays he returned to was very different from the one he'd left. That's after the break. Ray Blanchett had been away from TGI Fridays for about a decade, and in that time, things had changed. To find out just how much, Ray took an unorthodox approach.

In 2019, months after becoming CEO, he appeared on the reality TV show Undercover Boss. Today I'm undercover in my own company, TGI Fridays, to make sure our strict standards are being upheld. Ray posed as a man looking to start a new career. He wore a blonde wig and a fake goatee. In the episode, he trained in a restaurant in Maryland. The bartender there pointed to a hole in the ceiling. We had a massive flood,

and this collapsed in the middle of shift. The roof has to be completely leveled out, but the waiting on the corporate approval part, it's just a pain in the middle of shift. The roof has to be completely leveled out, but the waiting on the corporate approval part, it's just a pain in the ass. What were some of the things that stood out to you that you saw when you were on that show? You know, I grew up in the TGI Fridays that was fanatical about standards.

I mean, there would never be broken equipment. There would never be a leaky roof that didn't get rectified immediately. The standard was set at every level in the organization. And so when you see that we had allowed the business to not adhere to those same high standards, that was distressing. As CEO, Ray and his team tried to turn Fridays around.

But he says he had a different vision from the owners. They were more committed to some of these initiatives that I was less excited about. And it's their ball and their field, so they get to decide. But I wasn't going to compromise my integrity or pretend that I believe in these initiatives anymore. What were some of those initiatives? Like sushi. and that I believe in these initiatives anymore. What were some of those initiatives? Like sushi inside the restaurant.

Yeah, I just thought it was ridiculous. Some customers seem to feel the same way and said so on social media. Y'all, TGI Fridays has sushi. I decided to try their sushi. You see that? It was disgusting. Who's eating this? I just want to know.

It tastes foul. What the f*** is this? What the f*** is that? Triartizen, the private equity firm, said that sushi was part of an effort to adapt with the times and become more relevant. And it said that Ray supported the sushi edition. Ray maintains that he did not. Sushi sabotage or not, what really hurt Fridays was the pandemic.

Despite beefing up its takeout operations in 2020, the company couldn't hit its sales targets. In 2023, Ray left Fridays again. Three other CEOs followed in quick succession, and things just continued to unravel. Here's our colleague, Heather, again. Three other CEOs followed in quick succession and things just continued to unravel. Here's our colleague Heather again. It's a combination of T And from what I understand, there was friction between those CEOs and the board about correct approaches going forward. And here we are in bankruptcy. Ray was watching from the sidelines or sort of the sidelines. He just couldn't truly quit Fridays. Not long after he left, he had acquired eight TGI Fridays franchises. When TGI Fridays filed for bankruptcy, he saw an opportunity to swoop

in and revive the chain. Now, he's getting that chance. Ray is back at the company and is now responsible for managing hundreds of TGI Fridays worldwide. And his plan doesn't involve returning to the glory days. Instead, he's focusing on smaller menus and shorter hours, and he wants to put Fridays in transportation hubs like train stations and airports and in hotels, places where there's a captive audience. When you walk into a hotel and you're checking in at nine o'clock at night and you look over and you see that it's a Friday's cafe or Friday's grill, whatever you call it, it's a relief because now you know your rental car is parked. you can trust that you're going to get a good hamburger, and you don't

have to leave. Ray also says that the future of Fridays isn't just in the U.S. His plan includes being aggressive about expanding overseas. Internationally, we're still signing new development agreements. We have 30 restaurants in Manila. Well, we have zero restaurants in Bangkok, right? So, when I think of South and Southeast Asia, there's nothing in Vietnam. There's hardly anything in India. We still have big opportunity. We're not in Singapore. I mean, there are a lot of places for us to continue to grow with the right partners.

And so you're going to be the guy to save the company? Is that how you feel right now? I'm going to be the guy that brings the people together that change the trajectory of the business, right? I mean, if I haven't learned anything over 30 years, I've certainly learned that our brand is expressed through people, right? This is a labor-intensive business,

and the culture and the values and sort of establishing the white lines in the road for how we're going to interact, that's a really important piece of any turnaround, but especially at Fridays. It starts culturally within the Fridays family. I asked Ray if he was worried about Fridays not being cool anymore. You should be in one of my restaurants

at 10 o'clock at night. You'd have a hard time saying this place isn't fun. I mean, cool I think is ridiculous, right? You can't chase cool. I mean, James Dean, I mean, people are gonna, you know, we're not trying to chase cool. I mean, James Dean, I mean, people are going to, you know, we're not trying to be cool. We have food that people get excited about. We have an atmosphere that is conducive to social interactions and social connections. And so that's why I think the brand gets turned around.

What's the lesson from TGI Fridays rise and fall? I think TGI Fridays is a lesson on both casual dining and how much joy it has brought to America and how good of a concept it has been, but how challenging it is to keep these vintage brands going in a new America. I mean, I think taste of change and younger people don't see going out to eat at all sometimes as what they want to do. So I think we do see something emblematic in TJR Fridays in how consumers eat out differently

than they used to. That's all for today, Friday, January 24th. The Journal is a co-production of Spotify and the Wall Street Journal. The show is made by Katherine Brewer, Pia Gadkari, Rachel Humphreys, Sophie Kodner, Ryan Knutson, Matt Kuang, Kate Linebaugh, Colin McNulty, Annie Menoff, Laura Morris, With help from Trina Menino. Our engineers are Griffin Tanner, Nathan Singapok, and Peter Leonard. Our theme music is by So Wiley. Additional music this week from Emma Munger, Peter Leonard, Bobby Lord, Griffin Tanner, Nathan Singapok, and Blue Dot Sessions. Fact Checking by Mary Mathis, Kate Gallagher, and Najwa Jamal.

Thanks for listening. See you on Monday.