TGI Fridays is latest chain with Minnesota ties to fail as casual sit-down restaurants languish

Late last week, TGI Fridays became the latest chain restaurant with Minnesota ties to enter bankruptcy this year, marking a shift in dining habits for many families that has challenged even the biggest household names.

So far, more than 10 chains have filed for Chapter 11 bankruptcy in 2024, with even more constricting by closing stores. Local chain restaurant experts say these family- and budget-friendly dining options are struggling amid rising costs and shifting consumer expectations, which the COVID-19 pandemic partly fueled.

“There’s a lot of people right now, in my opinion, in a lot of trouble,” said Steve Schussler, the Minnesota restaurateur behind Rainforest Cafe. “And when a big chain goes under like that, it’s a bad sign for the little guys.”

Minnetonka-based Carlson had owned TGI Fridays for 40 years before selling the brand to a private equity firm in 2014. Carlson had expanded the chain to more than 900 locations and $2.6 billion in sales in 2013, but now the American restaurant and cocktail bar has about half as many locations across 41 countries, including 162 in the U.S.

TGI Fridays Inc., which owns and operates 39 locations, announced its filing for bankruptcy Nov. 2, which doesn’t affect the brand’s 56 franchisees and their restaurants.

The company called the pandemic and its capital structure the “primary driver[s] of its financial challenges.”

Family-style Italian restaurant Buca di Beppo started in Minneapolis in 1993 and also filed for bankruptcy in August. Founder Phil Roberts said the company adopted a chain mentality around the time it went public in 1999, cutting expenses and “the soul” of the restaurant. Red Lobster also entered bankruptcy in May but exited in September after closing a swath of restaurants and having an investment management firm take ownership.

The costs of operating a restaurant have risen significantly since 2019. Food costs are up 29%, and labor costs are up 31%, according to the National Restaurant Association. Rising costs put pressure on restaurants to increase prices to maintain a profit margin of around 3% to 5%.

But consumers have also become more price-conscious as they’ve dealt with inflation. Plus, consumer habits have changed, like favoring takeout or delivery options instead of sit-down dining since restaurants quickly ramped up those operations amid the pandemic.

“People have become accustomed to just driving up, grabbing their food and taking off,” said Dave Anderson, founder of Wisconsin/Minnesota-born barbecue chain Famous Dave’s.

For casual sit-down restaurants to stand out and attract customers, they need to offer an experience that meets the growing expectations that come with charging higher prices, Anderson said.

“The difficulty of being successful today is standing out from a sea of sameness,” Anderson said. “It has to be determined by more than just food. It has to be readily recognizable.”

Schussler said a chain’s recipe for success sounds simple: great food and great service. And he doesn’t recall ever going to a TGI Fridays “and leaving there saying, ‘The food was great, and the service was off the chart.’”

Zach Sussman, a hospitality marketing expert, remembered TGI Fridays being an exciting, fun place to go for kids and families in the 1990s. But the appeal of that business model does not last forever, he said, adding that these larger chains can struggle amid shifting industry trends.

“TGI Fridays, to me, is a giant ocean liner that was not able to steer and adapt the way small restaurants can,” Sussman said.

In the Twin Cities, remnants of this once-Minnesota-owned brand are fading away. Two of the seven Minnesota TGI Fridays locations — St. Louis Park and Edina — reportedly closed within one week of each other before Labor Day.

Schussler said this is all part of the “revolving door” of the restaurant industry, which has always been competitive with little room for error.

“The economy and the market,” he said, “can only handle so much.”

Caleb.Fravel@startribune.com is a University of Minnesota student reporter on assignment for the Minnesota Star Tribune.