4 things to know about TGI Fridays’ acquisition by Hostmore

TGI Fridays is about to embark on a new era. Earlier this week, it announced that it entered into a roughly $220 million deal to be acquired by its largest franchisee, Hostmore. Once complete, TGI Fridays will become a public company on the London Stock Exchange. This isn’t the first time TGI Fridays has tried to make its public debut. In 2019, it attempted to go public in the U.S. through a SPAC, but that deal fell apart.

Joining a public market is a huge milestone, and a lot has gone into setting up the American restaurant chain and U.K. franchisee for combination. Hostmore has undergone significant cost reductions, while TGI Fridays closed three dozen underperforming stores earlier this year.

Check out four things to know about the impending deal and how the new, combined company will function.

TGI Fridays has a long history in the U.K.

TGI Fridays has operated in the United Kingdom since 1986 under master franchisee Whitbread. In 2007, Whitbread sold its business to a joint venture called TGI Fridays U.K. Limited, which bought 30 out of its 45 restaurants. The joint venture was between TGI Fridays owner Carlson Restaurant Group and private equity Group ABN AMRO Capital. Carlson owned both TGI Fridays in the U.S. and U.K. for seven years.

In 2014, TriArtisan Capital, along with Sentinel Capital Partners, bought the U.S. TGI Fridays business from Carlson for a reported $800 million, while private equity firm Electra Partners bought the U.K. business for over $155 million. Electra then took TGI Fridays’ U.K. business public under the name Hostmore in 2021.

Hostmore has been undergoing its own turnaround strategy

Hostmore saw its costs increase over the past few years due to the creation of a multi-branded platform, new store openings and its public debut, per the company’s 2022 annual report. It completed an initial review of its fixed cost base and found £1.8 million ($2.2 million) in savings, which included staff cuts. These reductions were expected to save the company £1.2 million ($1.5 million) during fiscal 2023, although it has yet to file its fiscal 2023 report.

As part of its capital allocation policy, Hostmore deferred new store openings until at least fiscal 2025, which would save it £15 million ($18.7 million) during that period. The savings will be used to repay the company’s loans and borrowings, according to the company’s annual results for 2022.

The combined company will continue to pursue Hostmore’s revised capital allocation policy framework with a priority toward reducing debt and improving shareholder returns. The combined company will have “significantly enhanced scale and committed long-term funding,” Hostmore said in a regulatory filing about the transaction.

“Hostmore has made good progress in executing its turnaround strategy over the past year by reducing costs, revising our capital allocation policy to focus on debt repayment and shareholder distributions, and pursuing high ROI organic growth initiatives,” Hostmore chairman Stephen Welker said in a regulatory filing about the merger.

TGI Fridays also has been working on reducing its debt, including refinancing with new lenders, which is expected to be completed on or before the transaction closes.

An image of Weldon Spangler, CEO of TGI Fridays — TGI Fridays CEO Weldon Spangler will remain in his post under the combined company.

Courtesy of TGI Fridays

C-suite management from both companies will remain in place

Hostmore’s CEO Julie McEwan and CFO Matthew Bibby will remain in their positions under the U.K. business at the combined group. Bibby will also add the title of head of investor relations to his responsibilities. TGI Fridays’ current CEO Weldon Spangler and CFO Nik Rupp will remain in their same positions under the new company.

The combined company’s board will consist of a mix of chairpeople from both companies. Rohit Manocha, co-founder of TriArtisan and chairman of TGI Fridays, will become non-executive chairman of the board following the retirement of current Hostmore chair Stephen Welker, who is expected to step down during the 2025 Annual General Meeting. Other non-executive directors will include:

David Lis, current Hostmore senior independent director
Andrew Blurton, current Hostmore audit and risk committee chair
Helena Feltham, current Hostmore remuneration committee chair
Anil Yadav, TriArtisan investor in TGI Fridays and a significant franchisee
Two other representatives nominated by TGI Fridays

Off-premise will continue to be a key growth pillar for the combined company

TGI Fridays’ off-premise business made up about 25% of sales last year, with about 40% of those sales coming through the chain’s proprietary channels, which include its website.

The chain also has ongoing partnerships with third-party delivery platforms. Off-premise is expected to provide “a potential new growth lever through increasing customer numbers and margin enhancement,” Hostmore said in its regulatory filing about the transaction.

Hostmore also owns a fast casual dining brand, Fridays and Go, that emphasizes off-premise with order kiosks, mobile ordering and delivery. Its website indicates that there is only one such location in Dundee, Scotland, at this time. Hostmore said it has also been working on improving its loyalty app and email database to help increase repeat customer visits, as well.