Challenged by COVID, TGI Fridays Fights its Way Back

FSR Magazine

From a "Butcher Shop" to outdoor tents, the casual chain is getting back to business

Chief Experience Officer Sara Bittorf was with TGI Fridays barely two months when she saw the COVID-19 cycle in action. The chain stood up curbside pickup systemwide in roughly three days back in March, moving to meet the contactless demand so many customers leaned on during lockdowns—and still do today.

But this was just the start for TGI Fridays, which has faced some particularly sharp pandemic challenges.

If you flip back to early 2020, the company was on the doorstep of a strategic turnaround. TGI Fridays wanted to reclaim its bar heritage and foster an atmosphere built on social gatherings. Center to the plan was to deliver an affordable bar occasion anchored by everyday value offers. This way, TGI Fridays could expand reach and visits in a category typically plagued by low frequency.

It was something the 1965-founded chain lost sight of in recent years. TGI Fridays' bar-rich personality fell back as it repositioned to a more family-oriented destination. And, along the way, the category pioneer blurred into the casual-dining field.

TGI Fridays' fix was to relaunch via "significant TV and digital ad spend to provide a bang and build momentum," it said. The brand was running a "People of All Stripes" campaign at 2020's start.

Yet as we know today, the bar space took an even swifter blow than the dining one.

And "gatherings" became the four-letter word retailers raced to reconfigure against.

Additionally, TGI Fridays was preparing to go public through a $380 million merger with Allegro Merger Corp. But the parties agreed to cancel in April, citing "extraordinary market conditions and the failure to meet necessary closing conditions."

A few days ahead of June, CEO Ray Blanchette told Bloomberg TGI Fridays would likely close as many as 20 percent of its U.S. fleet. When the crisis hit, sales dropped about 80 percent almost immediately.

That number improved by about 30 percent over the next two months, with pickup and delivery gaining momentum.

When Blanchette offered that projection, there were 386 domestic units. In November, as the Allegro merger was unveiled, the chain had 396 U.S. stores (144 company run and 252 franchised).

TGI Fridays currently has 351 total locations, the company told FSR, with 28 units temporarily closed, 14 open for off-premises only, and 309 operating with some measure of on-premises dining, either through dining rooms, patios, or tents outside.

And innovation hasn't taken a day off. Bittorf arrived at TGI Fridays in February. Previously, she spent nearly four years as CMO of Bob Evans, directing the legacy chain prior to and following its $565 million sale to Golden Gate Capital in 2017.

Before, she was the chief brand officer at Boston Market for three-and-half years and clocked three years as VP of marketing at Carrabba's Italian Grill.

Naturally, the TGI Fridays challenge became something of a unicorn, as it has for all restaurant marketers since March. Bittorf says the pandemic created a vacuum of consumer demand that took time to mature. "I think one of the things that we realized, everybody has, is that restaurants really play a strong role in the fabric of consumers' lives," Bittorf says.

When the country shut down, it was up to brands to figure out how to fill that void. One thing TGI Fridays did after curbside was create "The Butcher Shop." Customers could buy cuts of raw meat from the restaurant and turn their kitchens and backyards into a makeshift TGI Fridays.

The ready-to-cook meals, complete with instructions, arrive pre-cut and pre-seasoned. Options include the "All-American Cheeseburger Kit," "Signature Whiskey-Glaze Burger & Chicken Sandwich Kit," and "Surf & Turf Kit," which comes with two flat-iron steaks, four chicken breasts, two salmon fillets, and 18 garlic-marinated shrimp, as well as sides, salad, and breadsticks, seasonings, butter, and Whiskey-Glaze. Whiskey-Glaze Rib and Steak & Ribs kits are options as well.

"We figured that by sending the food that we would prepare at the restaurant home to people who were already preparing food more than ever before—that it would kind of bring a taste of Fridays home for them," Bittorf says. "I think that occasions are really driving the different purchases, maybe more so than the consumer."

The Butcher Shop speaks to another pandemic roadblock. In an April Datassential study, 34 percent of respondents listed "people handling my food," as a reason to avoid dining out. Yet 24 percent—the third-highest measure—picked "foods I couldn't easily make at home" as a reason they'd return.

On a high level, customers felt more comfortable cooking their food, where they could exert quality control, but also were growing wary of it. So the take-home kit model started to gain prominence throughout COVID-19, with brands throwing grocery items and other essentials into the mix.

Perhaps more notably—as far as restaurants are concerned—take-home kits enabled operators to empower guests to recreate dine-in experiences. And, thus, in this case, keep TGI Fridays top-of-mind before they were ready to return.

"There have been so many phases in the crisis," Bittorf says. "The initial one being that people were intimidated by the grocery store or afraid of the grocery store. And so, having that Butcher Shop option proved to be really beneficial to consumers."

Bittorf adds Butcher Shop created an outlet for people during meat shortage periods. Ribs have been the most popular choice. Surf and Turf was a hit for Father's Day.

The pandemic spotlighted other TGI Fridays products as well—items that were background offerings before. Things like family meal boxes and platters which became a strong part of the chain's mix, Bittorf says, after being almost nonexistent before.

In markets where possible, TGI Fridays also offers drinks to-go for $5 and at-home cocktail kits.

On August 15, in honor of Sunday's National Rum Day, the brand started selling Long Island Tea to-go. TGI Fridays began offering the drink in 1965 and claims to be the first major chain to do so. They came in 16-ounce cups for $5 or 65-ounce cartons for $45.

Online, reopenings, changes, outdoor on the mind

Bittorf says TGI Fridays is generating about four times the number of online orders than it did pre-virus. The company responded by improving the functionality and taking a microscope to rewards.

Part of TGI Fridays' turnaround strategy in January was to triple the size of its active rewards base and increase frequency by at least 25 percent.

TGI Fridays had $74 million of off-premises sales in 2016. That number climbed to $88 million, $121 million, and $138 million in respective years (the final being a figure through September 30, 2019).

Leading into the now-defunct deal with Allegro, the chain witnessed delivery sales increase more than 175 percent, year-over-year (from $16 million to $43 million).

While those trends were storming forward before COVID, a pivot has taken place. One of the things that happened as a result of the crisis, Bittorf says, is TGI Fridays reduced its reliance on discounting. "And I think that's a good thing," she says. "It's a really good thing for the entire industry because it can get to be too much of a drug."

Instead, TGI Fridays is trying to build a value proposition that sticks. Great value for the price, without the need to discount any flagship items.

COVID opened this opportunity to some extent because why consumers dine out has changed. It isn't so much a variety game anymore. Familiarity and trust have climbed the ladder.

Bittorf says many of TGI Fridays' metrics, like guest perception and overall brand attribute ratings, have risen steeply in recent weeks. Especially in the areas of cleanliness and safety.

"I think there's a little bit of youdon't know what you have until you lose it kind of thing," she says. "But, people are really missing Fridays."

Bittorf says the brand is outperforming many of its peers, per Black Box Intelligence ratings.

The chain sees that as a reflection of loyal customers, incentivizing its database, and also "just the fact that people trust us," Bittorf says.

It's given TGI Fridays a chance to leverage scale and equity in ways it couldn't when the field was oversaturated. Every restaurant has a "cleaning captain" that's responsible for sanitizing all touchpoints. They clean tables after every visit.

TGI Fridays also created disposable, one-time-use menus that are extra-large (and heavy) and double as a placemat. So customers can dine-in without actually touching the table, if they so choose.

Servers were instructed to ask guests if they can approach before doing so. They'll stand as far away as a consumer wants. But the key is they show care and thoughtfulness, and never assume anything. "We take our cues from our guests," Bittorf says.

TGI Fridays boasted contactless payment before COVID, which runs through its app. Guests scan a barcode on the check and pay without handing over their card. And the majority of units also feature portable credit card readers servers bring to the table where all somebody needs to do is stick the card in the slot. The employee touches the buttons.

Bittorf says TGI Fridays approached reopening deliberately. It hung back for about a week after regulations loosened to understand what the environment was going to look like.

She says they've tracked and polled consumers throughout the crisis to get a handle on the percentage of guests who wanted to return right away versus those who needed more off-premises options to hold them over. And also, what those returning are required to feel comfortable.

TGI Fridays was concerned, Bittorf admits, with reopening as a different TGI Fridays. Would the restaurant experience feel the same with new protocols? The company lowered the volume of music (so guests could hear the servers through masks). TGI Fridays restaurants currently are, understandably, less crowded and boisterous places than before.

"And so, we actually fielded some restaurants a couple of weeks ago, asking people who had been inside our restaurants, how did it feel? Did it feel foreign? Was it the same kind of thing?" Bittorf says. "And what we found overall is that people are willing to overlook some of the things in the restaurant, like servers wearing masks. … All of those things are all important, and they're willing trade-offs to get back inside the restaurant. And we were really happy to see that data. It was fascinating."

Essentially, TGI Fridays discovered a forgiving guest grateful to be back inside a restaurant. They were letting some past pain points go.

Pivoting to outdoor dining has been a major initiative of late. There are units where TGI Fridays literally pitched tents in the parking lot. Not small tents, but rented party tents that almost create a pop-up restaurant feel. "We’re still seeing people who really want to get out and eat at a restaurant. It’s just now changed from being inside the dining room to being outside in either a tent or on the patio,” she says.

TGI Fridays has north of 400 locations internationally. It’s experienced challenges with sales and traffic in recent years. In Q4 2019, traffic fell 5.9 percent at corporate stores, 11.4 percent at franchises, and 9.1 percent systemwide.

In terms of sales, Q4 comps dropped 9.4 percent at corporate stores, 12.8 percent at franchises, and 1.3 percent systemwide.

Some upward gains were tracking before COVID arrived, and the Allegro deal collapsed. Midway through Q1, traffic grew 2.3 percent at corporate stores, fell 4 percent at franchises, and dropped just 1.3 percent systemwide. As for same-store sales, corporate units slid only 1.9 percent, while franchises decreased 5.2 percent, and stores systemwide fell 3.7 percent. Revenue stood at $426 million, up from $293.1 million in 2018. Prior to the pandemic, revenue projected to increase to $557.6 million.

Blanchette, who joined the company in October 2018 after nine months as CEO of Ruby Tuesday, told Bloomberg, “Right now it’s all triage and it’s all about cash: How are you going to make it through and keep the company solvent?”

Blanchette previously served as president and COO of Carlson Restaurants Worldwide, then the parent company of TGI Fridays. He started his career with the casual chain, working a variety of roles for 18 years.

Blanchette’s other industry experience includes founding since-dissipated Ignite Restaurant Group as a holding company for casual-dining brands, bringing on Joe’s Crab Shack and Brickhouse Tavern + Tap. The company struggled to gain footing after acquiring Romano’s Macaroni Grill and filed for bankruptcy in 2017. Two years after buying the Italian chain for $55 million, it sold it for $8 million.

Blanchette also held the CEO title at fast casual Au Bon Pain for 20 months, a run that culminated with the chain’s sale to JAB Holding Company. He took the Ruby Tuesday job shortly after.

Bittorf says the company has zeroed in on its strengths during the pandemic. “When everything around you is changing at the same time, you really have to figure out what matters,” she says. “You can’t do everything at once. You’ve got to prioritize stuff. It’s been a really valuable experience for me, and I’ve been fortunate to be working with a great company.”

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