‘Game over’ for TGI Friday’s UK owner as shares plummet 90%

TGI Fridays’ UK owner Hostmore is set to be wound down in a move that could wipe out its shareholders, after revealing it had dropped plans to buy the US restaurant chain for £177m.

Shares in the London-listed company tanked by more than 90% following the announcement on Monday.

Hostmore, a hospitality firm which runs 87 restaurants in the UK, is in the process of selling its UK restaurants to new owners, as it looks to become a fully franchise-operated model.

But the company revealed that it was not expecting to “recover any meaningful value” from the sale of stores, which is likely to amount to less than it owes to creditors and banks.

The sale process, which is predicted to complete by the end of the month, is expected to result in Hostmore being wound up and delisted from the London Stock Exchange.

Its UK restaurants, which have a New York-influenced food and cocktails menu, continue to stay open as normal.

Russ Mould, an investment director at AJ Bell, said it is “effectively game over for Hostmore as a listed business”, adding: “The company’s share price crashed 90% after an expansion plan went up in smoke, implying there is little to no value left in the listed business for shareholders.”

The plan to become fully-franchised formed part of a deal, struck in April, to merge with US-based TGI Fridays Inc, to create a larger firm that will remain listed in London.

But on Monday, Hostmore said it was no longer pursuing a takeover following a management change which means it would not be able to collect royalties from the TGI Fridays brand.

This could affect the future revenue of the business, with the royalty stream being the main attractive feature for Hostmore in pursuing the deal, it said.

While it is no longer actively pursuing an acquisition, the two firms said they were “open to re-engaging discussions” in the right circumstances.

“Having operated under the TGI Fridays brand in the UK for some time, Hostmore had been trying to buy the global master franchise owner,” AJ Bell’s Mr Mould explained.

“The acquisition would have significantly increased Hostmore’s scale and given it a big presence in the US.”

But he said the acquisition was scrapped after becoming “significantly less appealing”, while TGI Fridays continues to compete against a “growing number of modern chains”.

The brand’s biggest market is in the US where there are 128 sites, including franchised stores, as well as more than 270 in countries around the world.

Last year, total global restaurant sales hit $1.4bn (£1.1bn).

Hostmore also revealed that UK sales have fallen by more than a tenth this year, compared with last year.

Over the first three weeks of July, sales dropped by nearly a quarter compared with the same period in 2023, as it was affected by warmer weather resulting in fewer visitors and continued weaker consumer spending.

Nevertheless, conditions started to improve slightly in September with sales declines slowing, the group said.