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    • Concerns over million in unused gift cards
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    Concerns over $50 million in unused gift cards

    Harry Posted on

    Like TGI Friday’s bankruptcy As the process progresses, some of the beleaguered chain’s restaurants fear they will have to deal with nearly $50 million in gift cards.

    If you’re a cardholder, you may want to use your card as soon as possible so you don’t end up holding something that’s a fraction of its stated value. “Go use it, otherwise, you might end up lining up behind other creditors for repayment… (and) frankly you’ll be lucky to get pennies on the dollar for it,” said John Bringardner, president of Debtwire. An analysis and debt tracking firm that helps businesses.

    TGI Fridays Inc., whose restaurant chain has 39 locations across the U.S., filed for Chapter 11 bankruptcy protection on Saturday. Concerns about $49.7 million in unpaid gift cards were raised by more than 60 TGI Fridays franchisees not involved in the bankruptcy process at a hearing Monday in federal court in Dallas.

    When a business declares bankruptcy, customers often rush to use their gift cards because they worry the company might close the store without using the cards. In TGI Friday’s case, nearly $50 million worth of cards (some more than 20 years old) court documents — well above the $5.9 million that court records show TGI Fridays Inc. borrowed for its bankruptcy restructuring.

    “I’ve gone over this twice,” Judge Stacey Jernigan said at Monday’s hearing. Bloomberg reported. “You know, I was imagining grandparents buying gift cards for their kids in college and then throwing it away.” Jernigan approved the company’s initial bankruptcy steps, including the first $3.3 million of a proposed $5.9 million bankruptcy loan.

    Attorney Jason Binford said if so many customers rush to use their cards, facing a potential “use it or lose it” situation, independent TGI Fridays franchises would be forced to honor their cards without any guarantee of a refund from the company. at a hearing on Monday, according to Reuters.

    Typically, franchisees take gift cards as payment and then ask the chain for a refund, Binford said. Binford, who represents more than 60 franchisees, said he is concerned that franchisees “could be left holding the bag if there is no source of funds to repay.”

    Beyond its 39 U.S. restaurants, TGI Fridays Inc. has 122 franchise locations in the U.S. and 316 franchise locations in other countries, according to bankruptcy court filings.

    Another struggling American restaurant chain

    TGI Fridays is the latest restaurant chain to file for bankruptcy amid increased competition for customers and discerning and cautious shoppers. Red LobsterThe restructuring of the company, which filed for bankruptcy in May, is beginning to emerge.

    TGI Fridays is among the many businesses and restaurant chains that “failed to break out of COVID’s orbit,” Bringardner said. “This affected their locations, and they were never able to recover enough to bring business back to pre-pandemic levels,” he said.

    Bringardner said that customers began to migrate to new fast casual restaurants due to the company’s increasing debts.

    Burt Flickinger, managing director of Strategic Resource Group, a retail consultancy that advises restaurants, said private equity investors mismanaged TGI Fridays by failing to react to competition and changes in consumer behavior.

    “They have no idea about the blue-collar consumer who goes to TGI Fridays to celebrate quarterly or monthly and is now at Buffalo Wild Wings or another local operator location,” Flickinger said.

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    What should I do if I have a TGI Fridays gift card?

    Some gift card holders may have already seen their favorite location nearby. In January, TGI Fridays closes several dozen “underperforming” locations in 12 states.

    Although all existing locations are expected to remain open during the bankruptcy restructuring process, other locations may close. This should be taken into consideration if you have gift cards that you want to use.

    “They have already stated in court documents that they will close many underperforming locations,” Bringardner said. TGI Fridays Inc. He said at Monday’s hearing that the company plans to honor its obligations to customers and franchisees, including gift card refunds. and would discuss the matter with the franchisee association.

    If you don’t use the card, you may eventually file for bankruptcy and seek repayment of your debt. But “You’re at the bottom of the payment pile, so people’s advice is: If you have a gift card, use it now,” Bringardner said.

    Who owns TGI Fridays?

    TGI Fridays Inc., which filed for bankruptcy on Saturday, has 39 U.S. restaurants and is privately owned. TriArtisan Capital Advisors. TGI Fridays closed nearly 50 locations in total in 2024 before filing for bankruptcy, according to court filings. The company has $37 million in debt and plans to sell its assets to an outside buyer by early January, Reuters reported. There are 122 independently owned TGI Fridays locations in the U.S. and an additional 316 franchise locations in other countries franchised by TGI Fridays Franchisor, LLC, according to court records.

    Contributed by: Reuters.

    Follow Mike Snider on X and Threads: @mikesnider & mikegsnider.

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    Harry
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