As TGI Friday’s bankruptcy proceedings move forward, some of the embattled chain’s restaurants fear they will be stuck dealing with nearly $50 million in gift cards.
If you’re a cardholder, you may want to use your card sooner rather than later so you can’t be left holding something worth a fraction of its stated value. “Please take advantage of it, otherwise you may end up lining up to pay it off late with a lot of other creditors… (and) frankly, if you can get a dollar out of it, you’ll be lucky.” ,” said John Bringardner, head of Debtwire. An analytics and debt tracking company to help your business.
TGI Fridays, which owns 39 restaurant chains across the United States, filed for Chapter 11 bankruptcy protection on Saturday. Concerns about $49.7 million in unpaid gift cards were raised at a hearing Monday in federal court in Dallas by more than 60 TGI Fridays franchisees that are not included in the bankruptcy proceedings.
When a company declares bankruptcy, customers often rush to redeem their gift cards, fearing that the company will close before they can use their cards. In the TGI Fridays case, court documents show the cards, some of which are more than 20 years old and worth nearly $50 million, are being borrowed by TGI Fridays in its bankruptcy reorganization, documents filed with the court show. That’s far more than the current $5.9 million.
“I’ve reconsidered it,” Judge Stacey Jernigan said during Monday’s hearing, Bloomberg reported. “What I was imagining was grandparents getting gift cards for their kids going to college, and then they just threw them away,” Jernigan said of the proposed $5.9 million. Approved the company’s first bankruptcy proceeding, including the first $3.3 million in bankruptcy financing.
Lawyer Jason Binford said the independently owned TGI Fridays franchise would not receive a refund from the company if many customers rushed to redeem their cards, faced with a potential “use it or lose it” situation. said that they would have to respect customers without any guarantees. at a public hearing on Monday, according to Reuters.
Typically, franchisees accept gift cards as payment and then ask the chain for a refund, Binford said. Mr. Binford, who represents more than 60 franchisees, said franchisees were concerned they could be “left holding the bag without the financial resources to repay them.” said.
In addition to TGI Fridays’ 39 U.S. restaurants, the company has 122 franchised locations in the U.S. and 316 in other countries, according to bankruptcy court filings.
Another struggling American restaurant chain
TGI Friday’s is the latest restaurant chain to be forced to file for bankruptcy due to increased competition for customers and a fastidious and cautious clientele. Red Lobster, which filed for bankruptcy in May, is beginning to emerge from a restructuring.
Bringardner said TGI Friday’s was one of many businesses and restaurant chains that “couldn’t escape the trajectory of COVID-19.” “It affected their base, but it never recovered enough to get business back to pre-pandemic levels,” he said.
As the company’s debt mounted, customers began moving to new fast-casual restaurants, Bringardner said.
Bart Flickinger, managing director of Strategic Resource Group, a retail consulting firm that advises restaurants, said private equity investors mismanaged TGI Fridays by failing to adapt to competition and changing consumer behavior. said.
“They have no idea about the blue-collar, struggling consumers who go to celebrate at TGI Fridays quarterly and are now at Buffalo Wild Wings and other local carrier venues. No,” Flickinger said.
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What if I have a TGI Fridays gift card?
Some gift card holders may have already seen their favorite locations nearby. Back in January, TGI Fridays closed dozens of “unprofitable” stores in 12 states.
All current stores are expected to remain open during the bankruptcy reorganization process, but additional stores may close. So if you have a gift card that you would like to use, you should consider that.
“They have already indicated in court documents that they intend to close many of their underperforming stores,” Bringardner said. TGI Fridays said at Monday’s hearing that the company plans to meet its obligations to customers and franchisees, including refunding gift cards. And we’re going to discuss this issue with the franchisee association.
If you don’t use your card, you can eventually file for bankruptcy and seek repayment of the amount owed. But “you’re at the bottom of the payment stack, so the advice people give is, if you get a gift card…use it now,” Bringardner said.
Who owns TGI Fridays?
TGI Fridays, which filed for bankruptcy on Saturday, owns 39 restaurants in the United States and is privately owned by TriArtisan Capital Advisors. TGI Fridays closed about 50 stores in 2024 before filing for bankruptcy, according to court filings. The company has $37 million in debt and aims to sell the assets to an outside buyer by early January, Reuters reported. There are an additional 122 franchised and independently owned TGI Fridays stores in the United States and 316 franchised stores in other countries that are franchised by TGI Fridays. Franchisor LLC, according to court filings.
Contributed by: Reuters.
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