Restaurant chain TGI Fridays is worried they may be on the hook for nearly £50 million in unclaimed gift vouchers if their bankruptcy proceedings don’t go smoothly.
The amount of unused gift cards issued by the struggling chain- which have no expiration date- far exceeds the amount of cash they have access to, with some dating back as far as 2003.
‘I did a double take on that,’ said judge Stacy Jernigan during a bankruptcy hearing in Dallas, Texas, this week. ‘I was imagining, you know, grandparents who got gift cards for their kids in college and then it got thrown away.’
Attorneys for TGI Fridays at the hearing said the company intended to honour obligations to both its customers and franchisees, and said they would discuss the matter with the franchisee association.
But the franchisees said although they support the gift card program, they want to be sure they are not ‘left holding the bag if there is no source of funds to reimburse them,’ said attorney Jason Binford, at Monday’s hearing.
TGI Fridays’ franchisees rely on the corporation to reimburse them for redeemed gift cards, and while the company isn’t expecting every holder of a card to cash them in at once, there are fears that news of the company’s bankruptcy could prompt a ‘use it or lose it’ mindset amongst customers seeking to cash in before it’s too late.
Most of TGI Fridays’ restaurants are franchises, due to the company’s ‘asset-light’ business strategy. TGI Fridays owns 39 restaurants in the U.S., and it has 122 franchised locations in the U.S. and 316 franchised locations in other countries, according to its bankruptcy court filings.
TGI Fridays closed about 50 locations in 2024 before filing for bankruptcy, according to court filings.
During the court hearing, Jernigan also approved other initial steps in the company’s Chapter 11 case, allowing the company to borrow the first $3.3 million of its proposed $5.9 million bankruptcy loan and setting a schedule for an auction of its assets.
TGI Fridays has $37 million in debt, and it seeks to sell its assets to an outside buyer by early January.
The chain, which first opened in 1965, filed for bankruptcy on Saturday citing ‘capital structure’ and Covid recovery troubles as the need to restructure.
As its financial troubles worsened, the company cycled through three CEOs in 2023 and closed 36 locations in January, selling eight back to former CEO Ray Blanchette.
Hostmore, the company who manages the UK arm of the franchise, also went into administration in September.
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