TGI Fridays Navigates Bankruptcy and Gift Card Concerns

As TGI Fridays navigates through a critical bankruptcy phase, an alarming concern has emerged for restaurant franchisees: nearly $50 million in unused gift cards could leave them high and dry.

For those holding these gift cards, the advice is clear: use them sooner rather than later. “Go redeem your cards now. If you don’t, you may end up waiting alongside a long line of creditors, and may only receive a fraction of what they are worth,” warned John Bringardner, CEO of Debtwire, a premier analytics and debt tracking firm.

Chapter 11 Bankruptcy Filing

Recently, TGI Fridays Inc. has filed for Chapter 11 bankruptcy protection, with approximately 39 of its U.S. locations now under threat. Over 60 franchise owners have expressed growing alarm over the whopping $49.7 million in gift cards that remain outstanding, a concern raised during a recent federal court hearing in Dallas.

Typically, when a chain like TGI Fridays declares bankruptcy, there is a rush among customers to redeem their gift cards out of fear that the restaurants may soon shut their doors. In this situation, the total value of outstanding gift cards dwarfs TGI Fridays’ bankruptcy borrowing request of just $5.9 million, prompting Judge Stacey Jernigan to highlight the unusual circumstance during the court proceedings. “I was imagining, you know, grandparents who got gift cards for their kids in college, only for them to be discarded,” she stated.

Franchise Owners and Financial Burden

In the event that a rush occurs to redeem the cards amid a potential “use it or lose it” scenario, franchise owners would have to honor these gift cards without any guarantee that they would receive compensation from the parent company, according to attorney Jason Binford. Standard practice has allowed franchises to submit claims for reimbursement after accepting gift cards, but in this unprecedented situation, many franchisees fear they might bear the financial burden themselves.

Wider Impact on Franchise Locations

Beyond the 39 restaurants owned by TGI Fridays Inc., there are 122 franchise locations in the U.S. and an astonishing 316 franchises overseas, all of whom could face uncertainties should customers flood to redeem their gift cards.

Industry Trends and Consumer Behavior

TGI Fridays is not alone in facing significant challenges; the restaurant industry has seen many chains struggle, especially under the pressures amplified by post-pandemic competition. Red Lobster, for instance, recently emerged from its restructuring after filing for bankruptcy in May.

Experts have pointed out that TGI Fridays has “failed to adapt after COVID,” resulting in a loss of customer base to newer, more appealing fast-casual dining options. “Consumers are choosing to dine at establishments that resonate with their current economic realities,” stated Burt Flickinger, managing director of Strategic Resource Group.

Call to Action for Gift Card Holders

If you possess TGI Fridays gift cards, act quick! Although the restaurants are expected to remain operational throughout the bankruptcy proceedings, further locations could close in the near future. Indeed, the company has already announced the closure of several underperforming locations earlier this year.

While TGI Fridays insists it plans to honor customer obligations, including gift card reimbursements, the uncertainty remains palpable. Should you miss the opportunity to use your card and end up in the position of filing a bankruptcy claim, know that you're likely to find yourself at the back of the line for repayment.

Final Reminder

So, what are you waiting for? If you’ve got a gift card, redeem it NOW before it’s too late!