TGI Friday’s recently filed for bankruptcy, blaming the COVID-19 pandemic, its capital structure and a decrease in demand for casual dining for its current status. While the Chapter 11 filing affects only the 39 company-owned restaurants in the U.S., the chain’s franchisees are now worried the bankruptcy proceedings will impact them in the form of nearly $50 million worth of gift cards that are still out there waiting to be used.
Jason Binford, an attorney representing more than 60 franchise locations, argued in a Dallas court hearing Monday, Nov. 4, those restaurants could be on the hook for the millions of dollars in unused gift cards, with some dating back more than 20 years.
“Any comment on this other than — ‘Wow,’” U.S. Bankruptcy Judge Stacey Jernigan said. “$49.7 million on outstanding gift cards. I did a double-take on that. I was imagining, you know, grandparents who got gift cards for their kids in college and then it got thrown away. If it’s going back to 21 years, we have a lot of thrown-away gift cards.”
Usually, the company would reimburse the franchisees for customers using gift cards, but that policy’s feasibility is being questioned amid the 59-year-old restaurant chain’s bankruptcy filing.
The $49.7 million in outstanding gift cards surpasses the $5.9 million the restaurant is borrowing for bankruptcy restructuring, according to court documents.
Binford said the company’s bankruptcy could lead to an uptick in gift card use. He also said a “use it or lose it” mindset for cardholders may make them rush out to spend them.
“We’re certainly supportive of the continued use of gift cards because we agree they drive sales,” Binford told the judge. “It’s just there’s a circumstance where we can be seen, the franchisees, by we I mean, could be seen left holding the bag if there is not a source of funds available to reimburse the franchisees under the ordinary course.”
The judge is allowing TGI Friday’s to continue the gift card program on an interim basis. This gives franchisees more time to review the program and Friday’s finances. Friday’s has 122 franchised locations in the U.S. and 316 more around the world.
Attorneys for TGI Friday’s present at the hearing said the company does plan to honor its obligations for both its franchisees and customers.
![TASS [🇷🇺-affiliated] logo](https://groundnews.b-cdn.net/interests/1c364c1e553231a17f22d4a16db85a51fb715dd3.jpg)
