As TGI Fridays navigates Chapter 11 bankruptcy, concerns have mounted over approximately $50 million in outstanding gift cards, potentially impacting customers and franchise owners alike. The restaurant chain, which owns 39 U.S. locations and franchises many more, entered bankruptcy proceedings on Saturday, seeking to restructure amid financial challenges. Meanwhile, over 60 franchise owners not included in the filing raised alarm in federal court, fearing they might be forced to redeem gift cards without compensation from the company.
Gift cards, some issued over two decades ago, vastly exceed the $5.9 million TGI Fridays Inc. secured for restructuring. For franchisees, this discrepancy poses a serious risk: if many customers rush to use their cards, the franchises would need to honor them, but without reimbursement assurances, they could face severe financial strain. Typically, franchisees receive compensation from the chain for redeemed gift cards, but in this case, they may be left financially vulnerable.
With potential delays in gift card redemption or value reductions, cardholders are advised to use their cards soon. This bankruptcy adds TGI Fridays to a growing list of American restaurant chains struggling under increased competition, debt, and changing consumer habits. Franchisees and creditors now await further developments in the bankruptcy process to see how outstanding liabilities like gift cards will be resolved.
Source: Leaf Chronicle