Bankrupt TGI Fridays has $50 million in unused gift cards
- Image: Roger Utting Photography (Getty Images)
Things aren’t exactly festive at TGI Fridays. That’s because the bar-and-grill chain is grappling with a major issue in its bankruptcy case: Unused gift cards.
The company currently faces a $49.7 million bill tied to unredeemed gift cards – far more than the cash it has on hand, despite borrowing $5.9 million to help fund its bankruptcy, as reported by Reuters (TRI).
That has franchisees on high alert, concerned they’ll be left to foot the bill if the company’s financial restructuring goes off course. A lawyer representing the franchisees explained that, while they can accept gift cards as payment, there’s no guarantee they’ll be reimbursed if customers hurry to redeem the cards during the bankruptcy process.
TGI Fridays owns 39 U.S. locations, while its franchisees operate over 100 domestic restaurants, and more than 460 internationally. The company has already closed 50 locations this year. With most TGI Fridays locations in the U.S. being franchises, the uncertainty around reimbursement leaves franchise owners particularly vulnerable in a bankruptcy scenario.
At a court hearing, the judge allowed the gift card program to continue for now, buying franchisees more time to figure out if the company can cover these obligations.
The Texas-based chain filed for Chapter 11 bankruptcy protection on Nov. 2, citing rising costs and declining customer demand for casual dining, worsened by the pandemic. The company has struggled for years to regain its footing in an increasingly competitive market.
Despite attempts to rally, foot traffic has taken a nosedive. Recent data reveals a staggering 39% drop in visits year-over-year during the week of Oct. 21, mirroring a 37% decline in traffic on Jan. 1, according to foot traffic analytics firm Placer.ai. This decline reflects not only the post-pandemic shift, but also changing consumer habits and rising costs that are squeezing the brand.
With $37 million in debt and a plan to sell its assets by early January, the pressure is greater than ever. Moving forward will require a clear understanding of what today’s diners truly desire — beyond just good value.
