The restaurant chain TGI Fridays, popular across America, finally filed for bankruptcy. The patrons and the franchisees are in an uproar. However, one of the most relevant questions to have arisen out of this is what will happen to almost $50 million unclaimed gift cards. This article looks more deeply into what the effect of such bankruptcy is, the franchisees’ concerns, and what the customers should be made aware of regarding their unused gift cards.
Filing of bankruptcy
TGI Fridays have been staples in American dining for years, thanks to its relaxed dining and vibrant atmosphere. However, it has filed for Chapter 11 bankruptcy protection due to financial constraint. UK website Metro.co.uk reported that the filing came this week and was considered a serious decline in the fortunes of the once dynamic restaurant chain.
Gift cards: A looming challenge
One of the big problems relating to the bankruptcy is an incredible amount of gift cards, nearly $50 million, that have gone unclaimed. Lots of anxiety has been raised among franchisees who are scared that they might have to bear the burden in case the corporate office is unable to reimburse them for their store credits.
According to a report by VICE, franchisees have signaled unease with the possible financial strain honoring such gift cards will place on their individual businesses.
Franchisee concerns
Franchisees are particularly concerned about what this may imply for operations. According to a report carried out by Reuters, they estimate that franchisees could be liable for $49.7 million in customer gift cards outstanding. This could severely dent their financial stability in case large numbers of customers decided to redeem their gift cards within a short time.
The bankruptcy filings certainly create even more ambiguity. Some franchisees have voiced fear that the corporate company may place their claims regarding reimbursement on lower priority, thus leaving them to internally absorb the cost of redemption, which could mean a significant financial squeeze, especially for smaller franchise owners.
Customer concerns
Of course, the most important question to customers remains left unanswered: Will gift cards be honored? With the bankruptcy claim, there is always a possibility that TGI Fridays will not be in a position to honor them. In an article by Woman’s World, customers are urged to be aware of such complications and keep regular contact with developments proclaimed by the company.
Legal fights
The bankruptcy has also set the stage for potential legal fights. As noted by PaymentsJournal, liability for the outstanding gift cards could be one of the contentious issues. Franchisees might attempt to file lawsuits if they feel they are being unfairly burdened with the cost of redeeming the gift cards without adequate support from the corporate office.
A broader industry concern
The situation at TGI Fridays is not isolated but part of a bigger trend in the casual dining sector. In recent years, the sector has struggled with a myriad of challenges ranging from evolving consumer preferences to increasing competition. According to Sherwood News, other nostalgic dine-in chains, which include Red Lobster, have also taken bankruptcy in recent times.
What customers should do
Customers holding TGI Fridays gift cards should use them soon since it is not sure whether the chain would continue honoring them. Customers should check on the company’s website and plan for redeeming of their gift cards as soon as possible.
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