November 7th 2024.
In September, the UK operator of the popular restaurant chain TGI Fridays made the difficult decision to enter into administration. As a result, there has been concern within the company about the potential impact on their customers and franchisees. Specifically, there is worry that nearly £50 million worth of unused gift vouchers may go unredeemed if the bankruptcy proceedings do not go smoothly.
It is quite a staggering amount, considering that these gift cards have no expiration date and some have been in circulation since as far back as 2003. During a recent bankruptcy hearing in Dallas, Texas, Judge Stacy Jernigan expressed her surprise, stating that she couldn't help but imagine the scenario of grandparents who had purchased gift cards for their college-bound grandchildren, only for them to be thrown away.
Representatives for TGI Fridays assured the court that the company intends to fulfill its obligations to both its valued customers and franchisees. They also stated that they would be discussing the matter with the franchisee association. However, there is still a significant number of unclaimed gift cards out there, which could potentially cost the company millions.
The franchisees, who rely on the corporation to reimburse them for redeemed gift cards, expressed their support for the gift card program but also voiced their concern about being left responsible if there are no funds available for reimbursement. Attorney Jason Binford, who spoke during the hearing, reiterated their stance, stating that they want to ensure they are not "left holding the bag."
TGI Fridays operates primarily under a "asset-light" business strategy, with the majority of its restaurants being franchises. In the US, the company owns 39 restaurants, while there are 122 franchised locations in the country and 316 in other countries, according to their bankruptcy court filings. Prior to filing for bankruptcy, the company had already closed approximately 50 locations in 2024.
The troubled chain has also experienced some changes in leadership, going through three CEOs in 2023. During the recent court hearing, Judge Jernigan also approved some initial measures for the company's Chapter 11 case, including allowing them to borrow $3.3 million of their proposed $5.9 million bankruptcy loan and setting a schedule for the sale of their assets.
With a debt of $37 million, TGI Fridays is hoping to find a buyer for its assets by early January. The company, which has been in business since 1965, cited issues with its capital structure and the impact of the Covid pandemic on its recovery as reasons for the decision to restructure.
As the financial situation continued to worsen, the company went through three CEOs in 2023 and closed 36 locations in January. Some of these locations were later sold back to former CEO Ray Blanchette. Meanwhile, Hostmore, the company in charge of managing the UK arm of the franchise, also went into administration in September.
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