As TGI Fridays progresses through its bankruptcy proceedings, some of its locations are worried they might have to deal with nearly $50 million worth of unused gift cards.

If you hold a gift card, it’s wise to use it before the situation worsens, as you may end up with a card that’s only worth a small portion of its value. John Bringardner, the head of Debtwire, a firm specializing in analytics and debt tracking, advised, “Use it now, or you might find yourself in a long line for repayment after several other creditors… and you’ll be lucky to get even a fraction of its worth.”

TGI Fridays Inc., which operates 39 locations in the U.S., filed for Chapter 11 bankruptcy last Saturday. Concerns regarding the $49.7 million in outstanding gift cards were voiced by over 60 TGI Fridays franchise owners not included in the bankruptcy proceedings during a federal court hearing in Dallas on Monday.

It’s common for customers to rush to redeem gift cards when a business announces bankruptcy, as they worry it may close before they can use their cards. In the case of TGI Fridays, the amount tied up in gift cards—some dating back over 20 years, based on court documents—greatly exceeds the $5.9 million the company plans to borrow for its bankruptcy restructuring.

Judge Stacey Jernigan reacted with surprise at the hearing, stating, “I didn’t expect that amount. I was picturing how grandparents might gift cards to their kids, only for them to be lost.” She approved the initial steps towards the company’s bankruptcy, including an initial loan of $3.3 million from the proposed $5.9 million.

If many customers decide to redeem their gift cards, facing a “use it or lose it” choice, the franchise locations may need to honor them without any assurance of being compensated by TGI Fridays Inc., as mentioned by lawyer Jason Binford during the Monday hearing, according to Reuters.

Typically, franchises accept gift cards and later seek reimbursement from the main chain. Binford expressed concern that the franchisees could be “left with nothing if they’re not repaid,” representing more than 60 franchisees.

In addition to TGI Fridays Inc.’s 39 U.S. restaurants, there are also 122 franchised locations in the U.S. and 316 franchises internationally, according to bankruptcy court documents.

Another Troubled American Restaurant Chain

TGI Fridays is the latest restaurant chain to file for bankruptcy amidst stiff competition and changing consumer preferences. Red Lobster, which filed in May, is beginning to recover from its restructuring process.

According to Bringardner, TGI Fridays is one of many establishments struggling to recover from the impacts of COVID-19, which severely limited their operations and made it difficult to regain their previous levels of success.

As the company accumulated more debt, it lost customers to new fast-casual dining options, Bringardner noted.

Burt Flickinger, a managing director at retail consulting firm Strategic Resource Group, criticized private equity firms for poorly managing TGI Fridays by failing to adapt to evolving competition and consumer trends.

He stated, “They seem disconnected from the everyday consumer who would typically visit TGI Fridays for special occasions but is now opting for places like Buffalo Wild Wings instead.”

What Should You Do If You Have a TGI Fridays Gift Card?

If you have a gift card, you might have already noticed that your preferred restaurant location has closed down. Earlier in January, TGI Fridays shut down several underperforming outlets across 12 states.

Despite the expectation that all current locations will remain operational throughout the bankruptcy process, there is a chance of additional closures. This is a key factor to consider if you plan to use your gift cards.

Bringardner pointed out, “They’ve already mentioned in court filings that they will close multiple underperforming sites.” During the Monday hearing, TGI Fridays Inc. assured that it would uphold commitments to customers and franchisees, including honoring gift card reimbursements and would engage with the franchisee association on these matters.

If you decide not to use your gift card, you could eventually file a claim in bankruptcy proceedings to try to recover what’s owed. However, “you’ll be among the last to get paid back, so the advice is if you have a gift card, use it immediately,” advised Bringardner.

Who Owns TGI Fridays?

TGI Fridays Inc. is the company that declared bankruptcy on Saturday and operates 39 restaurants in the United States. It is privately held by TriArtisan Capital Advisors. Before its bankruptcy filing, TGI Fridays shut down around 50 of its locations in 2024, as mentioned in court documents. The company has accrued debts totaling $37 million and aims to find a buyer for its assets by early January, according to a report from Reuters. In addition, there are 122 franchised TGI Fridays restaurants that are independently owned in the U.S., along with 316 franchised locations located internationally, managed by TGI Fridays Franchisor, LLC, as outlined in the court filings.