Business Bayani PH

TGI Fridays is in hot water after filing for Chapter 11 bankruptcy, and the situation is raising some big questions about its future. 

The restaurant chain, based in Dallas, is dealing with a potential $49.7 million problem: gift cards that do not expire. 

If a lot of customers decide to cash in those cards, it could really hurt the company’s finances.

The chain has been struggling for a while now. Rising costs and changes in how people eat out since the COVID-19 pandemic have hit hard. 

TGI Fridays, which has been around since 1965, has closed many locations recently and even changed CEOs three times this year. 

Just in January, they shut down 36 restaurants across 12 states.

During a court hearing about the bankruptcy, Judge Stacey Jernigan said she was shocked to hear about the gift card situation. 

She imagined grandparents giving gift cards to their college kids, only for them to get lost or thrown away. 

This shows how much people care about those gift cards, and if many customers decide to use them, it could create a serious financial strain on TGI Fridays.

Franchise owners, who run most of TGI Fridays’ U.S. locations, rely on the main company to pay them back when customers use gift cards. 

While TGI Fridays does not think everyone will rush in to redeem their cards at once, franchisees are worried that the company will have enough cash to cover the costs. 

There are 122 franchise-run locations in the U.S., plus 316 more around the world, while TGI Fridays itself owns 39 locations.

Rohit Manocha, the executive chairman of TGI Fridays Inc., said that the pandemic played a big role in their financial troubles. 

He mentioned that this restructuring plan aims to help restaurants “proceed with an optimized corporate infrastructure that enables them to reach their full potential.”

Even with all these issues, TGI Fridays says it will keep honoring its gift card program for now. 

This gives franchise owners some time to figure out their finances while the company tries to stay afloat.

Experts say TGI Fridays’ struggles are part of a bigger problem for casual dining restaurants. 

Many family-friendly chains are finding it tough as more people turn to fast-casual dining and cooking at home because of rising prices. 

TGI Fridays is not alone; other chains like the Italian joint Buca di Beppo and the fish taco chain Rubio’s Coastal Grill have also filed for bankruptcy this year.

Mismanagement’s role

Mismanagement has played a significant role in TGI Fridays’ recent bankruptcy filing, playing a big part in its downfall. 

Key issues included the loss of solid oversight and financial struggles that got worse over time. 

Financial expert Hitha Herzog noted that Citibank, the trustee overseeing TGI Fridays, stopped managing the chain earlier this year, as reported by ABC News. 

Without this oversight, the company lost control of essential areas like licensing, franchise operations, and financial decisions, which threw their business off track.

The company’s financial setup also created problems. TGI Fridays relied on a model where it issued bonds backed by future franchise earnings. However, they struggled to keep up with payments, leading to more financial missteps. 

The pandemic only made things worse as many people started choosing faster dining options over sit-down spots like TGI Fridays. 

Herzog explained that customers have lost interest in the chain’s menu and overall vibe, which led to a 39% drop in foot traffic in October 2024 compared to last year.

Payment issues added to the troubles. Data showed TGI Fridays often delayed payments to suppliers, with over half of their bills being very late at times. This hurt relationships with vendors, who began doubting the chain’s ability to pay.

As TGI Fridays goes through bankruptcy, the company will need to fix these management problems. While the restructuring process is meant to stabilize the business and tackle its old debts, franchisees are worried about unresolved issues, like gift card redemptions, adding more uncertainty to the chain’s future.Ⓒ