Closed Restaurant Gift Certificates: Out of Luck?

Wednesday, May 25th, 2011

Downtown Restaurant Closed | PD Beth Schlanker

Like clockwork, every time a restaurant closes I get a little flurry of emails from folks left holding unused gift certificates often worth a hundred dollars or more.

Panicked, they ask, “What can I do? Can I get my money back?”

Long story short: Probably not.

Given as gifts or purchased in hopes of redeeming at a later date, restaurant gift certificates and cards represent an $18 billion industry nationally and are often a boon for local restaurateurs, especially during the holiday season.

But when a local, family-run restaurant shutters without warning, those same gift certificates become collateral damage. With phones turned off, owners MIA and bankruptcy courts paying out higher priority claims, gift certificate purchasers are usually left holding a worthless piece of paper with little recourse.

That doesn’t mean there are no options, however. Nor does it mean you shouldn’t ever purchase a restaurant gift certificate. Here’s the breakdown.

If you have a gift certificate to a closed restaurant
Depending on your comfort level with lawsuits, in most situations customers can bring a civil action against the owner in small claims court to recoup their losses. According to Matt Cheever, Deputy District Attorney for Sonoma County you can also file a claim as a creditor if the restaurant is in bankruptcy.

Keep in mind that secured claims are paid first — meaning interests who hold a lien or mortgage — followed by employee wages and benefits, vendors and other prioritized debts. Gift certificate debts are lower priority.

Cheever adds that if the certificate was purchased with a credit card, you may have some recourse with the credit card company if they’re willing to cover your loss.

One last resort is to hold onto the gift certificate. It is not uncommon for the restaurant owners to reorganize and re-open at a later date and honor the gift certificates out of good will (they are not required to). New restaurants sometimes honor gift certificates from a previous tenant (again, out of good will) or may have worked a financial deal out with the previous owner to honor those certificates. It’s always worth asking, though keep in mind that new businesses have no obligation to do this.

If you’re giving a gift certificate
Consider how long the restaurant has been in business (though even that’s not always a good gauge) and use a credit card to purchase. Ask around if the restaurant is popular and seems crowded. Usually locals have a pretty good sense of restaurants that are struggling. Try to give certificates to reputable, well-known eateries and make sure the certificate looks legit. If it’s scribbled on a piece of paper and doesn’t have a signature or some kind of tracking number, chances are the restaurant may not have a good accounting process. Trust your gut.

Instead of a gift certificate
If you’re not sure, why not tell the recipient of your intent and tell them you’ll have the certificate waiting for them at the restaurant. You can purchase it that day or simply offer to pay a portion of the bill via credit card. You can also give a pre-paid American Express or Visa gift card that can be used anywhere if you’re worried about restaurant gift cards.

If you get a gift certificate
Don’t hoard your certificate, use it!  Otherwise, you could end up eating the cost, rather than a tasty meal.

Author: biteclub

Food Dining and Restaurants in Sonoma County and beyond, is Wine Country dining with Drive-Thru Sensibility.

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  1. Cafe Europe in Santa Rosa has been sold. What will happen to the prepaid cards they sold to their customers? Will refunds be offered? Or is it another case of too bad so sad?

    Maybe, a lesson to be careful prepaying for services from local businesses.

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  2. that’s too disappointing. For me, it is wiser not to get into gift certificates. Let us all learn from each other’s mistakes.

    liza from moule à manqué 

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    • I have one to Brennan’s in New Orleans.
      Restaurant reopened with same name Brennan’s Restaurant , same building. New owner of the same family.
      Will not honor old Brennan’s gift certificate .
      In the past, being a local, we gave out Brennan’s gift certificate to family & friends.
      Unfortunately have learned to buy gift certificates from more nationally known restaurants.

  3. I have one for Fabiani’s. When I heard the former owner was opening Franco’s I sent him a nice letter asking him to please honor the certificate, and also give me the opportunity to try his new place, and for him to potentially gain a new customer by allowing me to do so. He never even gave me the courtesy of a reply. It really bothers me when business owners to not even respond to communications, and makes me inclined to not frequent their establishments.

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