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Home  >  Tips  >  The Peril Of Buying Gift Cards…
Tips

The Peril Of Buying Gift Cards…

Matthew Klint Posted onMay 11, 2020May 11, 2020 8 Comments

I don’t buy gift cards, unless I am gifting them in small amounts. A recent bankruptcy illustrates why you should also be careful about ever stocking up on gift cards.

First, perhaps, we should take a step back. The whole “manufactured spending” (MS) game has never appealed to me. Sure, the amount of points on the table was alluring, but that game requires far too much organization and far too much risk. There’s ethical implications as well. While I don’t see anything wrong with MS, many banks did…and shut down accounts.

But the idea of buying gift cards at office supply stores using Chase INK cards to get 5x points per $1…I can see why it made sense for some people.

But what happens when a company goes out of business? Short answer: those gift cards become worthless.

The Souplantation chain went out of business over the weekend. I’ve enjoyed this salad bar chain since I was a kid and have many happy memories of lunch and dinner with friends and family in this place. But salad bars and COVID-19 do not exactly mix and the chain’s 97 restaurants have been shut down for several weeks. With even curbside takeout virtually impossible, Souplantation announced it was declaring chapter 7 bankruptcy (liquidation) and closing for good:

CEO John Haywood told he LA Times:

“The FDA had previously put out recommendations that included discontinuing self-serve stations, like self-serve beverages in fast food, but they specifically talked about salad bars and buffets. The regulations are understandable, but unfortunately, it makes it very difficult to reopen. And I’m not sure the health departments are ever going to allow it.”

Even in Georgia, which has re-opened, buffets and salad bars are still prohibited. That does not bode well for the future of buffets.

Worthless Gift Cards

Referring to its outstanding gift cards, Souplantation said:

For gift card inquires, refund options are limited at this time. You may be able to dispute the purchase with your bank or credit card company. Otherwise, there may be an alternative option available through the court in the future.

A court-appointed bankruptcy trustee will now sell Souplantation assets, which may raise some money for gift card holders (pennies on the dollar) depending upon the relative position of other creditors.

Should You Buy Gift Cards At All?

I’m not going to tell you not to buy gift cards. That’s far too broad of a recommendation. But stockpiling gift cards seems like a dangerous game considering they can be lost and as we see here, companies can go out of business. Better, as an overall strategy, to put purchases on flexible currency or cash back cards and only use gift cards for gifts…

CONCLUSION

The sad thing is that many saw buying gift cards during COVID-19 as a smart way to prop up struggling restaurants. While that was logical in theory, the case of Souplantation demonstrates the danger of such an approach.

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About Author

Matthew Klint

Matthew is an avid traveler who calls Los Angeles home. Each year he travels more than 200,000 miles by air and has visited more than 135 countries. Working both in the aviation industry and as a travel consultant, Matthew has been featured in major media outlets around the world and uses his Live and Let's Fly blog to share the latest news in the airline industry, commentary on frequent flyer programs, and detailed reports of his worldwide travel.

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8 Comments

  1. Snorklez Reply
    May 11, 2020 at 1:17 pm

    Hi Matthew,

    Not being a bankruptcy attorney, nor being all too familiar with it, I did have some thoughts:

    The fate of gift card holders appears to be HIGHLY correlated to the type of bankruptcy pursued by the issuing company. I believe that Ch 11/13 bankruptcies very frequently shield gift card holders (at least initially) because the Court/Trustee/Creditors…etc likely recognize the brand loyalty that would be destroyed otherwise, and both Chapter 11/13 are both reorganization, rather than complete liquidation.

    Cheers

    • Matthew Reply
      May 11, 2020 at 1:21 pm

      You are correct, but we are in Chapter 7 in this case.

  2. Steve Reply
    May 11, 2020 at 1:28 pm

    I have no doubt that gift card holders would be considered unsecured creditors and will receive pennies on the dollar. In regards to MS, I did try it but I simply hated Walmart and felt like such a loser standing in line with all the welfare recipients that I never did it again.

  3. JohnnyBoy Reply
    May 11, 2020 at 1:34 pm

    Really depressing. I worked at the very first Souplantation in San Diego as a teenager in early ’80s and helped them open the second restaurant across town and down the street from where my parents still live. I ate there literally every day for years.
    How much more loss can we endure as a society due to Covid-19 mitigation?

  4. Stuart Reply
    May 11, 2020 at 1:51 pm

    If the CEO is warning that the demise of buffet and salad bars is upon us, and might never be allowed again, I wonder what that means for hotels.

    Hampton Inn, Homewood Suites etc etc will have to completely rethink their breakfast offerings and how they present them. Even Embassy Suites. At Marriott, Hyatt etc the Concierge breakfasts and evening cocktail hours no more.

    Airport lounges will no longer have buffet style food.

    Sunday brunches and holiday spreads at places like Four Seasons will be a memory of the past.

    Fascinating to see that the simple age old concept of a buffet style/spread might become distant memories of a bygone era.

  5. SO_CAL_RETAIL_SLUT Reply
    May 11, 2020 at 2:06 pm

    Although, they were a good deal especially at times over Black Friday when they offered more value for the cards over the purchase price, I stopped purchasing the Souplantation gift cards after Apollo Capital took over – the underlying thought I had is that they are not in this for the long run and could pull the plug at anytime – well before corona virus hit the stage.

    Los Angeles County has another minimum wage increase on July 1, 2020 (cities of Los Angels and Santa Monica as well), and the unions will pee in their pants if the Board of Supervisors attempts to delay the increase to $15.00 minimum wage on that date.

    So for any restaurant operator – most had already budgeted for this increase come July. At least in Los Angeles County, we have no idea when any type of sit-down in-person dining will be allowed to resume.

    For those buffet-style operations such as Souplantation, Hometown/Old Country Buffet. Golden Corral and the many independent asian-style buffet houses – how are they going to adapt to the “new” normal and face increased labor costs because they will have to serve the guests as self-serve is prohibited and guests counts will surely be reduced?

    In addition, at any sit down restaurant, your server will bring you the placemat, glassware, plates and silverware AFTER you are seated – and disposable paper menus will be handed out. I’ve heard a couple operators intend to use completely disposable plates and glasses – really – for sit-down?

    I would expect that many restaurants will simply move to a “quick-service” concept where everything including plates, cups and napkins are placed in a bag “to go”, but your are welcome to dine inside as long as social distancing measures are in place. Imagine the number of waiter and waitress positions that are never coming back?

    Going back to Souplantation, I will miss their Cream of Mushroom soup…served only on Mondays…lol

    I’m sure Apollo will somehow monetize the Souplantation recipes, including the soups. Who knows, we may well see some the most popular soups appearing at your local grocer.

    SO_CAL_RETAIL_SLUT

  6. Joseph N. Reply
    May 11, 2020 at 5:47 pm

    I went to our local Mongolian BBQ on Friday. Customers can still make up their own bowls (for take-out only), but now an employee stands there and replaces the serving tongs after one customer uses them. I thought it was very sanitary. Covid 19 is not a food-borne illness.

    As for the previous comment about monetizing the Souplantation name in the stores, I agree completely. I’ve always been surprised that Starbucks has never started a line of pastries for the supermarkets.

    As for your comment that you don’t see anything wrong with MSing, I do. The banks only have so much money for marketing. Every time some MSer signs up for a card and runs up a million points by MSing at Walmart, that means the bank offers smaller bonuses to the rest of us.

  7. Carl Reply
    May 16, 2020 at 4:47 pm

    I lost the full balance of my Tully’s Coffee gift card due to the criminal asset stripping conducted by that thief and creep Michael Avenatti. (The Stormy Daniels lawyer who also stole from trust accounts and tried to extort Nike.) He should rot in jail, although I think he was able to leverage Covid into a release.

    Tullys was a good coffee shop until Avenatti bought control. And I lost my gift card balance to that crook.

    https://www.bizjournals.com/seattle/news/2013/08/22/patrick-dempsey-sues-business-partner.html
    https://www.businessinsider.com/michael-avenatti-ex-coffee-shop-employees-speak-out-2018-5
    https://www.bizjournals.com/seattle/news/2019/04/11/tullys-owner-michael-avenatti-indicted-fraud.html

    https://nypost.com/2020/04/24/michael-avenatti-released-from-prison-over-coronavirus-fears/

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