Town Square

Why did PW lock thread about Stacy's gift cards?

Original post made by downtown shopper, Downtown, on Jan 7, 2011

I really don't see what was inappropriate or inflamatory about the comments. Several things do come to my mind about the transaction.

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Posted by Scott Adams
a resident of Foxborough Estates
on Jan 9, 2011 at 9:27 am

The current operator of Stacey's Cafe purchased only the assets of the business, including the name. That's a common practice. Purchasing the liabilities was never a practical option.

As the seller, I assumed that the flow of gift card use would be minimal, and since only the food/bev costs are incremental to the business, the new owner would honor them as a convenience to customers, and to maintain goodwill.

The actual flow of gift cards redeemed is apparently more than anticipated, putting a considerable strain on the new business. You might have noticed a number of restaurants closing recently (Bing Crosby in Walnut Creek for example). This is a new era.

I'm in discussions with the current owner to work something out for the gift cards that were outstanding before the asset sale. If you check back with the restaurant in a month or so, you should get a good answer.

I hope everyone understands that all small businesses are making hard choices to survive. I hope you give some thought to the hard working employees of Stacey's Cafe who do a great job.

I apologize for the inconvenience and confusion. I understand how annoying that must be.

Scott Adams

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Posted by Pick & Choose
a resident of Downtown
on Jan 10, 2011 at 12:53 pm

When a gift card is purchased, it creates an asset on the books of the business along side a liability of "owing" that meal to the person that holds the gift card.

While it's nice to say that the new owners did not in effect purchase the liability of the gift cards, the previous owner did receive the asset of cash.

It would be the same as if the new owner didn't elect to pay for the delivery of raw food items that have an outstanding bill.

Convenient for both old owner and new owner to neglect to deal with this liability for which they have already received as an asset.

The last owner of Mahalo Grille pulled the same thing and let us with $150 in unusable gift certificates. He gave us a letter from the lawyer and recommended we go down the block to Pasta's to attempt to collect from the previous owner.

The value of gift cards outstanding should be a consideration in any sale of a business that will be continuing!!!!!

Bad business decision on both parties part with the transfer of ownership of Stacy's.

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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Jan 10, 2011 at 2:06 pm

Stacey is a registered user.

I tried to look up about this. California law basically provides that the gift card/certificate has to be honored by someone, either the new owner or the former owner. From what I could tell, only a Chapter 7 bankruptcy could sever the obligation. Some sites said new owners purchase only the assets of the business. Other sites said that both assets and liabilities are included in a purchase. It probably depends upon what the contract of sale said.

This kind of thing shows how important it is for proper accounting of gift certificates and cards by a business owner. I do not think gift cards would be counted as an asset. Perhaps the Chamber of Commerce could provide some information on this.

Pick & Choose,
Did you try filing in small claims court against the previous owner?

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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Jan 10, 2011 at 2:13 pm

Stacey is a registered user.

Web Link

"In an entity sale, the seller transfers the stock or other indicia of ownership to the buyer. The new owner continues the depreciation and amortization the target has on its books, keeps the same tax identification number, and usually takes on any outstanding liabilities or obligations of the corporation.

This continued liability, coupled with what many consider to be less favorable tax treatment, makes 'entity' sales relatively uncommon with small businesses. The more common structure for the purchase of independent restaurants is the 'asset sale' wherein the buyer purchases the restaurant's assets, such as equipment and good will, but does not purchase the entity's stock. This minimizes the risk of inheriting unknown liabilities and generally provides more favorable tax treatment for the buyer. "

So it was probably an asset sale. In such a sale, an appraiser would have subtracted liabilities from the total worth of assets.

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Posted by JD
a resident of Birdland
on Mar 23, 2011 at 1:25 pm

This is why I never purchase gift cards from any business unless they are big corporate owned ones. It's to easy for small businesses to not honor these and it's not worth it to start going to small claims court.

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Posted by Sherry
a resident of Valley View Elementary School
on Mar 24, 2011 at 10:51 am

Is Stacys currently accepting the cards?

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Posted by sherry
a resident of Valley View Elementary School
on Apr 20, 2011 at 11:03 am

sherry is a registered user.

Upon entering Stacy's yesterday my husband and I were greeted by the new owner,assured our gift card would be accepted, and seated at a lovely window table. Our entrees looked like a picture from Gourmet magazine and tasted delicious! During our lunch the owner came by to see how we were doing and made us feel very comfortable. We had a wonderful Experience!