Monday, December 12, 2011

Am I obligated to honor gift certificates sold by previous owner after the business sale transaction?

I purchased a day spa business a month ago. The previous owner gave me $4500 credit towards gift certificate redeem, as she claimed there weren't that much out there. However, just one month after the close of escrow, there were already more than $3000 worth of gift certifcate redeemed came forward. My concern is, the business will be hurt if I don't honor past gift certificate; however I can not afford keep doing this, especially without knowing how much are really out there because the previous owner did not have any record to trace. I couldn't even tell the authenticity of those gift certificates as a lot of them don't have date of issue, or number, or even value. I am stuck here, please help.|||I don't envy your position.





The previous owner should have given you an example of a valid gift certificate so you could at least try to authenticate those being redeemed. Since the establishment is under new owndership you could post a sign stating a new policy regarding GC redemption. It could read something like:





"As of February 1, 2006 (or any date of your choosing) we will no longer be able to accept gift certificates that were purchased prior to December 1, 2005 (or whatever date you took over.) We apologize for any invonvenience this may cause." You might also want to mention the new ownership of the establishment.





Hopefully since you took over you have revamped the way your GC look so you can distinguish the old from new. You might also want to take into consideration that people may have just received the GC for Christmas and that would explain the huge redemption rate in the last few weeks.





It's one of those 'darned if you do and darned if you don't' situations. Just make sure that if you decide to cut off the old GC, you visibly post it in your shop for all to see for at least one month.|||If you recieved a gift certificate credit of $4500, you are legally obligated to redeem up to $4500 of gift certificates. You are not legally obligated to redeem anything above that amount, however some states do have legal requirements stating otherwise. I would check with a local attorney about state and local laws regarding such.|||Its a tough one. You know that anyone you turn away will never come back. Does your business have slower times of the day? Maybe you could explain to the customers that the gift certificates were voided by the sale of the business, but you would be able to honor it if they could schedule during your slower times.|||You can turn this into a promotion opportunity: we honor past certificates (up to a certain date) *if* the client also purchases something else/anotehr service. You can also state that as a new owner, you have redefined the certificate, instead of ignoring it altogether.





THe idea is to keep the customers coming back and happy to come back, nurturing future business.





Even explain to the clients the bind you are in, and also what you are willing to do to keep them happy.





As a new owner is not really obligated to honor the previous owner's promises, but it is noted if you do, and builds a client base. Also, track the GCs as a promotion expense.|||That depends entirely on the contract that you signed with the previous owner. If you have some hold-back in the deal that you struck, you might be able to get your money back out of the holdback.





What you could also do is make a deal with these customers that if they schedule multiple trips to your spa (a few of them paying) that you'll honor the gift certificate. Afterall, you want recurring revenue to grow your business --%26gt; worry about marketing and growing the business before you worry about finances (Peter Drucker).

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