How Restaurant Receivers Resolve Investment Conflicts and Restaurant Failure

Most of the time, restaurant investors, lenders, and co-owners like to think about the positives of their investments – not the potential failure of the restaurant.

It’s also hard to imagine a business relationship going sour, but these things happen, too. Restaurants fail, business partnerships become bitter, and stakeholders find themselves in the tricky territory of deciding between taking big losses, filing for bankruptcy, or suing a business partner.
When such conflicts arise, restaurant stakeholders and their lawyers may consider a useful resource in California’s court system: the receivership remedy. A restaurant receiver, with the full authority of the court, can step into a complicated situation and take over operations to ensure a fair outcome for everyone involved. 

If you are representing a restaurant investor or co-owner who is dealing with a toxic business relationship, a partner’s criminal or negligent behavior, or a failing restaurant investment, seeking the appointment of a restaurant receiver may simplify the process and ensure a timely resolution. 

The Role of a Court-Appointed Restaurant Receiver

Restaurant receivers play an important role in assisting restaurants, investors, and business partners as they navigate closure, potential bankruptcy, division of assets, and other complex legal realities. 

Some of the roles that a restaurant receiver can play include: 

• Managing the restaurant’s finances and cash flow
• Prioritizing paying essential bills and vendors
• Renegotiating leases and contracts to lower payments and modify terms
• Selling assets and equipment to increase cash flow and pay down debts
• Overseeing operations, including staffing, scheduling, purchasing, and menu management
• Closing underperforming locations
• Arranging refinancing to pay off unsustainable debt
• Facilitating acquisition by another company
• Buying time by halting any foreclosures and collections processes

When Is a Court-Appointed Restaurant Receiver Necessary?

Court-appointed receivers are most often utilized when other legal means have been exhausted. It typically involves uncooperative business partners and/or unresolvable stakeholder conflicts. 

For more information regarding the appointment of a receiver, feel free to reach out to us with questions. 

Richardson “Red” Griswold as Restaurant Receiver

Richardson “Red” Griswold has been appointed as a receiver by the California courts more than 180 times, including as a restaurant receiver. 

In 2023, Red Griswold was appointed by the San Diego County Superior Court to address a deadlocked and unresolvable conflict between a plaintiff and a defendant. The plaintiff had loaned the defendant significant funds to purchase a group of restaurants, but the defendant ended up defaulting on the loan. The plaintiff successfully obtained the appointment of Red Griswold as the receiver to maintain the assets and value of the restaurant portfolio.

The court-authorized scope of the receiver’s powers included: 

• Take possession and control of the portfolio of nine restaurants across the United States, including assets and books
• Operate or hire a manager to operate each restaurant in the portfolio
• Enter new contracts with vendors, food suppliers, and landlords
• Terminate existing contracts
• Negotiate resolutions with existing creditors
• Open new bank accounts under the receiver’s control
• Determine the defendant’s financial position
• Sell the restaurants, either individually or in groups
• Sell any assets owned by the restaurant entities

Ultimately, the parties worked toward a settlement of their claims during the receivership.

Contact Red Griswold & the team at Griswold Law

If you have questions, our team has answers. Red Griswold and his team have years of experience in the California courts, working in all capacities of receiverships, including health and safety, rents and profits, post-judgment receiverships, and much more. 

With such extensive experience, Red can provide clear and comprehensive support to owners and investors with struggling or failing businesses, including restaurants.

Check out our blog to learn more about our services, resources, and experience, and don’t hesitate to reach out to ask us questions. We look forward to hearing from you!