Hirzel Dreyfuss & Dempsey, PLLC
NEWS AND INFORMATION
A $250,000 Deposit, a $2.5 Million Escrow, and Why a Sale Order Could Not Settle the Difference
A buyer who walks away from a court-approved sale of restaurants does not automatically forfeit its deposit, and the seller does not automatically keep it. On September 11, 2026, in the Chapter 11 case of one of Popeyes' largest domestic franchisees, Judge Robert A. Mark declined to resolve a $2.5 million escrow dispute on a motion in the main bankruptcy case. He denied the buyer's motion to enforce the sale order and compel turnover, and directed that the fight proceed as a separate adversary proceeding.
THE SHORT ANSWER
A buyer who walks away from a court-approved sale of restaurants does not automatically forfeit its deposit, and the seller does not automatically keep it. On September 11, 2026, in the Chapter 11 case of one of Popeyes' largest domestic franchisees, Judge Robert A. Mark declined to resolve a $2.5 million escrow dispute on a motion in the main bankruptcy case. He denied the buyer's motion to enforce the sale order and compel turnover, and directed that the fight proceed as a separate adversary proceeding.
The underlying disagreement is one every buyer and seller of a distressed franchise portfolio should read closely. The asset purchase agreement defined the deposit as $250,000. The escrow account holds $2.5 million, the entire purchase price. Whether the seller may keep all of it turns on whether an unwritten agreement, reached while the parties negotiated a two-week closing extension, enlarged the contract's defined term.
That is a Florida contract question. A section 363 sale order did not answer it, and the court would not treat it as though it had.
WHAT HAPPENED
Sailormen, Inc., a Miami-based operator of Popeyes Louisiana Kitchen restaurants, filed Chapter 11 in the Southern District of Florida on January 15, 2026. Case No. 26-10451-RAM. We covered the filing and the auction that followed in an earlier post on two Florida restaurant franchisee bankruptcies.
The June auction produced five buyers for 97 of the debtor's 136 restaurants, and the court entered a separate sale order for each buyer on June 23, 2026. The Orlando package, 23 restaurants at $2,500,000, went to RFI Ventures, LLC under the sale order at ECF No. 718.
What happened next is drawn from the parties' own filings.
The APA was executed the same day as the sale order. Section 2.4(b) defined the "Deposit" as $250,000, payable on execution into a non-interest-bearing escrow. Section 7.2 provided that on termination for the purchaser's breach, failure to close, or failure of a condition within the purchaser's control, "the Deposit shall be retained by Seller as liquidated damages and not as a penalty." Section 2.1(iii) sold the assets "AS IS, WHERE IS, and WITH ALL FAULTS." Section 8.5 made the agreement subject to Florida law.
The original closing date was June 30, 2026. As it approached, the buyer sought more time. The seller agreed to extend, and the parties executed a First Amendment on June 30 that moved the closing date to July 12, 2026 and deleted the defined term "Outside Date." By then the escrow held the full $2,500,000 purchase price.
The buyer did not close on July 12. It delivered a letter purporting to terminate under Section 7.1(c), citing an inoperable HVAC system at a Colonial Drive store, an equipment repossession matter, and alleged equipment and water-intrusion conditions at certain stores.
The estate did not return the money. It sold the same 23 Orlando restaurants again, filing an expedited private sale motion on July 17, 2026 (ECF No. 796) and obtaining an order approving that sale on July 22, 2026 (ECF No. 804). Trade press reported the replacement buyer as SBH Foods PLK, which already held five Savannah restaurants from the June auction, at roughly $2.7 million.
On August 10, 2026, the buyer moved to enforce the sale order and compel turnover of the $2,500,000 (ECF No. 858). On September 9, the debtor filed an adversary complaint against RFI Ventures, LLC and RFIV Orlando Foods, LLC (ECF No. 925, Adv. Pro. No. 26-01315-RAM). Summonses issued September 10, with answers due October 13, 2026.
THE TWO ARGUMENTS
Both sides agree on the documents and the dates. They disagree about what the word "Deposit" means. Neither position has been adjudicated, and what follows is each party's contention, not a finding.
The estate's position, as alleged in its complaint, is that the buyer "manufactured post-hoc pretexts to walk away from the deal." It alleges that the seller had no obligation to grant an extension, that it conditioned the extension on the buyer placing the entire purchase price into escrow as a deposit at risk, that the buyer agreed and wired the funds, and that the buyer's own wire confirmation described the money as "DEPOSIT." It alleges the parties orally amended the agreement and that the First Amendment ratified that amendment, leaving Section 7.2's liquidated damages clause operative as to the enlarged deposit.
On the termination itself, the estate alleges the buyer failed to follow Section 7.1(c)'s mandatory notice and cure procedure, which permits termination only if an alleged default "is not cured on or before the fifth (5th) business day after the date written notice is given." It alleges the buyer terminated on the closing date itself without affording any cure period, that the "as is" and anti-reliance provisions allocated physical conditions to the buyer, and that the equipment repossession had been authorized by a publicly docketed order entered before the buyer accepted the extension.
The buyer's position, as stated in its motion, is that the case "reduces to a single question of contract text, and the answer is not close." It argues that Section 2.4(b) defines the Deposit as $250,000 and nothing more, and that Section 7.2 permits the seller to retain exactly that. It argues the estate's theory rests on "an alleged oral understanding that appears in no writing, in no amendment, on no docket, and in no order of this Court."
Its strongest point is structural, and it uses the court's own sale order. Paragraph 12 of the sale order permits the purchase agreement to "be modified, amended, or supplemented by the parties thereto in a writing signed by the parties." Section 8.6 of the APA says the agreement "may be amended only by a writing signed by the Parties." The only signed amendment, the buyer argues, did two narrow things and expressly ratified everything else. On that reading, the sale order itself forbids giving effect to the unwritten arrangement the estate relies on.
WHAT THE COURT ACTUALLY DECIDED
Very little, and that is the point.
The September 11 order is captioned "Order Denying Motion of RFI Ventures, LLC and RFIV Orlando Foods, LLC to Enforce Sale Order and Compel Turnover of $2,500,000 in Escrowed Funds and Directing Commencement of Adversary Proceeding."
It denied the buyer's motion. It did not hold that the estate may keep the money. It did not rule on whether an oral modification occurred, whether the termination was proper, or whether the escrow is property of the estate. It decided the vehicle, not the merits.
That distinction matters more than it may appear. The buyer framed its request as enforcement of an order the court had already entered, which is the kind of relief a bankruptcy court can grant by motion. The court treated the dispute instead as what it substantively is: a contested claim to property, and a request for a declaration of rights, which Bankruptcy Rule 7001 channels into an adversary proceeding with a complaint, an answer, discovery, and the ordinary apparatus of litigation.
For anyone holding escrowed funds after a failed closing, the practical translation is that a sale order is not a self-executing forfeiture mechanism. Getting to an answer takes months, not a hearing.
WHAT THIS MEANS IF YOU ARE BUYING OR SELLING A DISTRESSED FRANCHISE PORTFOLIO
The lessons here are drafting lessons, and they are cheap to apply in advance and expensive to litigate afterward.
Amend in a signed writing, every time. Whatever the eventual outcome, the estate is in this fight because the enlargement of the deposit was not reduced to a signed amendment saying so. A wire memo reading "DEPOSIT" is evidence, but it is not a contract term. When a sale order itself requires signed writings for amendments, an oral side arrangement is not merely weaker proof, it runs against the order governing the sale.
Say what the escrowed money is. There is a real difference between a deposit at risk, a prepayment of the purchase price held for convenience, and liquidated damages. If a seller demands the full price in escrow as the price of an extension, the amendment should state in terms that the entire sum constitutes the Deposit for purposes of the liquidated damages clause. One sentence would have removed the question.
Liquidated damages clauses are read against a defined term. Section 7.2 did not say "the escrowed funds." It said "the Deposit." Defined terms are where these disputes live. Check that every remedy provision points at the amount you actually intend to put at risk.
Follow the notice and cure provision even when you are sure you are right. The estate's first argument is not about HVAC units or water intrusion. It is that the buyer terminated without giving the five business days the contract required. A party with a good substantive complaint can lose it by skipping a procedural step that takes a week.
Diligence the docket before you accept an extension. The estate alleges the equipment repossession the buyer later cited had already been authorized by a publicly docketed order entered days earlier. In a bankruptcy sale, the docket is running while you negotiate, and what it shows on the day you sign is chargeable to you.
"As is, where is" means what it says. In a distressed sale, physical condition is ordinarily the buyer's risk. If specific conditions matter, they belong in a closing condition or a specific representation, not in a later termination letter.
Price the possibility of not closing. The Orlando package was small relative to its unit count. Walking away still put the entire purchase price in dispute, funded litigation on both sides, and left the buyer with neither the restaurants nor the money while the case proceeds.
WHAT IS STILL OPEN
Answers were due October 13, 2026. As of this writing there has been no ruling on any of the four counts, which are breach of contract, declaratory judgment, turnover of estate property under 11 U.S.C. section 542, and breach of the implied covenant of good faith and fair dealing under Florida law. No court has found that the buyer breached, that the termination was pretextual, or that the escrow belongs to the estate. Nor has any court found the opposite.
We will follow the adversary proceeding. The contract questions in it are the ordinary questions in any failed closing, which is precisely why the answer will be worth reading.
SOURCES
● Adversary Complaint, Sailormen, Inc. v. RFI Ventures, LLC, Adv. Pro. No. 26-01315-RAM (Bankr. S.D. Fla. Sept. 9, 2026), filed at ECF No. 925 in Case No. 26-10451-RAM
● Order Denying Motion to Enforce Sale Order and Compel Turnover and Directing Commencement of Adversary Proceeding, ECF No. 929 (Sept. 11, 2026)
● Order Authorizing and Approving the Sale, RFI Ventures, ECF No. 718 (June 23, 2026)
● Expedited Motion to Sell the Orlando Region, ECF No. 796 (July 17, 2026), and Order Approving Sale of the Orlando Region, ECF No. 804 (July 22, 2026)
● Sailormen, Inc. case docket, Stretto (court-appointed claims and noticing agent)
● Nation's Restaurant News, Bankrupt Popeyes franchisee is selling most of its restaurants
● 11 U.S.C. sections 363, 541, 542; Fed. R. Bankr. P. 7001
Disclaimer
This post discusses publicly reported legal developments for general informational purposes. It is not legal advice, it does not create an attorney client relationship, and it does not reflect the firm's position in any pending matter. Outcomes depend on the specific facts and the governing law of the relevant jurisdiction.
Two Franchisees, Two Ways to Close a Restaurant, and the Decisions That Separate Them
The short answer
One multi-brand franchisee closes underperforming units on its own schedule, rebuilds on land it owns, and grows revenue by more than a third. Another files Chapter 11 and puts forty-nine of its sixty-five restaurants up for sale through a liquidation firm. Both are closing restaurants. Only one of them still controls the outcome, and the difference traces back to decisions about real estate, leases and defaults made long before either closure.
The operator that closed by choice
Franchise Times reported on August 28, 2026 on a Kansas-based operator that runs fifty-two Burger King and forty Denny's restaurants across two entities, with revenue up 34.3 percent since 2023 to $135 million.
The described strategy is unsentimental. The chief executive put it this way: "We're growing by adding locations and we're growing by getting rid of losers." The chief financial officer described closing or declining to renew locations that are not performing while opening replacements that do better. In 2024 the company tore down and rebuilt an aging Burger King on a site it had acquired, and sales improved more than 25 percent. This year it closed a location when the lease expired and is rebuilding on separate space it owns.
The financial officer identified the structural reason this works: owning the real estate means "you're not getting hit with increased rents on the properties you own like you do with the other ones." The operator owns much of the real estate under its more than ninety stores.
The operator that ran out of choices
On April 2, 2026, a franchisee operating sixty-five Carl's Jr. restaurants in California, together with five affiliates, filed Chapter 11 in the United States Bankruptcy Court for the Central District of California. Forty-nine of the sixty-five have been put up for sale, marketed by a firm that specializes in liquidations. Reporting attributes the distress in part to California's $20 fast food minimum wage, per a statement by the company's chief executive in a court filing.
The detail that matters most is buried in the filing. The company is in default under its franchise agreements at a number of locations for failure to timely pay rent, royalties and other required charges. Those defaults could result in termination of the franchise agreements, which would end the ability to operate and generate revenue at all.
Reporting also quotes a bankruptcy analysis for the proposition that even where a debtor is not assigning a franchise agreement, assumption without franchisor consent is barred in the Ninth Circuit, which gives franchisors substantial leverage over whether a distressed franchisee continues under existing agreements.
Our take: the franchise agreement is the asset, and it is the one you can lose fastest
Read the two stories together and the same variable appears in both.
Real estate ownership is the difference between a decision and an emergency. The healthy operator closes a location when a lease expires and rebuilds on land it owns. It is not negotiating with a landlord in distress, and its occupancy cost does not reset at renewal. The distressed operator is in default on rent, which is what put its franchise agreements at risk. Two operators facing the same cost environment ended in different places largely because one controls its occupancy cost and the other does not.
A franchise default is faster and more dangerous than a lease default. A landlord that is not paid must generally evict, which takes time and produces a claim. A franchisor that is not paid can terminate, and termination ends the business rather than the tenancy. Once bankruptcy is filed, the franchisee's ability to keep the agreement is constrained in ways an ordinary contract is not. The Ninth Circuit position described in the reporting means the franchisor's consent may be required even to keep an agreement the franchisee is not trying to sell.
Closing units is not itself a distress signal, and closing them late is. The healthiest operator in these two stories closed more locations by choice than many struggling ones close under pressure. The failure mode is not the closure, it is subsidizing an underperforming location out of the cash flow of the good ones until there is no cushion left. The operating discipline and the balance sheet are the same subject.
We would add a candid caveat about the minimum wage explanation. A wage increase applies to every operator in the state, and many of them did not file. It is a real cost pressure and it is rarely the whole story. The default on rent and royalties is the more proximate cause of the loss of control, and it is the part a franchisee can actually manage.
What it means practically
If you are a franchisee: know which of your locations lose money and what each one costs to exit. Model lease expirations against unit economics so that closures happen at renewal rather than in default. Understand that missing rent and missing royalties are not the same kind of problem, because only one of them can terminate the business. If a franchise agreement default notice arrives, the cure period is the last point at which you control the outcome.
If you are a franchisor: the reporting shows both sides of the leverage. Consent rights are real and enforceable, and they are worth exercising deliberately rather than reflexively, because a terminated agreement produces a dark location and a rejection damages claim rather than an operating royalty stream.
If you are a landlord to a franchisee: the franchisor's consent rights can determine whether your tenant survives, and you may have no seat at that table.
When to call a lawyer
Before signing or renewing a lease at a marginal location, on the first missed royalty payment, and immediately on receiving a default or termination notice under a franchise agreement.
Sources
Disclaimer
This post discusses publicly reported legal developments for general informational purposes. It is not legal advice, it does not create an attorney client relationship, and it does not reflect the firm's position in any pending matter. Outcomes depend on the specific facts and the governing law of the relevant jurisdiction.