Fallout from the Franchise Group bankruptcy continues to widen<\/p>\n
DALLAS Buddy Mac Holdings, which as recently as a few months ago was the largest franchisee of Buddy\u2019s Home Furnishings, has\u00a0filed for Ch. 11 bankruptcy protection<\/a>\u00a0in U.S. Bankruptcy Court for the Northern District of Texas.<\/p>\n Owned and operated by Ian Macdonald (90%) and Aaron Macdonald (10%), Buddy Mac (BMH) comprised 82 Buddy\u2019s locations across eight states\u00a0in April this year<\/a>. When it filed for Ch. 11 on Thursday, the count was down to 47 locations in Texas,\u00a0Arkansas, Florida, Illinois, Kansas, Missouri, New Mexico and Oklahoma.\u00a0<\/p>\n Cited for the bankruptcy\u2019s reasons in Ian Macdonald\u2019s declaration include the financial distress associated with Franchise Group, which filed its own Ch. 11 in November last year. The FRG bankruptcy made getting credit from suppliers more difficult, according to the declaration, which caused inventory shortages and, therefore, a drag on sales.\u00a0<\/p>\n Also cited were litigation with the franchisor, FRG\u2019s Buddy\u2019s Newco division, over its franchise agreement, in particular that agreement\u2019s non-compete clause, as well as the acquisition of a $12.6 million loan by a group that Buddy Mac claims is unwilling to negotiate.<\/p>\n Macdonald also states that the filing is intended to stop foreclosure proceedings on Buddy Mac properties across several states by that same group, Phonix RBS.\u00a0<\/p>\n The largest unsecured creditors listed are Buddy\u2019s Newco, the franchisor, owed over $1 million; O\u2019Rourke Sales Company, over $1 million; C&L Supply, over $919,000; Leopard Mobility, over $314,000; Progressive Furniture., over $211,000; Noctova Solutions RTO Sleep, over $134,000; and Womble Bond Dickenson, over $80,000.<\/p>\n FRG funk<\/p>\n Once FRG filed for bankruptcy late last year, \u201cAlmost immediately, [Buddy Mac] began experiencing serious difficulties in keeping its stores stocked with inventory, because suppliers associated the Company with the Buddy\u2019s franchise and stopped extending credit,\u201d MacDonald stated in his declaration supporting the bankruptcy filing, hurting revenues despite the company maintaining its own supplier agreements independent of the franchisor.<\/p>\n Buddy Mac had been thriving, generating over $73 million in revenue in 2022 and $74 million in 2023, according to the declaration, a track record that culminated in BMH being named Buddy\u2019s franchisee of the year in 2022.\u00a0<\/p>\n The last straw, however, appeared to be the refusal by lender INTRUST Bank in Wichita, Kansas to renegotiate the terms of its $11.9 million loan to Buddy Mac when it matured in August 2025. INTRUST refused to renew despite a previously positive relationship, MacDonald attests, leading him to believe that INTRUST became unwilling to take on new exposure in the RTO industry following FRG\u2019s highly publicized collapse.<\/p>\n As we reported in November, just a few days after the loan\u2019s maturity, INTRUST sold the debt to Phonix RBS, which listed its chairman as Brent Turner, who is a principal also at AF Newco and once was CEO at Liberty Tax, the company that became FRG in 2019. Turner and fellow former Liberty Tax executive Michael Piper launched AF Newco in January to buy 31 American Freight stores.<\/p>\n