Restaurant investors, lenders, and co-owners naturally prefer to focus on the upside of their investments—not the possibility that a restaurant might fail or a partnership might collapse. Yet these outcomes are common. Restaurants close, business relationships deteriorate, and stakeholders can suddenly find themselves facing difficult choices: absorb substantial losses, pursue bankruptcy, or initiate litigation against a business partner.
When these conflicts arise, restaurant stakeholders and their counsel have a powerful option within California’s court system: the receivership remedy. A court‑appointed restaurant receiver can step into a complex situation, assume operational control, and work to protect and maximize the value of the business for all parties.
If you represent a restaurant investor or co‑owner facing a toxic partnership, a partner’s criminal or negligent conduct, or a failing restaurant investment, seeking appointment of a restaurant receiver can streamline the process and help move the matter toward a fair, timely resolution.
The Role of a Court-Appointed Restaurant Receiver
Restaurant receivers serve as neutral, court-appointed fiduciaries who step into distressed situations to stabilize operations, preserve value, and protect the interests of all stakeholders. In practice, a restaurant receiver may take immediate control of the restaurant’s finances and cash flow, ensure that critical vendors and essential bills are paid, and renegotiate leases and contracts to reduce expenses or modify unfavorable terms.
The receiver can also sell nonessential assets and equipment to improve liquidity and pay down pressing debts, all while overseeing day-to-day operations such as staffing, scheduling, purchasing, and menu management to keep viable locations functioning.
Where necessary, the receiver may close underperforming locations, arrange refinancing to retire unsustainable debt, or facilitate the sale or acquisition of the restaurant by another company. By intervening in this way, a receiver can often pause foreclosures and collections activity long enough to evaluate options, implement a strategy, and move the matter toward an orderly, equitable resolution under the court’s supervision.
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 that make it impossible for the business to operate fairly or transparently. In a restaurant context, this might include situations where one partner is locking the other out of financial information, diverting funds, refusing to comply with court orders, or continuing to mismanage operations despite repeated warnings.
It can also arise where the parties are so deadlocked that they cannot agree on basic decisions—such as whether to sell, close, or restructure the business—or where allegations of fraud, self‑dealing, or criminal conduct make continued joint control untenable. In these high‑conflict scenarios, the court may turn to a neutral restaurant receiver to step in, take control of the business, and protect the restaurant’s assets while the underlying disputes are litigated or resolved.
Case Example: A Nine-Restaurant Portfolio in San Diego
Richardson “Red” Griswold has been appointed more than 300 times, and our team has experience with restaurants in receivership.
In 2023, the San Diego County Superior Court appointed Richardson “Red” Griswold as receiver to resolve a deadlocked, unresolvable dispute between a plaintiff and a defendant involving a portfolio of restaurant assets. The plaintiff had advanced substantial funds for the acquisition of a group of restaurants, but the defendant defaulted on the loan, putting the investment and ongoing operations at risk. To prevent further deterioration and protect the value of the portfolio, the plaintiff successfully obtained the appointment of a neutral receiver, empowering Red to step in, stabilize the restaurants, and preserve their assets and going‑concern value under the court’s supervision.
The court-authorized scope of the receiver’s powers included:
- Taking possession and control of the portfolio of nine restaurants across the United States, including all assets, books, and records
- Operating, or hiring qualified management to operate, each restaurant in the portfolio
- Entering into new contracts with vendors, food suppliers, and landlords as needed to stabilize operations
- Terminating existing contracts that were no longer viable or in the best interests of the estate
- Negotiating resolutions with existing creditors to address outstanding obligations and reduce ongoing pressure on the business
- Opening new bank accounts under the receiver’s exclusive control to safeguard and properly account for all income and expenses
- Determining the defendant’s overall financial position through review of records, accounts, and obligations
- Selling the restaurants, either individually or as a group, to maximize recovery and preserve going‑concern value
- Selling any other assets owned by the restaurant entities to generate funds for creditors and stakeholders
Ultimately, under the receiver’s oversight and the court’s supervision, the parties were able to work toward a settlement of their claims during the receivership.
Experts in Restaurant Receiverships
Contact us today if you think receivership might be a viable solution for the issue you're facing. Our team is available for a free evaluation or discovery call to determine what your next steps could be.
