Buddy Mac Holdings: Franchisor Collapse Triggers Chapter 11

Buddy Mac Holdings, LLC, the largest franchisee of Buddy's Home Furnishings with 84 rent-to-own stores across eight states, filed for chapter 11 bankruptcy protection on December 4, 2025, in the U.S. Bankruptcy Court for the Northern District of Texas alongside 49 affiliated entities. The DeSoto, Texas-based company, which generated over $74 million in revenue in 2023, operated 47 stores at filing, down from 84.

The bankruptcy followed Franchise Group's November 2024 chapter 11 filing, which led suppliers to cut credit lines to Buddy Mac despite the franchisee operating under independent supply agreements. When secured lender INTRUST Bank sold the company's $12.6 million loan to Phonix RBS, LLC in September 2025, foreclosure actions and receivership litigation proceeded, and the company filed days before a scheduled foreclosure sale. The case includes contested cash collateral proceedings, with Phonix objecting to the Debtors' use of its collateral, and a $38 million counterclaim Buddy Mac has asserted against the franchisor for alleged breaches of exclusive territory rights.

Debtor(s)	Buddy Mac Holdings, LLC (50 jointly administered entities)
Court	U.S. Bankruptcy Court, Northern District of Texas (Fort Worth Division)
Case Number	25-34839
Judge	Hon. Michelle V. Larson
Petition Date	December 4, 2025 (Holdings + 45 affiliates); December 1, 2025 (4 affiliates)
Employees	~230 (~159 at debtor entities)
Claims Agent	Epiq Corporate Restructuring, LLC

Company Background and History

Franchise system. Buddy's Home Furnishings was founded in 1961 as Buddy's Bi-Rite in Tampa, Florida, becoming an early participant in the rent-to-own furniture and appliance sector. The company provides rent-to-own furniture, appliances, and electronics to consumers who make periodic payments with an option to pay the full amount or return the product at any time. This business model serves customers who lack access to conventional credit or prefer flexible payment options for essential household items.

Buddy's adopted a franchise model in 2009, implementing a strategy of acquiring smaller rent-to-own operators, converting their stores to the Buddy's brand, and selling franchises to multi-unit operators. This acquisition-and-conversion approach supported expansion while limiting capital requirements. Franchise Group acquired Buddy's in 2019 and expanded the brand's franchise development program, integrating it into FRG's portfolio of retail franchise concepts.

By the time of Buddy Mac's bankruptcy, Buddy's operated over 300 franchise and corporate locations nationwide. According to the Buddy's franchising website, the top 25% of stores average $1.45 million in annual gross sales, with 91% of franchisees operating as multi-unit owners averaging approximately 10 units each. The franchise model features a 0% royalty fee for the first six months, designed to help new franchisees establish profitability before recurring fees begin.

Buddy Mac's growth. Buddy Mac Holdings began operations in 2014 as a Buddy's franchisee and grew over the following decade. The company is 90% owned by Ian MacDonald, who serves as President and CEO, with Aaron MacDonald holding the remaining 10% interest. The company headquarters is located at 400 East Centre Park Blvd in DeSoto, Texas, a suburb of Dallas.

Key milestones:

In 2021, Buddy Mac opened eight new franchises across Texas and Oklahoma while simultaneously acquiring the Show Me Rent to Own portfolio. At that time, Buddy Mac was the second-largest multi-unit franchise operator in the Buddy's system, and later became the largest franchisee.

Operations at filing. According to the MacDonald Declaration, Buddy Mac's operations had contracted from their 2022 peak at the time of the bankruptcy filing:

The corporate structure includes Buddy Mac Holdings, LLC as the parent entity, with BMH RTO, LLC serving as the holding company for 43 operating subsidiaries (the "RTO Subsidiaries"). The structure includes a non-debtor employer entity, which created complications during first day proceedings regarding the authorization of prepetition wage payments.

Path to Bankruptcy: The Franchise Group Collapse

Franchise Group background. Buddy Mac's distress followed the November 3, 2024 chapter 11 filing of Franchise Group, Inc., the parent company of the Buddy's franchisor. FRG assembled its portfolio through acquisitions between 2019 and 2021. According to Wikipedia's account of Franchise Group's history:

The August 2023 leveraged buyout that took FRG private for $2.6 billion, led by Brian Kahn and facilitated by B. Riley Financial, preceded the November 2024 filing. Court documents from FRG's Delaware bankruptcy indicated the company owed approximately $2 billion to creditors, with about $1 billion owed to first-lien lenders alone.

Brian Kahn. Kahn stepped down as CEO in January 2024, months after completing the leveraged buyout. His departure coincided with a Department of Justice investigation into his activities at Prophecy Asset Management, a hedge fund where Kahn had secretly acted as the primary trader.

Kahn ultimately pleaded guilty to participating in a years-long scheme that defrauded investors of approximately $294-$300 million. According to the charges, Kahn controlled nearly 80% of Prophecy's $1 billion in leveraged capital between 2017 and early 2020, concealing mounting losses through forged documents, fabricated collateral, and misleading statements.

B. Riley Financial faces ongoing litigation stemming from its involvement with Kahn. A court found that B. Riley's co-founder acted with "deliberate recklessness" given his close relationship with Kahn, allowing investor fraud claims to proceed against the firm that had backed FRG in the $2.8 billion take-private transaction.

FRG restructuring outcomes. FRG's chapter 11 case concluded with the company emerging from bankruptcy on June 6, 2025 after the Plan of Reorganization was confirmed on June 2, 2025. The restructuring resulted in different outcomes for FRG's portfolio companies:

American Freight. American Freight closed all 328 stores during the bankruptcy proceeding, with liquidation sales beginning November 5, 2024 and all locations closing by December 31, 2024. According to FRG's chief restructuring officer, the chain "struggled due to sustained inflation and macroeconomic challenges facing the large durable goods sector," and its limited profitable locations "could not support the rightsizing of its business." Hilco Consumer-Retail oversaw the liquidation process.

Vitamin Shoppe. The Vitamin Shoppe was sold for $193.5 million to private equity firms Kingswood Capital Management and Performance Investment Partners. The acquisition was completed in May 2025, with former CEO Sharon Leite returning to lead the company under new ownership.

Pet Supplies Plus and Buddy's. Pet Supplies Plus and Buddy's Home Furnishings continued operations under newly formed parent entity Fusion Parent, LLC. Both businesses maintained independent management teams post-emergence, with a reconstituted board including Chris Rowland (CEO of Pet Supplies Plus), Chuck Rubin, David Barr, Susan Lintonsmith, and Tim Johnson.

Supplier credit tightening. Despite Buddy Mac operating under independent supply agreements separate from FRG, the franchisor's bankruptcy led suppliers to stop extending credit to Buddy Mac. Suppliers that had previously extended credit required cash on delivery or prepayment for inventory.

The downstream effects included:

• Credit Termination: Suppliers stopped extending credit terms to Buddy Mac, requiring cash on delivery or prepayment for inventory
• Inventory Shortages: Unable to finance adequate inventory purchases, store shelves became depleted
• Revenue Decline: Without sufficient inventory to display and rent, customer traffic and revenues declined
• Store Closures: Underperforming locations were closed as the business contracted from 84 to 47 stores

As Franchise Help explains, a bankrupt franchisor is likely to cease at least some level of performance of system-wide services and obligations, requiring franchisees to conduct their own marketing, locate alternative suppliers, or substitute products and services. In Buddy Mac's case, suppliers withdrew credit after the franchisor's bankruptcy despite independent supply agreements.

Debt Structure and the Phonix RBS Acquisition

INTRUST Bank loan. According to the CRO Declaration, the secured debt originated in December 2019 when BMH RTO, LLC obtained a loan facility from INTRUST Bank, N.A., a commercial bank based in Wichita, Kansas. INTRUST operates primarily in Kansas, Oklahoma, and Arkansas—the same geographic footprint as many Buddy Mac locations.

The loan facility was amended multiple times:

The loan matured on August 31, 2025. Bankruptcy filings state the company could not refinance before maturity.

Phonix RBS acquisition. Just two days after the loan matured on August 31, 2025, INTRUST sold the RTO Loan to Phonix RBS, LLC pursuant to a Loan Sale Agreement.

Phonix holds first-priority liens on substantially all assets of the RTO Debtors, including:

• Inventory (furniture, appliances, electronics)
• Accounts receivable
• Equipment
• Pledged real properties in Tyler, Texas; Caruthersville, Missouri; and Marion, Illinois

Upon acquiring the loan, Phonix commenced enforcement actions:

The chapter 11 filing occurred in early December 2025 after a foreclosure sale was scheduled for December 2, 2025.

At filing, the capital structure consisted of Phonix's ~$12.6 million secured debt (accruing interest at ~$3,326.21/day), ~$3.4 million in subordinated debentures and convertible notes issued through multiple private investment offerings between 2016 and the petition date, ~$3.3 million in trade payables, and ~$643,000 in disputed franchisor obligations—totaling approximately $20+ million in estimated liabilities.

Traditional Chapter 11 Process

Contested cash collateral. The Buddy Mac case has been contested from the first day hearing. Phonix RBS filed its objection to the Debtors' cash collateral motion on December 7, 2025, one day before the scheduled first day hearing.

Phonix's objections. Phonix's objection characterized the bankruptcy filing as a "delaying tactic" following collapsed settlement negotiations. The lender raised several substantive objections:

• No Consent: Phonix explicitly stated it does not consent to use of its cash collateral
• No Interest Payments: The proposed budget included no adequate protection payments (interest) to Phonix
• No Equity Cushion: Debtors failed to provide evidence of any equity cushion in the collateral
• Carve-Out Dispute: The $250,000 professional fee carve-out was "imposed without negotiation"
• Cure Mechanism: The proposed default/cure procedures would "handcuff Phonix for a critical month"

During the first day hearing, Phonix's counsel emphasized: "There's no agreement with Phonix. Phonix does not consent to the use of its cash collateral." The lender requested only a two-week interim cash collateral period, versus the five weeks proposed by the Debtors.

Adequate protection package. The Debtors proposed the following adequate protection package:

• Replacement liens on all post-petition assets
• Super-priority administrative claims under Section 507(b)
• Inventory purchases of $300,000-$350,000 to maintain collateral position
• Weekly budget-to-actual reporting (due Wednesday of following week)
• 15% line item variance covenant
• 10% accumulated variance covenant

The Debtors argued that maintaining inventory levels was itself a form of adequate protection, as depleted inventory would diminish the value of Phonix's collateral position. Judge Larson agreed to a five-week interim period, rejecting Phonix's request for a shortened two-week period.

Interim cash collateral order. The Court entered the Interim Cash Collateral Order on December 11, 2025, authorizing use of cash collateral for a five-week period:

Key order terms. Five-week cash collateral usage period (interim)

• Adequate protection package to Phonix (replacement liens, super-priority claims)
• Reporting requirements (due Wednesday of following week)
• Budget variance covenants (15% line item / 10% accumulated)
• Challenge period provisions deferred to final order
• Intercompany transaction protections and reporting
• Final hearing set for January 5, 2026

The U.S. Trustee participated in the first day proceedings, insisting on a carve-out for UST fees and pushing any waiver or release provisions to the final hearing.

Case timeline.

First day relief. The Court granted the following first day relief:

The Prepetition Wages Order was granted on a final basis despite Phonix's objection regarding the non-debtor employer structure. The Court found practical justification given the likelihood of Section 507 priority claims if employees were not paid.

Professional retentions.

The Franchisor Dispute and $38 Million Counterclaim

Territory violation claims. The case includes a dispute with the franchisor over alleged breaches of exclusive territory rights. Buddy Mac leads a group of Buddy's franchisees asserting that Franchise Group's ownership of American Freight and Badcock violated non-compete provisions embedded in their franchise agreements.

The franchisees' core claims include:

• Franchise agreements delineate exclusive territory with a radius of approximately 3 miles
• American Freight opened stores within Buddy Mac's exclusive territories after FRG acquired the chain in 2020
• This constituted a direct breach of the exclusive territory rights granted under the franchise agreements
• The franchisees competed against a sister company owned by their own franchisor

Buddy Mac is not alone in asserting territory violation claims. A coalition of franchisees—including Greene and Greene (78 locations), Pentex RTO (73), BB BHF (62), A-Team (10), and Reddi Rents Iowa (5), together with Buddy Mac's 47 locations—represents approximately 275 franchise locations.

Litigation posture. The legal dispute between Buddy Mac and the franchisor involves competing claims:

The franchisor filed suit against Buddy Mac in Florida on November 6, 2025. Buddy Mac disputes the franchisor's claims and asserts that its counterclaims exceed the demands made by the franchisor.

Industry Context: Rent-to-Own Sector Challenges

Market overview. According to GlobeNewswire market research, the domestic market was valued at $11.95 billion in 2023 and is projected to exceed $18.1 billion by 2029, driven by e-commerce channel expansion and consumers facing restricted access to conventional credit.

On a global scale, the rent-to-own market reached $100.92 billion in 2024 and is expected to reach $151.65 billion by 2033, representing a compound annual growth rate of 4.63%. North America represents more than 40% of global rent-to-own revenue, with a market size of approximately $37.4 billion in 2024.

Industry reports cite challenges including:

• High Total Cost of Ownership: Rent-to-own customers pay more over time than traditional purchasers
• Customer Security Concerns: Personal and financial data handling presents ongoing risks
• Tight Profit Margins: Operators face pressure from both acquisition costs and default rates
• Economic Uncertainty: Inflation and rising cost of living affect the core customer demographic
• Credit Access Competition: Expanding alternative credit options create competitive pressure

Sector distress (2024-2025). Buddy Mac's bankruptcy occurred during a period when multiple operators filed bankruptcy or liquidated during 2024-2025:

Reported challenges in the sector include:

• Housing Market Slowdown: Fewer home sales translate directly to fewer furniture purchases
• Sustained Inflation: Rising labor and product costs squeezed margins throughout the supply chain
• High Interest Rates: Prolonged elevated rates reduced consumer willingness to finance large purchases
• E-Commerce Competition: Walmart and Amazon continue to pressure mid-market furniture retailers
• Franchise System Fragility: Operator distress can cascade throughout interconnected franchise networks

Competitive landscape. The U.S. rent-to-own industry is dominated by two major players. Rent-A-Center holds approximately 31.7% market share. The company acquired financial technology firm Brigit in early 2025.

Aaron's, the other major national competitor, was acquired by IQVentures in early 2025. The declaration in Buddy Mac's case noted that both Aaron's and American Freight faced liquidity challenges during this period.

The Association of Progressive Rental Organizations (APRO), the international voice for the lease-purchase industry since 1980, represents approximately 350 member companies operating approximately 10,400 stores across all 50 states, Mexico, and Canada. The association advocates before Congress, the IRS, state legislatures, courts, media, and the public on behalf of the rent-to-own industry.

Frequently Asked Questions

What is Buddy Mac Holdings?

Buddy Mac Holdings, LLC is a rent-to-own furniture and appliance retailer that operated as the largest franchisee of Buddy's Home Furnishings, with 47 stores across Arkansas, Florida, Illinois, Kansas, Missouri, New Mexico, Oklahoma, and Texas at the time of filing. The company began operations in 2014 and at its peak operated 84 locations, generating over $74 million in annual revenue. The business is 90% owned by Ian MacDonald, who serves as President and CEO.

Why did Buddy Mac file for bankruptcy?

The bankruptcy followed franchisor Franchise Group's November 2024 chapter 11 filing. Despite operating under independent supply agreements, suppliers stopped extending credit to Buddy Mac after the franchisor's distress became public. The company's secured loan matured in August 2025, and bankruptcy filings state the company could not refinance before maturity. INTRUST Bank sold the $12.6 million debt to Phonix RBS, LLC, which pursued foreclosure and receivership actions, and Buddy Mac filed days before a scheduled foreclosure sale.

What is the relationship between Buddy Mac and Franchise Group's bankruptcy?

Franchise Group, Inc. owned the Buddy's Home Furnishings franchisor. When FRG filed chapter 11 in November 2024 carrying approximately $2 billion in debt, suppliers withdrew credit and inventory purchasing became difficult. Bankruptcy filings state the company could not refinance the loan before maturity.

What happened to Buddy Mac's employees?

The company employed approximately 230 workers (159 at Debtor entities) at the time of filing. The Court authorized payment of approximately $132,278.22 in prepetition employee wages via the Prepetition Wages Order, ensuring workers received compensation for services rendered before the bankruptcy. Monthly payroll obligations are approximately $337,028 plus $95,567 in benefits, totaling approximately $432,595 per month.

What is the $38 million counterclaim about?

Buddy Mac has asserted a counterclaim against the franchisor for approximately $38 million, alleging that Franchise Group breached exclusive territory rights by allowing American Freight (another FRG portfolio company) to operate stores within Buddy Mac's exclusive franchise territories. Of this amount, approximately $34 million relates specifically to territory violation claims. The franchisor had sued Buddy Mac for approximately $643,000 in allegedly unpaid franchise obligations; Buddy Mac disputes these claims and asserts its counterclaims exceed the franchisor's demands.

Is Phonix RBS cooperating with the bankruptcy?

Phonix RBS has contested cash collateral usage from day one, filing objections arguing the Debtors failed to provide adequate protection, there is no equity cushion in the collateral, and characterizing the bankruptcy as a "delaying tactic" after collapsed settlement negotiations. The Court approved only a five-week interim cash collateral period, with a final hearing scheduled for January 5, 2026.

How many Buddy's franchisees are involved in territory disputes?

Buddy Mac is part of a coalition of franchisees asserting territory violation claims against the franchisor. The coalition includes Greene and Greene (78 franchises), Pentex RTO (73 franchises), BB BHF (62 franchises), A-Team (10 franchises), and Reddi Rents Iowa (5 franchises). Together with Buddy Mac's 47 locations, the coalition represents approximately 275 franchise locations.

What happened to American Freight?

American Freight, which was also owned by Franchise Group, liquidated all 328 stores during FRG's chapter 11 bankruptcy, with all locations closing by December 31, 2024. Hilco Consumer-Retail oversaw the liquidation process.

How does Buddy Mac's case fit into broader retail distress?

The rent-to-own and furniture retail sectors saw multiple bankruptcies in 2024-2025, including The RoomPlace, Conn's HomePlus, Badcock Furniture, and Franchise Group. Industry challenges include housing market slowdown reducing furniture demand, sustained inflation increasing costs, prolonged high interest rates discouraging consumer borrowing, and intensifying e-commerce competition from Walmart and Amazon.

What is the outlook for Buddy Mac's bankruptcy case?

A final cash collateral hearing is scheduled for January 5, 2026. The case includes contested cash collateral proceedings and a ~$38 million counterclaim against the franchisor.

Who is the claims agent for Buddy Mac Holdings?

Epiq Corporate Restructuring, LLC is the claims and noticing agent for the Buddy Mac Holdings bankruptcy cases. Stakeholders may visit the Epiq case page or call Epiq's hotline for filing deadlines, proof-of-claim forms, and docket updates.

For more chapter 11 case coverage, visit the ElevenFlo bankruptcy blog.