by Pinboarding the FRG bankruptcy continues …
In the last column, we dug through some of the 1,200 or so court filings in the Franchise Group bankruptcy to add a few more pushpins to the “crazy wall.” One of the interesting finds was that no fewer than six groups of Buddy’s Home Furnishings stores have made claims of “incurable” defaults of their franchise agreements specific to the noncompete language in those agreements, with most of them filed at the end of January.
The groups are Buddy Mac Holdings (82 franchises), Greene and Greene (78 franchises), Pentex RTO (73 franchises), BB BHF (62 franchises), A-Team Leasing (10 franchises) and Reddi Rents Iowa (five franchises). Because of the FRG dumpster fire, these groups have to prepay for their inventory and deal with the stink that the FRG Chapter 11 has caused, among many other problems. It hasn’t been easy, and all of this is on top of the fundamentals challenging all of retail (inflation, sluggish housing starts, a White House on meth, etc.). In fact, Reddi Rents has already succumbed, filing bankruptcy last April.
Most of these groups we know. Buddy Mac Holdings is a dye-in-the-wool furniture industry group led by Ian MacDonald. Mike and Patrick Greene are also big players in the PODS moving and storage container business. (PODS pods are ubiquitous on my college campus on move-out day in May.) Patrick Greene was the Buddy’s franchisee of the year in 2021.
But who the heck is BB BHF? Even the group’s filing is a bit unclear as to just who they are. The filing claims that the defaults relating to Badcock stores in the group’s marketing territories have resulted in “material incurable breaches of noncompetition provisions that are essential elements of BHF bargained-for rights under the Franchise Agreements” (Docket 879).
At 62 franchises, BB BHF “appears to be” the third largest of the groups, the quoted qualifier from BB’s own filing, and it operates Buddy’s stores in 10 Southeastern states. BB BHF’s 10-year franchise agreement with FRG was signed in November 2020, when Bebe Stores acquired 47 Buddy’s locations. The agreement is a 58-page contract that is included in the filing as Exhibit A.
The “appears to be” is a good call, because the name of this legal entity changes throughout the filing. Sometimes it’s BB BHF, sometimes BHF, sometimes bb BHF and other times bb BAF. Whether any of this matters legally, I don’t know, but it’s confusing and probably merely sloppy.
Signing that franchise agreement in November 2020 for “bb BHF” was Gary Bosch, who is listed as president and secretary, with an address for notices of 552 Wisconsin St., San Francisco. I’m including here a photo of 552 Wisconsin Street courtesy of Google Earth.
Do you believe this is a corporate headquarters for Bebe Stores and BB BHF’s 62 Buddy’s stores? No, I don’t either.
Manny the front man
Signing as guarantor of the agreement, and this is where it gets really interesting, is Manny Mashouf, who also lists the Wisconsin street address for notices, even though he lives in Los Angeles, and who states the percentage of ownership at 100%. Mashouf a 100% owner of BB BHF? No, not by a long shot.
Not mentioned anywhere in either the filing or the exhibits are Bryant Riley, B. Riley Financial or any of the many BRF subsidiaries, which is intriguing, because even an amateur doing financial forensics quickly discovers that B. Riley has a majority ownership stake in Bebe, the owner at least on paper of BB BHF. Even Bebe’s own financial statements acknowledge that B. Riley “has the ability to influence certain actions for day-to-day operations,” which is from an SEC filing dated July 2022.
So, who is Manny Mashouf? He was 82 when he signed the FRG franchise agreement, if Wikipedia and IMDB have his bio correct. This makes him 86 today. That Wikipedia entry credits Mashouf for founding Bebe Stores, a retail women’s clothing chain. Born in Iran, he started his own fashion line in 1976 and 30 years later he partnered with two others to start up a motion picture production company, Argonaut Pictures.
The Wikipedia entry has Mashouf selling a 59% stake in Bebe Stores in 2015, two years before the chain liquidated and rapidly began closing its 170 or so stores. These closures occurred in a month, and to effect this transition, Bebe “retained B. Riley & Co. as its financial advisor,” according to its 2017 press release.
The Wikipedia entry doesn’t mention furniture in any context, making it a bit quizzical that Mashouf was quoted on the merits of the Bebe acquisition of 47 Buddy’s Home Furnishings stores for $35 million in November 2020.
“The acquired Buddy’s stores have a strong and consistent record of free cash flow generation across multiple market cycles,” read the quote attributed to Mashouf but likely written by someone else. “The operational infrastructure being developed for this transaction can be leveraged to support additional acquisitions of high free cash flow entities in the future.” Whatever that means.
All in the family
According to the release, the acquisition was funded by a $1.5 million primary share purchase by B. Riley Financial and a $22 million loan from Milfam. In public filings by Bebe, two employees of B. Riley, as well as Neil Subin, managing member of Milfam, a sometime business partner of B. Riley, are listed as members of Bebe’s board. Milfam and B. Riley worked together to form Spartacus Acquisition Corp. in 2021, for example.
According to B. Riley Financial’s very late 10Qs for the second and third quarters 2024, filings made earlier this year, the company stated that it had a 47.5% ownership stake in Bebe as of September 2023, but that in October, B. Riley (BRF) purchased 3.7 million more shares of Bebe to push its ownership stake to 76%. The filing repeats as a sort of chorus or refrain the phrase, “bebe, in which we acquired a controlling interest in the fourth quarter of 2023.”
So, back to the BB BHF complaint with respect to its franchise agreement, essentially this is BRF claiming that a deal brokered and backed by BRF (FRG’s acquisition of Badcock) caused incurable defaults of an agreement with BRF-controlled stores. Just see if you can stop your own head from spinning.
BB BHF “has been materially damaged by the Franchisor’s breaches of the Franchise Agreements,” the filing states. “These breaches continued for years and are continuing.”
Legal schizophrenia?
Specifically, BB BHF states that in November 2021, FRG acquired W.S. Badcock, which was a deal perhaps impossible without BRF and its founding co-CEO Bryant Riley. And yet, in 2025, in the filing, BB BHF claims that Badcock Home Furnishings stores near its Buddy’s stores “constitute Competitive Businesses as defined by the Franchise Agreement, resulting in a breach of Section 2(d)(ii) of the Franchise Agreement, which prohibited the Franchisor or its affiliates from operating any Competitive Business within a BHF Territory.”
I don’t know whether to be impressed by the bravado or disgusted by the hypocrisy.
The objection lists a dozen Badcock stores directly competing with BB BHF stores in Alabama, North Carolina, Tennessee and South Carolina. The rest of the filing is essentially a cut-and-paste of the others, all of which follow closely the original claim of incurable defaults filed by MMS, a group led by Joe Gazzo, the president of Buddy’s Home Furnishings corporate from 2003 to 2015, in November 2022. This makes the non-MMS incurability claims joinders, the legal equivalent of, “What they said!”
The MMS suit was settled in May 2024. FRG filed for bankruptcy in November 2024.
So, to recap, BRF helps Brian Kahn found FRG by consolidating Liberty Tax and Buddy’s Home Furnishings. BRF brokers the deal that enables Kahn to take the FRG private, an entity with a board of two, Kahn and Riley. BRF becomes FRG’s biggest lender. BRF agrees to acquire $400 million in Badcock receivables to allow FRG to acquire Badcock, and BRF agrees to take on more receivables going forward. BRF then advises on the sale of Badcock to Conn’s. When Conn’s files for Chapter 11, who is brought on as advisers? Why, BRF, of course. And now, in 2025, BRF-controlled BB BHF/Bebe/bb BHF/BB BAF is suing FRG for violating its franchise agreement specific to the Buddy’s locations, an agreement that went into effect five years ago?
Fate was working its ass off when it got all these guys together. And fate will have to keep on working if this FRG bankruptcy is ever to be resolved, because the only winners in this clusterFbomb are the lawyers. In the FRG hearing two weeks ago, DIP counsel said, “Our proposal would be to freeze all of the pending litigation, just given the insane amounts of [legal] cost that we’re incurring.” The 1L lenders said through their counsel that those lenders want a settlement “purely to avoid future litigation spend.”
That’s a lawyer saying the lawyers are costing too much, which is . . . atypical.
We’ll give that ad hoc group of lenders’ counsel the last word here, because they are wise: “Each day, the utility of settlement for our clients goes down, the value that we would give goes down and, inherently, the likelihood of a settlement goes down.”
This attorney is right: It’s all quite a downer.
Editor’s note: The author has no financial stake or interest in any of the companies mentioned here, nor in any of their competitors.
