Out West’s Chapter 11: What Happens to Franchise Agreements and Commercial Leases?

A “stalking horse” is a proposed initial bidder whose offer establishes a starting point for the sale process. The arrangement may give that bidder certain negotiated protections, but it does not make the bidder the owner. A sale of estate property outside the ordinary course of business proceeds under 11 U.S.C. § 363(b), which involves notice and an opportunity for a hearing under bankruptcy court supervision. ²

Until the court enters the corresponding orders, the bidder designation, the bidding procedures, the financing, and the sale itself remain proposals. Competing bidders may submit higher or otherwise better offers, and the court supervises that process before any sale is approved. Describing any of these steps as approved requires the order that approves it.

Franchise agreements and commercial leases are often “executory contracts” or “unexpired leases” under the Bankruptcy Code. Under 11 U.S.C. § 365(a), a debtor’s assumption or rejection of qualifying contracts and leases is subject to court approval and statutory limitations. The filing itself neither preserves nor terminates them. ³

Section 365(e) generally restricts a counterparty from terminating or modifying an executory contract solely because of the debtor’s insolvency or bankruptcy filing. That restriction has exceptions, and it does not revive a contract properly terminated before the filing under applicable law. Not every agreement survives, and not every termination is prohibited. ³

A buyer of assets does not automatically acquire the seller’s contracts. When a debtor seeks to assume and assign a qualifying contract or lease, § 365(b) generally requires cure, or adequate assurance of prompt cure, of qualifying defaults, compensation for qualifying default-related losses, and adequate assurance of future performance. ³

Assignment raises separate questions under §§ 365(c) and (f), including whether applicable law excuses a counterparty from accepting performance from someone else. Franchise agreements may involve brand standards and consent rights, so they are not freely transferable, and the terms of the particular agreement and the nature of any default both matter. A proposed buyer’s agreement to assume specified obligations does not mean it assumes every debt. ³

For landlords, franchisors, vendors, and other counterparties, the useful steps are concrete. Identify the actual contracting entity, which may differ from the brand name on the door. Review the operative agreements and any default or termination notices. Distinguish proposed transaction terms in a securities filing from orders the bankruptcy court has actually entered, and follow notices in the bankruptcy case itself, which may carry deadlines affecting contract and lease rights.

This account reflects the November 2, 2026 disclosure reviewed during preparation; later filings, competing bids, or court orders may change it. This article does not predict creditor recoveries, store closures, or the identity of any final buyer.