In today’s economy, retail businesses either adapt and grow or struggle and disappear. The local malls of our youth certainly look much different today. Stores that once dominated the market are gone, and certain malls have been abandoned altogether. Other retailers, however, have found a niche, are on trend, and are thriving.

The same is true with restaurants – some of our favorite national chains are extinct, while others have rebranded and live to see another day. New chains and food concepts are popping up everywhere. Some kill it, others get killed.

How can this volatility be explained?

It is easy to blame the American consumer and retailers’ shifting business models for accommodating them. Our needs and shopping habits have changed, and our loyalty is hard to gain but easy to lose. Deloitte’s 2026 Retail Industry Global Outlook suggests that the retail industry has changed, is changing, and will continue to change. Consumers want value and convenience. Retailers want customer loyalty and an enhanced overall customer experience. And, just like other businesses, those retailers who win the AI race will benefit the most – from marketing, pricing, and customer service to supply chain enhancements, social media strategy, and cybersecurity. As Bain & Company recently said, before we know it, “algorithms and robots will run” retail businesses.

Tariff-driven supply chain disruptions and unsteady global markets are also to blame. We are all aware of how these factors can impact the survival of a consumer-facing business.

Some buyers may see these risks and run in the other direction. For PE (private equity) funds, though, the calculus is typically different. PE funds have proven their ability to take on businesses that have debt, are illiquid, or are in bankruptcy proceedings and turn them into cash-flow opportunities.

Volatility in the retail and food industries – driven by shifting consumer preferences, supply chain disruptions, and technological change – creates attractive PE acquisition targets, especially among distressed or asset-light chains suited to restructuring and leveraged buyouts. But beneath these deals lie legal risks embedded in lease portfolios, employment practices, data privacy exposure, and post-closing disputes that can erode value quickly if not identified early.

Early identification of these risks can help mitigate them

• Valuation. When the target is distressed or in transition, valuation methodology must be sharp. Analysis of normalized EBITDA, the application of industry-specific multiples, and adequate inventory and working capital adjustments are necessary to bridge valuation gaps. The assumptions underlying this methodology should be stress-tested to determine whether they will hold up in a dispute.
• Post-closing capital adjustments. Valuation in retail is often a moving target. Working capital arbitrations – driven by inventory valuation, markdown reserves, shrinkage, and seasonal timing – are the most litigated issue in retail PE deals. Careful review of the purchase agreement at the drafting stage can identify specific ambiguities that may be exploited in those proceedings.
• Material adverse change (MAC) clauses. A meaningful drop in metrics between signing and closing can trigger a MAC dispute, where the buyer wants to walk and the seller wants to enforce. For buyers, these are difficult cases to win, but under the right facts, they are winnable. Understanding where the line is and drafting accordingly is essential.
• Earnout disputes. The metrics used to measure earnouts (same-store sales, EBITDA, revenue growth) are directly affected by post-closing decisions the buyer controls. Sellers routinely argue that the buyer’s operational choices suppressed the earnout metrics. These cases are expensive and hard to resolve without full arbitration – and carefully drafted earnout covenants are essential to enforcement.
• Data privacy and cybersecurity. CPRA and CIPA are only the beginning; a growing patchwork of state privacy laws is generating class actions across the country. In the retail and food industries, with so much business occurring online and on apps, a data breach or privacy class action post-acquisition can be catastrophic if proper diligence was not done on the target’s data security posture. Representations, warranties, and indemnities deserve careful review.
• Consumer protection. The FTC has sharpened its focus on dynamic pricing algorithms, subscription auto-renewal structures that make cancellation deliberately difficult, and misleading advertising. State attorneys general are busy, too. An enforcement action post-close will increase legal costs and undermine consumer trust.
• Real estate. Assignment and subletting provisions, exclusivity clauses, and co-tenancy clauses are routinely litigated – and the counterparties are often sophisticated landlords. Co-tenancy rights require active enforcement. Understanding what arguments are coming and what leverage actually exists is critical.
• Employment. Shutting down physical locations or conducting layoffs triggers WARN Act considerations. Other risks include restrictive covenant litigation, immigration compliance, wage and hour class actions, and worker misclassification in gig-adjacent delivery and fulfillment roles.
• Distressed retail. Section 363 sales are marketed as clean acquisitions free of pre-existing claims, but they are not bulletproof in retail. Employment and product liability claims have followed buyers through bankruptcy sales.

In all, retail and food deals move fast, but the legal risks move faster. PE funds, however, are uniquely positioned to navigate these challenges – with the operational expertise, financial flexibility, and deal discipline to identify risks early, structure protections at the drafting table, and turn complexity into competitive advantage.