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Vitamin Shoppe Owner Files for Chapter 11 Bankruptcy

The Franchise Group, which operates The Vitamin Shoppe, Pet Supplies Plus, and Buddy’s Home Furnishings, filed for Chapter 11 bankruptcy.
Vitamin Shoppe Owner Files for Chapter 11 Bankruptcy
  • Franchise Group Inc. filed for Chapter 11 bankruptcy to implement a debt restructuring agreement, which includes a debt-to-equity swap with senior lenders.
  • Due to challenging economic conditions, FRG will close American Freight, its durable goods chain, as part of the restructuring.
  • Investment firm B. Riley, which held a 31% stake in FRG, may have to eat a $120M loss following the bankruptcy, wiping out its equity.
Key Takeaways

As reported by Bisnow, Franchise Group Inc. (FRG), a leading retail operator of chains like The Vitamin Shoppe and Pet Supplies Plus, filed for Chapter 11 bankruptcy to implement a debt restructuring deal aimed at stabilizing the business.

The Bigger Picture

Under the plan, approximately 80% of FRG’s senior debt holders agreed to a debt-to-equity swap, effectively making them the company’s new owners. FRG received $250M in debtor-in-possession financing from its first-lien lenders, which will support the company’s restructuring operations.

Prior to the bankruptcy, FRG held secondary liability on real estate leases for Pet Supplies Plus and Vitamin Shoppe franchisees, with obligations totaling $34.4M and $30.2M. These liabilities add more pressure to the company, particularly if any franchisees face financial difficulties.

Part of FRG’s reorganization strategy involves winding down American Freight, its furniture and appliance brand. With over 370 locations, American Freight has struggled amid persistent inflation and flagging consumer spending on large durable goods. 

The company announced that liquidation sales for American Freight would begin Tuesday, while other brands, including The Vitamin Shoppe and Pet Supplies Plus, will continue to operate without interruption.

Wiped Out

The bankruptcy restructuring has taken a toll on B. Riley Financial (RILY), which acquired a 31% stake in FRG through a $2.8B buyout in 2023. The bankruptcy will lead to a $120M write-down for B. Riley, adding to earlier losses, as the firm previously reported impairments of up to $370M related to FRG. 

In an email to employees, B. Riley Chairman and co-CEO Bryant Riley admitted they would have to eat the loss, after declining consumer demand and fallout from a scandal involving FRG’s former CEO, Brian Kahn, who resigned last year amid a federal investigation into securities fraud.

Looking Ahead

As the Franchise Group navigates restructuring, B. Riley has taken steps to reduce its own exposure by liquidating over $500M in equity and debt assets and arranging sales of other portfolio investments. 

Riley emphasized a renewed focus on positioning B. Riley for future growth, although the firm’s investment in FRG has been fully written down due to the bankruptcy.

The Franchise Group’s case highlights the volatility facing consumer-focused retail brands in a challenging post-pandemic environment—and the risks investors often face when acquiring struggling companies.

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