Franchise Group, Owner of Vitamin Shoppe and Other Retail Chains, Seeks Bankruptcy Protection

Controlled Chaos: The Vitamin Shoppe and Friends Declare Bankruptcy

The Big Apple never sleeps, and neither do its financial dramas. In a startling turn of events, the powerhouses behind beloved brands like The Vitamin Shoppe, [Pet Supplies Plus](https://www.sec.gov/ix?doc=/Archives/edgar/data/0001528930/000152893023000016/frg-20230701.htm), and Buddy’s Home Furnishings have taken a dive into [Chapter 11 bankruptcy](https://www.bisnow.com/tags/chapter-11-bankruptcy). This dramatic maneuver is aimed at breathing life into the beleaguered company through a daring debt restructuring strategy.

### The Bold Move to Rebuild

Talk about guts. [Franchise Group Inc.](https://www.prnewswire.com/news-releases/franchise-group-reaches-agreement-with-first-lien-lenders-to-substantially-reduce-debt-enhance-liquidity-and-best-position-profitable-operating-businesses-for-sustainable-growth-302294886.html) has, as of Sunday, wrangled a restructuring support agreement with nearly 80% of its top-tier debt holders. Their innovative approach? A debt-to-equity swap that hands the reins of the company to its savvy lenders. The game plan includes a hefty $250 million debtor-in-possession financing, a safety net stitched to support over 3,000 stores crisscrossing the U.S.

### When the Chips Fell: The Rise and Fall

However, this restructuring comes at a cost; notably, [B. Riley Financial](https://www.bloomberg.com/news/articles/2024-11-04/b-riley-chairman-feels-personally-sick-as-frg-goes-bankrupt)’s investment has been effectively wiped out. Just a few months back, B. Riley masterminded a mammoth $2.8 billion buyout, snatching up 31% of FRG. But fast forward to now, and that investment’s value has plummeted—a result that’s leaving B. Riley’s top brass feeling particularly queasy.

Turmoil and Troubles

B. Riley’s chairman wrote in an SEC filing, “I feel personally sick about this result,” citing minimal chances of any equity recovery for stakeholders like themselves, employees, and wealth clients. Meanwhile, others—like [Brian Kahn](https://www.investmentnews.com/broker-dealers/franchise-group-ceo-steps-down-amid-sec-probe/248315) of the infamous Prophecy Asset Management—find themselves slumped in scandal. Notably, Riley points to these scandals as significant factors undermining FRG’s trajectory.

### Going, Going, Gone: The American Freight Downfall

Adding salt to the wound, [FRG will close doors at American Freight](https://www.bisnow.com/tags/bankruptcy), a once-flourishing brand with over 370 locales. The culprit, according to those in the know, is prolonged inflation paired with a shaky macroeconomic climate. Surely, shoppers won’t be flooding furniture aisles any time soon.

Shuffled Pieces: The Survival Plan

While American Freight gears up for its Tuesday closing parade, FRG is steadfast that its other brands remain unaffected. The franchised spots continue to stick to their established rhythm, operating under significant lease obligations exceeding $60 million. As articulated in a [regulatory filing](https://www.sec.gov/ix?doc=/Archives/edgar/data/0001528930/000152893023000016/frg-20230701.htm), FRG remains secondarily liable for these leases and faces potential financial liabilities if the franchisees falter.

### Playing Offense: The Aftermath

Meanwhile, B. Riley is dusting off its strategic playbook. In the run-up to the bankruptcy, it has already liquidated more than $500 million in assets, bringing in cool cash for its coffers. Additionally, it has generated a rewarding $400 million from sales within its broader portfolio. With this maneuvering, Riley’s vision transitions to an offensive stance, bracing for a rebound.

This narrative truly is the epitome of a financial rollercoaster. From bankruptcy moves to high-stakes corporate drama, New York remains the ultimate stage for all things bold and chaotic.