Vitamin Shoppe Owner Franchise Group Files for Bankruptcy, Announces Restructuring

The Vitamin Shoppe owner Franchise Group (FRG), which manages several different franchised retailers in the U.S., filed for bankruptcy Sunday after reporting nearly $2 billion in debt, court records show.

B. Riley Financial-backed FRG, which also owns brands Buddy’s Home Furnishing and Pet Supplies Plus, announced a new restructuring plan as part of the Chapter 11 proceedings in the U.S. Bankruptcy Court in Delaware.

That plan includes securing $250 million in debtor-in-possession financing from lenders to reduce the company’s debt and support its companies, as well as a complete shutdown of all American Freight stores — another one of FRG’s brands.

A discount furniture chain, American Freight has “struggled due to sustained inflation and macroeconomic challenges facing the large durable goods sector,” FRG said.

American Freight will begin store closing sales Nov. 5 then shut down its more than 370 locations in the U.S., the company said. That includes the chain’s New York locations in Albany, Clay, Horseheads, Buffalo, Rochester and Syracuse, according to its website.

Meanwhile, FRG has filed motions to “maintain business-as-usual operations” at Pet Supplies Plus, The Vitamin Shoppe and Buddy’s Home Furnishing during the bankruptcy process, according to the release.

“Today’s announcement to de-lever our balance sheet is a pivotal step forward in enabling our market-leading businesses to realize their full potential,” FRG CEO Andrew Laurence said in a statement Sunday.

“Each of these businesses has a demonstrated value proposition and provides great products and services to customers, which they will continue to do seamlessly during this process,” Laurence added. “Strengthening FRG’s balance sheet will allow us to enhance our support for these businesses as they advance their growth trajectories.”

A spokesperson for American Freight did not immediately respond to a request for comment.

FRG also plans to implement a new marketing strategy through “court-approved bidding procedures” to position itself for “long-term success,” the company said. That plan is expected to be filed in court this week.

The news comes after FRG reported poor earnings during the first half of 2023 with about a $160 million net loss, according to a filing with the Securities and Exchange Commission.

In a deal led by then-CEO Brian Khan and backed by investment firm B. Riley, FRG went private last year for $2.8 billion, Bloomberg reported. But Khan later became involved in a criminal investigation related to a securities fraud case and stepped down in January, according to Forbes.

“FRG’s bankruptcy is a confluence of events that ultimately derailed our original investment thesis,” B. Riley co-founder Bryant Riley said in an email to employees, as reported by Forbes. “Unfortunately, the investment was devastated by the precipitous decline in consumer spending in the markets served by FRG brands, and the fallout and uncertainty from the scandal and the related federal investigation into Brian Kahn.”

FRG follows several other retail bankruptcies in recent months, including baby wares seller BuyBuy Baby, hardware company True Value, discount retailer Big Lots, retailer LL Flooring and fitness chain Blink, as Commercial Observer previously reported.

And just on Saturday, American dining chain TGI Fridays filed for Chapter 11 bankruptcy to begin a “restructuring process” in the aftermath of financial challenges caused by the  pandemic, the New York Times reported.

Isabelle Durso can be reached at idurso@commercialobserver.com.