by Matt Weik, BS, CSCS, CPT, CSN
It pains me that I even need to write this article about some industry news, as I’ve been a fan of The Vitamin Shoppe over many other big retailers for years.
GNC was having massive issues in the past, and I blamed it on their lack of customer service and the fact that they were only pushing products on which they were making the most commission.
But now, The Vitamin Shoppe is going through their own set of financial issues, and it’s a sad day.
Franchise Group Inc. (FRG), the parent company of health retailer Vitamin Shoppe, has filed for Chapter 11 bankruptcy as it seeks to resolve mounting debts and restructuring issues. The company said that they have nearly $2 billion in debt that they cannot get out from under and pay.
Let’s dive a little deeper into the news surrounding The Vitamin Shoppe and see where they go from here.
That said, Josh Schall has done a great job of breaking all this down. You can find his video here if you want his take.
The Vitamin Shoppe Financial Troubles and Restructuring Efforts
The news comes after months of restructuring discussions and speculation that FRG might hand over control to lenders. The company confirmed it had reached an agreement with senior debt holders to trade their debt for full ownership of the restructured business.
This debt-for-equity swap is intended to stabilize FRG’s finances while allowing operations to continue during the bankruptcy process.
Franchise Group’s troubles extend way beyond its debts. In 2019, the company acquired Vitamin Shoppe, and in 2023, it went private in a $2.6 billion deal led by FRG CEO Brian Kahn.
FRG’s journey since then has been challenging, with CEO Kahn facing a criminal investigation related to securities fraud allegations tied to the collapse of Prophecy Asset Management, a hedge fund with which he was previously involved.
I actually thought the move to bring Kahn on as CEO would help the company. Little did I know he was not exactly a solid person with good integrity. But then again, I guess The Vitamin Shoppe and FRG didn’t know that either at the time.
Leadership Challenges and Impact of the Investigation
The investigation surrounding Kahn has further complicated FRG’s efforts to stabilize. Although Kahn denies any wrongdoing and maintains that he was also defrauded, the probe has cast a shadow over FRG.
In January 2024, Kahn stepped down amid the investigation, and FRG’s restructuring officer, David Orlofsky, noted in court that the allegations hindered potential sales of other FRG assets.
In an email to employees, B. Riley Financial co-founder Bryant Riley described FRG’s bankruptcy as the result of an unfortunate series of events, citing declines in consumer spending and the fallout from Kahn’s investigation as primary drivers.
- Riley Financial initially supported FRG’s expansion and holds a 31% stake in the company. Riley expressed confidence that, despite setbacks, B. Riley remains financially sound and positioned to rebound.
The Road Ahead: Restructuring and Financing
In support of the restructuring, FRG announced that it had secured $250 million in financing from a group of first-lien lenders, providing enough liquidity to maintain operations, meet employee and vendor obligations, and continue serving customers.
Alongside this, Vitamin Shoppe will proceed with business as usual, even as FRG plans to shut down its American Freight stores and initiate closing sales for those locations.
The Vitamin Shoppe’s Role and Future
As one of the most recognizable brands under FRG, Vitamin Shoppe operates over 700 stores under the Vitamin Shoppe and Super Supplements banners, along with a strong e-commerce presence.
Recently, the retailer expanded its offerings in a really cool deal by partnering with Uber Eats, allowing customers to receive same-day delivery through the app, a move aimed at boosting accessibility for wellness products and getting consumers their supplements in a super speedy timeframe.
I personally found this really interesting, as we live in a time where everyone Door Dashes and Uber Eats everything so that they don’t need to leave their house or place of employment.
Vitamin Shoppe’s focus on health and wellness products has positioned it as a reliable resource for consumers, and FRG’s bankruptcy filing is expected to have minimal impact on the retailer’s day-to-day operations. FRG’s leadership emphasized that the financing package and cash reserves will keep The Vitamin Shoppe and its other brands operating smoothly throughout the restructuring.
What Comes Next for The Vitamin Shoppe?
The Chapter 11 filing marks a significant turning point for FRG, allowing it to reorganize its finances and address lingering issues from Kahn’s investigation.
While the process will involve some cost-cutting measures and divestments, FRG is optimistic about emerging stronger. With sufficient funding secured and a clear path to reorganize, the group aims to keep The Vitamin Shoppe and its other core brands running as it regains stability.
In a statement, FRG expressed commitment to its stakeholders, including employees, franchise partners, vendors, and customers, and assured that day-to-day operations would continue largely unaffected.