Washington, D.C. 20549


Form 8-K




Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of Earliest Event Reported): March 12, 2020  


Franchise Group, Inc.
(Exact name of registrant as specified in charter)


Delaware 001-35588 27-3561876
(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification Number)


1716 Corporate Landing Parkway, Virginia Beach, Virginia 23454

(Address of principal executive offices) (Zip Code)


(757) 493-8855
(Registrant’s telephone number, including area code)


Not Applicable
(Former name or former address, if changed since last report.)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
  o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Securities registered pursuant to Section 12(b) of the Act:


Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.01 per share FRG Nasdaq Global Market


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company           o


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Item 1.01 Entry into a Material Definitive Agreement.


As previously disclosed, on December 16, 2019, Franchise Group Newco R, LLC (“Newco R”), an indirect subsidiary of Franchise Group, Inc. (the “Company”), entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Revolution Financial, Inc. and its subsidiaries (collectively, “Revolution”) for the acquisition of Revolution’s consumer lending business. On March 12, 2020, the Company and Revolution agreed to extend the “End Date” (as defined in the Asset Purchase Agreement) from March 16, 2020 to April 30, 2020 pursuant to an amendment (the “Amendment”) to the Asset Purchase Agreement.


Other than as expressly modified pursuant to the Amendment, the Asset Purchase Agreement, which was previously filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission by the Company on December 17, 2019, remains in full force and effect. The foregoing description does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment attached hereto as Exhibit 2.1 and incorporated herein by reference.


Item 7.01.Regulation FD Disclosure.


The Company is furnishing a copy of an investor presentation dated March 11, 2020 (the “Investor Presentation”). The Investor Presentation is attached as Exhibit 99.1 to this Current Report on Form 8-K.


The information in this Item 7.01 of this Current Report on Form 8-K (including the Exhibit 99.1) is furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to such filing. This Current Report on Form 8-K should not be deemed an admission as to the materiality of any information in the Investor Presentation that is required to be disclosed solely by Regulation FD.


Item 8.01.Other Events.


Dividend Approval


On March 12, 2020, the Company announced that its Board of Directors (the “Board”) approved a cash dividend to the Company’s stockholders. The quarterly dividend of $0.25 per share will be paid on or about April 27, 2020 to stockholders of record at the close of business on April 10, 2020.


Annual Meeting of Stockholders


On March 5, 2020, the Board set the date of the Company’s 2020 Annual Meeting of Stockholders for June 3, 2020 (the “2020 Annual Meeting”). The Board fixed the close of business on April 10, 2020 as the record date for the 2020 Annual Meeting.


Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, stockholders who wish to have a proposal considered for inclusion in the Company’s proxy materials for the 2020 Annual Meeting must ensure that such proposal is received by the Company no later than the close of business on March 22, 2020. Any such proposals must be received by such deadline at the Company’s principal executive offices at 1716 Corporate Landing Parkway, Virginia Beach, Virginia 23454, Attention: Corporate Secretary.


Further, in accordance with the requirements for advance notice in the Company’s Bylaws for director nominations or other business to be brought before the 2020 Annual Meeting by a stockholder, written notice must be received by the Company’s Corporate Secretary no later than the close of business on March 22, 2020. Any such notice must comply with and contain all of the information required by the Company’s Bylaws. A copy of the Company’s Bylaws is filed as Exhibit 3.4 to the Company’s Form 10-K filed with the Securities and Exchange Commission on June 27, 2019.


Item 9.01.Financial Statements and Exhibits.


(c) Exhibits


2.1Amendment No. 1, dated as of March 12, 2020, to Asset Purchase Agreement, dated as of December 16, 2019, by and among Franchise Group Newco R, LLC, the sellers listed on Schedule I thereto, and Revolution Financial, Inc. as the representative of the sellers.


99.1Investor Presentation dated March 11, 2020.







Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


  Franchise Group, Inc.
Date: March 12, 2020 By:  /s/ Eric F. Seeton  
    Eric F. Seeton
    Chief Financial Officer


Exhibit 2.1







March 12, 2020


Reference is hereby made to that certain Asset Purchase Agreement, dated as of December 16, 2019 (the “Asset Purchase Agreement”), by and among Franchise Group Newco R, LLC, a Delaware limited liability company (“Buyer”), the Sellers listed on Schedule I thereto (collectively, “Sellers”), and Revolution Financial, Inc., a Texas corporation, as the representative of the Sellers (the “Seller Representative”).


WHEREAS, the parties to the Asset Purchase Agreement desire to amend the Asset Purchase Agreement, in accordance with Section 12.10 thereof (this “Amendment”); and


WHEREAS, capitalized terms used herein but not defined shall have the meaning set forth in the Asset Purchase Agreement.


NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:


1.      Amendment. Section 8.1(b)(ii) of the Asset Purchase Agreement is hereby amended and restated in its entirety as follows:


“on or after April 30, 2020 (the “End Date”), if the Closing has not occurred prior to the End Date; provided, that the right to terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be available to any party that is in breach of this Agreement and such breach results in the failure of the Closing not to have occurred by such End Date;”


2.      Miscellaneous; No Other Waivers or Amendments. The provisions of Sections 12.2 (No Third Party Beneficiaries), 12.4 (Succession and Assignment), 12.5 (Counterparts), 12.6 (Headings), 12.8 (Governing Law), 12.9 (Consent to Jurisdiction), 12.10 (Amendments and Waivers), 12.12 (Severability), 12.14 (Construction), 12.15 (Incorporation of Exhibits and Schedules) and 12.17 (Waiver of Jury Trial) of the Asset Purchase Agreement shall apply to the Amendment mutatis mutandis. Except as specifically amended hereby, the Asset Purchase Agreement shall continue in full force and effect as written.


3.      Entire Agreement. The Amendment, together with all documents referenced herein, represents the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties hereto, or between any of them, with respect to the subject matter hereof and thereof.


[Remainder of Page Intentionally Left Blank]





IN WITNESS WHEREOF, the parties have caused the Amendment to be executed by their respective officers thereunto duly authorized, all as of the date first above written.


  By: /s/ Andrew Kaminsky  
     Name: Andrew Kaminsky
     Title: Executive Vice President and Chief
     Administrative Officer
  By: /s/ Michael Brent Turner  
     Name: Michael Brent Turner
     Title: Chief Executive Officer












[Signature Page to Amendment to Asset Purchase Agreement]



Exhibit 99.1


Overview March 11, 2020 1


Forward - Looking Statements This document contains forward - looking statements within the meaning of the securities laws (including the Private Securities Litigation Reform Act of 1995 ) . Forward - looking statements can be identified by the fact that they do not relate strictly to historical or current facts . They may include words or variations of words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “targets,” “would,” “will,” “view,” “opportunity,” “potential,” “should,” “could,” or “may” or other similar words or expressions that convey projected future events or outcomes . Forward - looking statements provide the Company’s or its management’s current expectations, predictions, opinions or judgments of future conditions, events or results . All statements that address operating performance, events or developments that the Company expects or anticipates will occur in the future are forward - looking statements . They may include estimates or projections of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure, synergies, EBITDA or other financial items, descriptions of the Company’s or management’s plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above . Such forward - looking statements are based on various assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements . All forward - looking statements speak only as of the date they are made and although the Company believes that its beliefs, assumptions and expectations with respect to forward - looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance or guarantee that actual results, performance or achievements of the Company will not differ materially from any projected future results, performance or achievements expressed or implied by such forward - looking statements . Actual future results, performance or achievements may differ materially from historical results or those anticipated depending on a variety of factors (including, but not limited to a variety of economic, competitive and regulatory factors), many of which are beyond the control of the Company and its management team . Furthermore, the Company disclaims any obligation to publicly update, clarify or revise any forward - looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or otherwise, except as required by law . We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10 - K for the year ended April 30 , 2019 , and comparable sections of the Company’s Quarterly Reports on Form 10 - Q and other filings, as well as additional factors that have been or may be described from time to time in other filings with the SEC and are available on the SEC’s website at www . sec . gov . You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties . All of the forward - looking statements made in this document are expressly qualified by the cautionary statements contained or referred to herein . The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or its business or operations . You are cautioned not to rely on the forward - looking statements contained in this document .


Executive Summary Acquired: July 2019 Acquired: August 2019 Acquired: December 2019 Founded: 1996 Acquired: February 2020 ▪ Franchise Group, Inc. (“FRG”, “Franchise Group” or the “Company”) is a leading North American operator and acquiror of franchised and franchisable businesses that uses its operating expertise to drive cost efficiencies and revenue synergies to grow its brands ▪ Pro forma for all completed acquisitions, FRG currently operates approximately 4,400 locations, predominantly located in the U.S. and Canada, that are either Company - operated or operated by franchisees pursuant to franchising agreements ▪ FRG works towards achieving significant post - acquisition cost and revenue synergies across all of its operating companies: ▪ Potential cost synergies through use of FRG shared services, vendor and franchisee relationships, and access to capital ▪ Cross - selling ▪ Offering multiple FRG products / services in a single location ▪ Large customer file ▪ Consolidated systemwide revenue of $2.4BN+ in 2019 with over 11,000 employees ▪ Lean executive management team with significant ownership position in the Company


5.00 9.00 13.00 17.00 21.00 25.00 0 .20mm .40mm .60mm .80mm 1.00mm 1.20mm 1.40mm Franchise Group, Inc. (NasdaqGm:FRG) - Volume Franchise Group, Inc. (NasdaqGm:FRG) - Share Pricing FRG History Volume (Shares) Price per Share ($) 1) August 1, 2018: Vintage Capital / Brian Kahn announces approximately 2.3MM share position in Liberty Tax 2) July 10, 2019: Liberty Tax merges with Buddy’s Home Furnishings in an all equity transaction at an implied enterprise value o f a pproximately $122MM and announces new franchising business model 3) August 8, 2019: Liberty Tax announces agreement to acquire The Vitamin Shoppe in an all cash transaction for approximately $2 08M M 4) August 27, 2019 : Liberty Tax announces agreement to acquire Outlet business from Sears Hometown and Outlet Stores, Inc. in an all cash transac tio n for approximately $133MM 5) September 9, 2019: Liberty Tax changes its name to Franchise Group, Inc. 6) October 23, 2019: Franchise Group closes acquisition of Sears Outlet 7) November 12, 2019: Franchise Group announces relisting on Nasdaq and completes a cash self - tender offer for approximately $47.6M M and announces $0.25/share dividend 8) December 16, 2019: Franchise Group closes acquisition of The Vitamin Shoppe 9) December 30, 2019: Franchise Group announces a definitive agreement to acquire American Freight in an all cash transaction fo r a pproximately $450MM 10) February 14, 2020: Franchise Group closes acquisition of American Freight and announces completion of new $675MM credit facil ity 1 2 3 4 5 7 8 9 10 6


Franchise Group’s Brands Offers brand - name furniture, mattresses and home accessories at discount prices . American Freight buys direct from manufacturers and sells direct in warehouse - style stores . 176 stores in over 30 states with 2 + million satisfied customers . A retailer primarily focused on providing customers with in - store and online access to new, one - of - a kind, out - of - carton, discontinued, reconditioned, overstocked, and scratched and dented products across a broad assortment of merchandise categories at prices that are significantly lower than list prices . Sears Outlet operates 127 locations, which includes 8 franchised stores . Liberty Tax operates in the U . S . and Canada and prepared approximately 1 . 85 million individual income tax returns in approximately 2 , 785 offices and online in 2019 , primarily through franchise arrangements . A specialty retailer which franchises and operates rent - to - own stores that lease durable goods, such as electronics, residential furniture, appliances and household accessories . Buddy’s operates almost 300 locations, primarily through franchise arrangements with franchisees . An omni - channel specialty retailer and wellness lifestyle company that offers a comprehensive assortment of nutritional solutions, including vitamins, minerals, specialty supplements, herbs, sports nutrition, homeopathic remedies, green living products, and natural beauty aids through proprietary brands and approximately 700 national brands . 743 Company - operated retail stores under The Vitamin Shoppe and Super Supplements banners, as well as through its online store .


Strategic Brand Transformation □ Planned combination of two big - ticket durable goods companies that are complementary in products sold, customer base, logistics and operations to create a national 300 - store chain – Opportunity to accelerate growth – Anticipated to drive operating and cost efficiencies through economies of scale – Management team integration – Rebranding expected to occur in April 2020 – Extremely attractive franchising economics □ Both operate in value - oriented retail corridors – Warehouse style stores – Ancillary revenue (including protection plans) – In - home, same day delivery – Purchasing options Customer Demographics Products AF Outlet Avg. Age 50 51 Female 55% 56% Avg. Household Income $56K $70K Home Owners 76% 96% College Degree or Higher 35% 34% High School Diploma 45% 52% Average Store Size AF Outlet Appliances 0% 84% Furniture 76% 4% Mattresses 24% 5% AF Outlet Sq. Ft. 28K 35K


Leverage Franchise Group’s Shared Services Examples of Corporate Initiatives ▪ Operating companies are expected to benefit from common policies and leverage economies of scale ▪ Significant savings have been achieved to date within already integrated business lines ▪ Management believes the opportunity for additional savings is substantial x Corporate insurance program x Health & welfare plans x 401(k) plan x Consolidated accounting and finance functions x Corporate headcount & expenses x Merchant processing □ Field organizations □ Logistics, freight, shipping □ Marketing □ Purchasing and supply chain □ Call center operations consolidation □ Centralized real estate function □ Corporate spending programs □ Travel and reporting process □ Fixed and mobile telecom costs □ Software licensing (i.e. O365) and services (i.e. cloud) □ Payroll/HRIS □ Recruiting and training tools x Reflects initiatives that are already underway and have achieved meaningful savings .


Corporate Strategy ▪ Disciplined, value - based acquisition and operation of franchised or franchisable businesses : ▪ Asset light, high product margin and strong cash conversion characteristics ▪ Refranchising of Company - operated stores expected to create substantial one - time cash inflows that may be used to deleverage and return value to shareholders ▪ Leverage franchisees to grow the brands and run them as vested owner/operators ▪ Deliver strong and predictable cash flow that is expected to allow consistent dividends ▪ Continue to build a scalable franchise holding company that leverages : ▪ Franchisee appetite for multiple brands and concepts ▪ Corporate and field infrastructures, supply chain, freight and delivery logistics, merchandising and buying, and marketing and advertising ▪ Shared corporate services ▪ Cross - pollinate appropriate store models ▪ Maintain a flexible balance sheet and access to capital markets ▪ Optimize cost of capital ▪ Opportunistic M&A


2020 Financial Outlook Notes: • FRG does not provide quantitative reconciliation of forward - looking, non - GAAP financial measures such as forecasted 2020 Proforma Adjusted EBITDA or non - GAAP EPS to the most directly comparable GAAP financial measure because it is difficult to reliably predict or estimate the relevant components without unreasonable effort due to future uncertainties that may potentially have significant impact on such calculations, and providing them may imply a degree of precision that would be confusing or potentially misleading. • All fiscal years for operating entities were changed at the end of 2019 to a December retail year end • All amounts reflect management estimates • Proforma adjustments represent realized and unrealized synergies consistent with the FRG credit agreement • The potential impact of COVID - 19 is not known or contemplated in the estimates • Estimates exclude potential refranchising activities • All numbers are unaudited • Represents a full year of performance as if all operating entities were owned at January 1, 2020 ($ in millions, except per share data) Revenue $2,100 - $2,150 Proforma Adjusted EBITDA $230 - $240 Non-GAAP EPS $2.35 - $2.55 Ending December 26, 2020 Estimate For the Year


Capitalization Fully Diluted Shares Outstanding (1) 36.3 Stock Price (2) 18.90$ Market Capitalization 686.1$ Total Debt 815.0 Total Cash (3) 75.0 Net Debt 740.0$ Enterprise Value 1,426.1$ Notes: (1) Assumes conversion of all Franchise Group New Holdco, LLC units and FRG voting non-economic preferred stock into shares of FRG common stock. (2) Closing price on March 11, 2020 (3) Management estimate at March 11, 2020




American Freight – Company Overview Est. Revenue Mix by Merchandise Category ▪ American Freight is a category - defining retailer of value furniture with 176 locations across 30 + states □ 2015 - 2019 revenue CAGR of ~ 11 % ▪ Stores are no - frills warehouses with efficient merchandising to provide best - in - category value for customers while reducing operating costs ▪ Est . ~ $ 215 k in store opening capital expenditures, starting inventory, and pre - opening expenses (over 80 % of average opening costs reflect starting inventory) ( 1 ) ▪ Low opening costs are expected to result in 65 % and 195 % cash - on - cash ROIs within the first 12 and 24 months of opening, respectively ( 1 ) ▪ Operates through a simplified supply chain that leverages domestic manufacturers and distributors ▪ Expected to continue to gain market share within the large and growing value furniture segment as other players of scale move towards premiumization ▪ Founded in 1994 and headquartered in Delaware, Ohio Locations Upholstery 39% Mattress 15% Bedroom 17% Dining & Other 29% ( 1 ) Based on all stores opened since 2011 in operation for at least 24 months . Company Overview


Appliances 83% Mattress & Furniture 8% Lawn & Garden 3% Tools 3% Sporting Goods & Other 3% Sears Outlet – Company Overview Company Overview Est. Revenue Mix by Merchandise Category ▪ Sears Outlet is a specialty retailer that provides customers with in - store and online access to out - of - carton, reconditioned, and scratched/dented products ▪ Only “as - is” retailer with national scale and distribution capabilities ▪ Product focus is on home appliances at significant discounts ▪ Operates 127 retail stores (8 franchised locations) in 30+ states ▪ Provides value to manufacturers by providing a dependable channel for liquidation of their returned, reconditioned, or scratched/dented products ▪ FRG plans to combine the operations of Sears Outlet and American Freight and rebrand all stores to American Freight – Appliance, Furniture and Mattress, creating a 300 store national brand that will sell both deep - value furniture and mattress product offerings, as well as appliances ▪ The combination is anticipated to drive significant margin expansion and accelerate growth ▪ 14 Outlet Repair and Distribution Centers (“ORDCs”), 12 of which are co - located with retail stores ▪ ORDCs provide significant product testing and repair capabilities located in major metro areas to support the store base ▪ ~91% of revenue from in - store sales; ~9% from online ▪ Founded in 2012 as a spin - off from Sears Hometown and Outlet Stores, Inc., and headquartered in Hoffman Estates, Illinois Locations


Buddy’s Home Furnishings – Company Overview ▪ Buddy’s is the 3rd largest operator of rent - to - own (“RTO”) stores in North America, with 299 stores ▪ 207 franchised stores ▪ Located in 21 U.S. states and territories ▪ Sources products from large, well - known brands, such as Ashley Furniture, Sealy, LG, GE, Samsung, Whirlpool, Dell, and HP ▪ Highest percentage of franchised stores in the RTO industry, providing a potential path to growth without significant capital deployment ▪ Buddy’s refranchising strategy provides a “playbook” for other FRG business lines ▪ Corporate segment consists of 92 Company - operated stores ▪ Company - operated stores serve as a proving ground for operational initiatives ▪ Founded in 1961 and headquartered in Orlando, Florida Furniture , 42% Consumer Electronics , 26% Appliances 15% Computer , 8% Smartphones , 5% Other , 3% Locations Company Overview Est. Revenue Mix by Merchandise Category


Liberty Tax – Company Overview Est. Revenue Mix by Stream ▪ Liberty Tax is the 3 rd largest institutional tax - preparation service provider in North America, operating 2,785 offices across the U.S. and Canada ▪ ~94% franchised units ▪ Provides federal and state income tax preparation services and do - it - yourself tax preparation software ▪ Primarily serves the underbanked population, with ~80% of its customer base earning <$50k annually ▪ FRG intends to implement an initiative to provide installment lending services at Liberty Tax locations □ Founded in 1997 and headquartered in Virginia Beach, Virginia Franchise Fees and Royalties 52% Financial Products / E - file Fees 28% Interest Income 6% Tax Preparation Fees 12% Other Revenue 2% Company Overview


The Vitamin Shoppe – Company Overview Est. Revenue Mix by Channel ▪ Vitamin Shoppe is a $1BN revenue national specialty health supplement retailer with 743 locations ▪ Operates as an omni - channel specialty retailer of nutritional products in the US and internationally ▪ Approximately 14,000 SKUs from approximately 700 brands, including The Vitamin Shoppe®, BodyTech®, True Athlete®, Mytrition®, plnt®, ProBioCare® and Next Step® brands ▪ Ongoing shift toward private brands is expected to drive margin expansion ▪ Private brands generate approximately 60% product margins compared to approximately 40% for third - party brands ▪ Private brands are exclusive to Vitamin Shoppe and drive customer retention ▪ E - commerce sites complement in - store experience by extending product offerings with approximately 7,200 additional SKUs ▪ Enables access to customers outside Vitamin Shoppe’s retail markets and those who prefer to shop online ▪ Existing stores are currently Company - operated, representing a significant potential refranchising opportunity ▪ Expected significant overhead savings opportunity from streamlining organization and leveraging FRG shared services ▪ Founded in 1977 and headquartered in Secaucus, New Jersey Locations Company Overview Store Sales 85% Direct To Consumer Sales 15%