Have you heard of Franchise Group Inc.? Franchise Group Inc. is a franchising platform for market-leading and emerging brands. They operate through well-known brands including the Vitamin Shoppe, Pet Supplies Plus, Badcock Home Furniture & More, American Freight, Buddy’s Home Furnishings, and Sylvan Learning.
Franchise Group is continuously looking to grow its portfolio through acquisition or organic brand development. They typically target businesses that can be scaled by adding franchise and company-owned units or that can be restructured to enhance their performance under the Franchise Group umbrella.
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00:29 Franchise Group, Inc. Platform
00:54 Originally Operated as Liberty Tax
01:34 Franchise Group Locations
02:18 Franchise Group IPO Price and Market Capitalization
02:40 Franchise Group Net Income
The Franchise Group originally operated under the name Liberty Tax (which they no longer own). The company changed its name to Franchise Group Inc. on September 19, 2019. Franchise Group completed the acquisition of its current subsidiaries in 2019 and 2020.
ALTHOUGH OPERATING UNDER THE NAME FRANCHISE GROUP FOR ONLY THREE YEARS, ON A COMBINED BASIS, AS OF DECEMBER 25, 2021, THE FRANCHISE GROUP IS OPERATING IN 2,948 LOCATIONS CONSISTING OF 1,221 FRANCHISED LOCATIONS, 1,410 COMPANY-RUN LOCATIONS, AND 317 DEALER LOCATIONS.
As each company is managed by its respective team, they share a services platform that drives them the best practices.
Overall, the Franchise Group increased its locations from 3,654 in 2019 to 3,770 in 2020. However, the Franchise Group has a net decrease of 822 in the number of stores since 2021 due to the selling of Liberty Tax, which has a total of 2,441 locations, in 2021. The gap is filled through the acquisition of Pet Supplies Plus, Badcock, and Sylvan.
By comparing Table 1 and Table 2, except for Liberty Tax, all of the other segments (Buddy’s, American Freight, and Vitamin Shoppe) have increased operating locations in 2021. More importantly, Buddy’s, which heavily relies on franchising, has newly opened 29 franchised stores. The Franchise Group has acquired Sylvan and Pet Supplies Plus which mainly operates through franchising, which provides vast opportunities for franchisees to join their platform. Additionally, Pet Supplies Plus closed no locations in 2020 despite the COVID-19 pandemic!
Pet Supplies Plus Franchise Unit Count (Past 5 Years)
The Franchise Group continues to look at acquisition targets outside of franchising including Kohl’s. The Franchise Group is seeking to pay $59 per share to acquire Kohl’s department store retail chain. Although this deal is yet to be determined, franchisees should be aware of the future growth opportunities provided by the Franchise Group.
The Franchise Group has been publicly traded on Nasdaq since its Initial Public Offering (IPO) on July 23, 2018. The Franchise Group priced its IPO at $10.40, and it is currently $40.43 (as of April 19, 2022). Currently, it has a total market capitalization of $1.629 billion. However, it is highly volatile with a beta of 1.76. In terms of shareholders, the Franchise Group has a dividend yield of 6.51%.
Note: as the Liberty Tax business was sold to NextPoint in 2021, its relevant data are reported as discontinued operations and it is excluded from the results of operations.
The total Franchise Group Inc. revenue increased by $1.2 billion, or 60%, mainly due to the acquisition of Pet Supplies Plus on March 10, 2021, consisting of $917.4 million. The Badcock Acquisition on November 22, 2021, increased revenue by $102.1 million, while the Sylvan Acquisition on September 27, 2021, increased revenue by $9.7 million. Accordingly, the operating expenses increased by $1.1 billion due to the expansion of the portfolio.
The total revenues for the Franchise Group consist of three segments: product, service and other, and rental. Specifically, the Franchise Group leases the vast majority of its Company-owned stores and Distribution Centers. There is a $30.6 million decrease in rental revenue due to the refranchising of 47 Buddy’s Company-owned stores and an additional 8 stores.
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