For Astronova Company

ACCT 203

Group 6

Rose Perlman (Captain)

H703111510

Company Background and Financial Overview, ESG Report

Tyler Love

H703250464

Financial Analysis of Company’s Financial Statements

Erik Mazzanobile

H703214292

Recent Developments & SWOT Analysis

Jay Nayak

H703222933

Overall Summary & Final Recommendation

Table of Contents

Part 1: Franchise Group, Inc. Company Background and Financial Overview

Formal Corporate Name

Products and Services

Mission Statement

Sources of Revenue by Business Segment

State of Incorporation

North American Industrial Classification Code (NAICS)

Standard Industrial Classification Code (SIC)

Where Stocks Trade

Corporate Senior Officers - CEO, President, and CFO

Independent Auditors and Opinion

Franchise Group’s Competitors

Recent Stock Price Activity

Geographic Market

Executive Officers Compensation Schedule

Critical Issues Facing the Company

Financial Summary

Key Financials

Management Discussion & Analysis

Critical Accounting Policies/ Estimates and Audit Matters

Part 2: ESG Performance Report

ESG Goals and Progress Achieved

Environmental

Social

Part 3: Financial Analysis of Franchise Group, Inc. Financial Statements

Part 4: Recent Developments and SWOT Analysis

Part 5: Summary and Final Recommendation

Part 6: Bibliography

Part 7: Appendix

Part 1: Company Background and Financial Overview

Formal Corporate Name

Franchise Group, Inc.

Products and Services

Franchise Group is a company that operates as an owner of franchisable and franchised businesses and operates in the consumer staples sector. Franchise Group has over 3,000 brand locations and over 15,000 brand associates (Franchise Group, Inc., 2023). The company has a diversified portfolio of recognized brands and businesses that operate in over 12 countries and offers programs to help grow and promote consistency. Franchise Group’s business segments and subsidiaries include Vitamin Shoppe, Pet Supplies Plus, Badcock Home Furniture, American Freight, Buddy’s Home Furnishing, and Sylvan Learning. Franchise Group has mutually beneficial relationships with individualized dealers and franchisees and focuses on partnering with those dealers and franchises who have the capability, commitment, and capitalization to grow their brands (Franchise Group, Inc., 2023).

Mission Statement

Franchise Group’s mission statement is “to provide a first-class environment for our operating companies and their associates to thrive by partnering with strong management teams who are committed to growth through franchising” (Franchise Group, Inc., 2023).

Sources of Revenue by Business Segment

State of Incorporation

Franchise Group, Inc. was incorporated originally in the state of Ohio in 2010 and was formerly known as JTH Holding, Inc. (S&P Global Market Intelligence, 2023). In 2014, the company changed its name to Liberty Tax, Inc. In 2019, the company changed its name to Franchise Group, Inc. (S&P Global Market Intelligence, 2023).

North American Industrial Classification System Code (NAICS)

NAICS 1: 541213- tax preparation services

Standard Industrial Classification Code (SIC)

SIC 1: 72910000- tax return preparation services

Where Stocks Trade

Franchise Group’s stocks trade on the NASDAQ Global Market.

Corporate Senior Officers- CEO, President, and CFO

Brian R. Khan is the President, Chief Executive Officer, and Director of Franchise Group. Khan has served as the President, Chief Executive Officer, & Director of Franchise Group since October 2, 2019 (Franchise Group Inc., 2023). Mr. Khan attended Harvard University, where he graduated with a Bachelor of Arts. Khan came to Franchise Group, Inc. with several years of previous experience, including serving as a director of API Technologies Corporation, White Electronic Designs Corporation, and as chairman of the Board of Buddy’s Home Furnishings (Franchise Group Inc., 2023). Mr. Khan was also the founder of Vintage and its predecessor, Khan Capital Management LLC and has served as investment manager of the company since 1998 (Franchise Group Inc., 2023).

Eric Seeton is the Chief Financial Officer of Franchise Group. Seeton has served as the Chief Financial Officer of Franchise Group since October 28, 2019. Mr. Seeton attended Bentley University (formally Bentley College), where he graduated with a Bachelor of Science in Accounting and a Master of Business Administration from Cornell University (Franchise Group Inc., 2023). Mr. Seeton came to Franchise Group with several years of previous experience, including serving as CFO and Senior Vice President of API Technologies Corporation and as a Director of Corporate Finance for Hittie Microwave Corporation (Franchise Group Inc., 2023).

Independent Auditors and Opinion

Deloitte & Touche LLP has served as Franchise Group’s auditor since 2019. The Auditor’s Opinion states that the company’s financial position, operations, and conditions were presented fairly in the financial statements, making it an unqualified opinion. The auditor did mention that they did not include the financial reporting over three of Franchise Group's most recent business segments as they were acquired during the fiscal year in which this opinion was issued. Still, it did not affect the company's overall opinion.

Critical Audit Matter

The Critical Audit Matter (CAM) identified by Franchise Group’s auditor Deloitte & Touche LLP, is Acquisitions (Franchise Group, Inc., 2022). Acquisitions were noted because Franchise Group had made several acquisitions during the given period, which caused concerns about reporting of the current financial statements at the time. The audit team, Deloitte and Touche LLC, worked with fair value specialists to evaluate the reasonableness of management’s revenue forecasts and the impact of actual results compared to management forecasts (Franchise Group, Inc., 2022).

Franchise Group’s Competitors

Franchise Group operates within the consumer staples sector because the company offers a wide range of services and products through its business segments which sell a wide range of essential products used by consumers (MarketBeat, 2023). For instance, the company’s most well-known segment Vitamin Shoppe sells health and wellness products that consumers need, such as nutritional supplements. According to both Standard & Poor's NetAdvantage report and MarketBeat Research Analysis, some of Franchise Group’s competitors are companies that are of similar size in the consumer staples sectors. These companies include Nu Skin Enterprises, Hain Celestial, and Avantax, Inc., among others (MarketBeat, 2023).

Recent Stock Price Activity

The chart above from MSN.com shows recent stock price activity over the last 3 years from the Franchise Group ranging from August 21, 2020, to August 18, 2023 (Franchise Group, Inc., 2019). The stock price increased from $23.21 in 2020 to $26.01 at the beginning of 2021(Franchise Group, Inc., 2019). Later, in 2021, the company’s stock price significantly increased to its highest price recorded at the end of 2021 of $59.99 (Franchise Group, Inc., 2019). In 2022, the company’s stock price continued to decrease through 2023, with its most recent price being $29.88 (Franchise Group, Inc., 2019).

Geographic Market

The geographic market of Franchise Group is spread across numerous locations within the United States, as well as international operations in over 12 countries through their business segments. All of Franchise Group’s business segments are headquartered in different states across the United States. These segments are franchised, dealer-owned, and company-owned. These retailers listed below include Vitamin Shoppe, Pet Supplies, Badcock, American Freight, Buddy’s, and Sylvan.

Vitamin Shoppe is a well-known omnichannel retailer of products, including vitamins, herbs, specialty supplements and other wellness and health products (Franchise Group, Inc., 2023). The Vitamin Shoppe was acquired by the Franchise Group in December 2019 for $208 million (Franchise Group, Inc., 2023). The Vitamin Shoppe is headquartered in Secaucus, New Jersey and has over 700 company-operated stores located throughout the United States (Franchise Group, Inc., 2023). Pet Supplies Plus is an omnichannel retail chain of pet supplies and services which was acquired by the Franchise Group in March of 2021 for approximately $700 million (Franchise Group, 2023). Pet Supplies Plus has over 620 store locations across 39 states within the United States and is headquartered in Livonia, Michigan (Franchise Group, Inc., 2023). Badcock is a specialty retailer of furniture, bedding, electronics, and more which was acquired by the Franchise Group in November of 2021 for $580 million (Franchise Group, Inc., 2023). The company operates over 380 stores in eight southeastern states, including Florida, Mississippi, Virginia, Georgia, North Carolina, Alabama, South Carolina, and Tennessee (Badcock, 2023). The company headquarters is located in Mulberry, Florida.

American Freight is a retail chain segment that offers furniture, mattresses, home appliances and seasonal items in a showroom format (Franchise Group, Inc., 2023). The company operates over 365 store locations across 40 states within the United States and has store locations in Puerto Rico (Franchise Group, Inc., 2023). American Freight's headquarters are located in Delaware, Ohio. Buddy’s is a specialty retailer of high-quality products, including furniture, appliances, and household accessories. Buddy’s was acquired by the Franchise Group for $580 million in November of 2021(Franchise Group, Inc., 2023. Buddy’s has more than 300 store locations throughout the United States and Guam. The company headquarters is located in Orlando, Florida. Sylvan Learning is a growing and established franchisor of supplemental learning and education for students in grades Pre-K through 12. Sylvan Learning has over 700 locations across 49 states within the United States, including locations in Canada. Sylvan also has international locations in countries including the United Arab Emirates, China, Guam, Kuwait, Turkey, and Vietnam (Sylvan Learning, 2023). Sylvan Learning is headquartered in Hunt Valley, Maryland.

Executive Officers Compensation Schedule

Critical Issues Facing the Company

Franchise Group, Inc. recently announced their second quarter fiscal year results on August 8th, 2023, ending July 31st, 2023, which occurred after the release of the company’s most recent 10k report. For the second quarter fiscal year, revenue for the Franchise Group was $1 billion, net loss from operations was $50.8 million and $1.50 per fully diluted share, Adjusted EBITA was $53.9 million, and non-GAAP EPS was a loss of $0.22 per share (GlobeNewswire, 2023). As of July 1st, 2023, outstanding term debt was $1.4 billion, and total cash on hand was approximately $106.3 million (GlobeNewswire, 2023). Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS were measures that were not prepared in accordance with GAAP (GlobeNewswire, 2023).

The COVID-19 pandemic has had a profound impact on the financial conditions of the Franchise Group. The spread of the omicron variant in 2021 had an impact on the availability of employees to work in their businesses and within the store locations of their business segments (Franchise Group, Inc., 2022). There were approximately 240 temporary store closures during the second quarter of 2020, which the company predicts has affected its future financial performance because it was the highest number of store closures it has experienced (Franchise Group, Inc., 2022). The company predicts that the COVID-19 pandemic will continue to have a major impact on future developments and has the potential to cause major supply chain disruptions in the near future.

Franchise Group has reported significant transaction and acquisition-related debt costs and expects to incur integrated-related costs in connection with its recent acquisitions (Franchise Group, Inc., 2022). This is because of significant changes to Franchise Group’s business in connection with their recent acquisitions. Despite this, they are still seeking to expand through acquisitions of and investments in other businesses, even though their attempts may be unsuccessful or divert management's attention (Franchise Group, Inc., 2022). The Franchise Group recognizes that they are competing with direct and third-party competition that may have significantly more financial resources than it does (Franchise Group, Inc., 2022). This, as a result, puts them at a disadvantage and may adversely affect their financial condition and the company’s operating results in the future.

Franchise Group is in a highly competitive industry, therefore putting them at high risk of being adversely affected. The Franchise Group’s business segments operate in many different sectors, including retail, consumer services, rent-to-own industries, and consumer staples sector, which are subject to intense competition (Franchise Group, Inc., 2022). The success of Franchise Group’s business segments is dependent on many factors that are out of their control, including general economic conditions, consumer debt, prevailing interest rates, and more (Franchise Group, Inc., 2022). Unfavorable changes in these factors can affect consumer spending and lessen demand for the products and services offered. Franchise Group also holds responsibility for making sure that their segments, including Vitamin Shoppe, Pet Supplies Plus, Badcock, American Freight, and Buddy's, can successfully manage their inventory levels and compete with the growing competition from the e-commerce sector. (Franchise Group, Inc., 2022).

Franchise Group also faces a risk relating to the volatility of its stock price (Franchise Group, Inc., 2022). Their stock price has been extremely volatile due to various risk factors, including a high risk of the company’s investors being unable to resell their shares at or above their acquisition price. One reason for this is the Franchise Group's inability to maintain effective internal controls (Franchise Group, Inc., 2022). This, as a result, may cause investors to lose confidence in the company’s reported financial information in the future, which can have a material adverse effect on the company's stock price.

Franchise Group, Inc. announced that they entered a merger agreement with B. Riley Financial, Inc. and Irradiant Partners on August 21, 2023. The independent directors of Franchise Group’s Board of Directors approved the proposed merger based on the “unanimous recommendation of a Special Committee of the Board of Directors, which was composed of independent directors not affiliated with the Management Group and was advised by its own financial and legal advisors” (GlobeNewswire, 2023). As a result of this financial partnership B. Riley Financial, Inc. and Irradiant Partners acquired “approximately 64% of the Company’s issued and outstanding common stock that the Management Group does not currently control itself or own” (GlobeNewswire, 2023). The transaction has an enterprise value of approximately $2.6 billion, including the Company’s net debt and outstanding preferred stock (GlobeNewswire, 2023). According to the CEO of Franchise Group, Brian Kahn, Franchise Group, Inc. entered into this merger agreement because they believe it will allow the company to better deliver its value to its public stockholders within the challenging business environment today where they are competing and operate in (GlobeNewswire, 2023).

Financial Statements Summary

Key Financials

Total revenue for the Franchise Group increased each year from $201.8 million in 2019 to $2,029.73 million in 2020 to $3,255.20 million in 2021. Revenues increased again in 2022 to $4,397.8 million and saw a slight decrease in 2023 to $4,310.09 million (S&P Global Market Intelligence, 2023). This increase in revenue can be attributed to Franchise Group’s addition of acquisitions and business segments in 2021, including Pet Supplies Plus, Sylvan, and Badcock, which added sources of revenue and sales for the company.

Retained earnings decreased from $18.4 million in 2019 to $3.8 million in 2020 to $287 million in 2021 (S&P Global Market Intelligence, 2023). In 2022, Franchise Group starts to see a significant decrease in retained earnings from $109.9 million in 2022 to -$85.6 million in 2023 (S&P Global Market Intelligence, 2023). This decrease could have been caused by a drop in the company’s stock price in 2022 and 2023, which may have resulted in a loss of confidence in investors. Additional paid-in capital increased from $382.4 million in 2020 to $475.4 million in 2021, then decreased in 2022 to $311.1 million and decreased again in 2023 to $310.7 million (S&P Global Market Intelligence, 2023).

Gross Profit has increased from $79.9 million in 2019 to $869.6 million in 2020 (S&P Global Market Intelligence, 2023). Gross profits increased again to $1,334.4 million in 2021 and $1,864.5 million in 2022 but decreased to $1,716.2 million in 2023 (S&P Global Market Intelligence, 2023).

Total current assets of the Franchise Group have been shown to have increased from $439.9 million in 2019 to $575.4 million in 2020 and increased significantly in 2021 to $1,478.2 million (S&P Global Market Intelligence, 2023). In 2022, current assets slightly decreased to $1,316.5 million and increased again in 2023 to $1,336.7 million (S&P Global Market Intelligence, 2023). This decrease in current assets from 2021 to 2022 can be attributed to the effects that the COVID-19 pandemic had on the Franchise Group in 2021. The omicron variant impacted the number of employees available to work in their stores. Since there was a limited number of employees available to work, this caused temporary store closures, which had a negative impact on the ability to operate store locations. This is something from which the company has still not fully recovered.

Accounts receivable increased from $53.6 million in 2020 to $86.2 million in 2021 and increased again from $141.8 million in 2022 to $207.8 million in 2023 (S&P Global Market Intelligence, 2023). Total liabilities increased from $1,146.8 million in 2019 to $1,462.7 million in 2020 (S&P Global Market Intelligence, 2023). There was a significant increase in total liabilities to $3,150.3 million in 2021. Total liabilities increased again to $3,209 million in 2022 and increased to $3,346.4 million in 2023 (S&P Global Market Intelligence, 2023).

Net earnings did not see the same growth as the company’s revenues and assets. While net earnings increased from $25.1 million in 2020 to $363.8 million in 2021, net earnings decreased significantly in 2022 to -$68.6 million and decreased in 2023 to -$281 million (S&P Global Market Intelligence, 2023). Despite the increase in Franchise Group’s business segments, the company has seen a decrease in net earnings. This could be attributed to the increasing number of acquisitions made in 2021. As a result of these multiple acquisitions throughout the year, while they have helped the company increase its revenue, they have incurred related expenses, with liabilities and debt being higher than what the company is bringing in.

Management Discussion & Analysis

Revenue of the Franchise Group saw an increase of 35% from 2021 to 2022. This change was a $1.1 billion change, resulting in a total revenue of $4397 million in 2022 (Franchise Group, Inc., 2022). This increase was due to a full year from the Badcock Acquisition, which increased revenue by $817 million alone (Franchise Group, Inc., 2022). There was also a $371.3 million revenue increase within Franchise Group’s segment, Pet Supplies Plus, due to a full period of activity being reported in the current period compared to the prior period (Franchise Group, Inc., 2022). This began on the acquisition date of March 10, 2021, with 81 additional franchisee stores and an increase in comparable store sales (Franchise Group, Inc., 2022). There was also a $33.1 million increase in revenue at Franchise Group’s segment Vitamin Shoppe, which was caused by an additional week in the fiscal year 2022 and a higher-than-average transaction value (Franchise Group, Inc., 2022). These increases were offset by a $105.4 million decrease in revenue in Franchise Group’s American Freight segment and a $7.0 million decrease in Franchise Group’s segment Buddy’s (Franchise Group, Inc., 2022).

Operating expenses increased by 38% between 2021 and 2022. This change was in the amount of $1.1 billion, resulting in operation expenses of $4176 million dollars in 2022 (Franchise Group, Inc., 2022). This was a result of many factors, including the company’s Badcock Acquisition, which increased operating expenses by $710.6 million (Franchise Group, Inc., 2022). This also occurred due to increased sales and the inclusion of full-period results from Pet Supplies Plus in the current period. This, in turn, increased operating expenses by $331.7 million (Franchise Group, Inc., 2022). Another reason for this increase is due to a corresponding increase in sales of $31.3 million for Franchise Group’s segment Vitamin Shoppe (Franchise Group, Inc., 2022).

Non-operating expenses increased by $230.7 million from 2021 to 2022 due to many factors. In 2021, a $132 million bargain purchase gain was recorded from the Badcock Acquisition (Franchise Group, Inc., 2022). Preliminary estimates were also finalized at the end of the 2022 fiscal year, resulting in a $3.5 million bargaining purchase gain in the current year (Franchise Group, Inc., 2022). Other non-operating expenses also decreased $45.4 million at the end of the fiscal year due to a prepayment penalty in the prior period of $36.7 million from the repayment of the ABL Loan, Franchise Group New Holdco Term Loan, and a $8.1 million increase in the loss related to the company investment in NextPoint compared to the prior period (Franchise Group, Inc., 2022).

Net earnings decreased by $68.6 million between 2021 and 2022 due to fluctuations, primarily a $14.7 million impairment of goodwill disallowed for tax purposes and the company release of a $6.8 million valuation allowance in the current year compared to the release of $45.2 million in the previous year (Franchise Group, Inc., 2022). This has caused the basis of the management’s reassessment of the amount of its deferred tax assets to be more than realized (Franchise Group, Inc., 2022).

Critical Accounting Policies/Estimates and Matters

	Critical Accounting Policies and Estimates		Critical Audit Matters
● ● ● ●	· Long-Lived and Right-of-Use Assets · Business Combinations-Purchase Price Allocation · Goodwill and Non-amortizing Assets	●	· Acquisitions

The auditors listed Acquisitions as Franchise Group’s Critical Audit Matter, stating that: “The Company completed multiple acquisitions during the current year. The Company accounted for the acquisitions under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values. The method for determining fair value of certain assets and liabilities, such as intangible assets, is subjective in nature and involved management making significant estimates and assumptions, such as future cash flows and the selection of the discount rate. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future cash flows and selection of the discount rate, in determining the estimated fair value assigned to certain assets acquired and liabilities assumed, such as intangible assets” (Franchise Group, Inc., 2022).

The management of the Franchise Group listed Goodwill and Non-Amortizing Intangible Assets, Business Combinations-Purchase Price Allocation, and Long-Lived and Right-of-use Assets as Critical Accounting Policies and Estimates. The Franchise Group company states that these estimates were based on a high level of judgment and are an estimate of what they believe to be considered critical and reasonable (Franchise Group, Inc., 2022).

Part 2: ESG Performance Report

A comparable company that is within the consumer staples sector, similar to Franchise Group, Inc., which has an extensive ESG report that will serve as Franchise Group’s aspirational model, is the company Hain Celestial. Hain Celestial sells healthy product offerings similar to Franchise Group, Inc. through the company’s other businesses and subsidiaries similar to Vitamin Shoppe, operating within the same sector as the Franchise Group.

ESG Goals and Progress Achieved

Hain Celestial is focused on improving its metrics, further developing a culture of ESG of all functions, and bringing its regional businesses and brands together to support its ESG strategy (Hain Celestial, 2022). Hain Celestial believes that the key to successfully meeting their long-term ESG goals is embedding ESG criteria into every functional process so every team within the company is making responsible long-term decisions shaped by their ESG priorities (Hain Celestial, 2022). In 2022, Hain Celestial worked to advance its climate and renewable electricity goals by enhancing its greenhouse gas emissions accounting methodology and by increasing the percentage of renewable energy that it procures (Hain Celestial, 2022). Some of the company’s main ESG goals include developing a process for collecting sustainable packaging data and prioritizing sustainable packaging projects, obtaining site-specific data to identify projects to meet energy, food waste, and zero-waste-to-landfill goals, and increasing the percentage of food and personal care products that go to people in need by improving their process with respect to donating short shelf-life products prior to expiry, and more (Hain Celestial, 2022). Hain Celestial’s ESG strategy is shaped by the company’s Mission, Values, and Vision. Hain Celestial’s vision is “to inspire healthier living for all, help shape our ESG strategy, platform and the “Healthier Way” framework we use to prioritize and communicate our goals” (Hain Celestial, 2022). This framework consists of three pillars, including the following,

· “Healthier Planet – Reduce our environmental footprint with a commitment to lessen our impact on resource scarcity and climate change” (Hain Celestial, 2022).

· “Healthier Products – Inspire consumers to create A Healthier Way of Life® through better shopping choices and purpose-driven brands” (Hain Celestial, 2022).

· “Healthier People – Engage our employees by creating a positive impact in their lives and in the communities where we work and live” (Hain Celestial, 2022).

Environmental Impact

The amount of purchased electricity from renewable sources was shown in FY 2021 to be approximately 52%, increasing in FY 2022 to 63% (Hain Celestial, 2022). Hain Celestial was able to increase the amount of electricity purchased from renewable sources by expanding their renewable procurement from the UK to also include North America. The company also purchased Renewable Energy Green Certified Renewable Energy Certificates to help meet this goal. To maximize the onsite generation of electricity, heating and natural gas, the company also upgraded its Power Plant, Anaerobic Digester, and Combined Heat systems (Hain Celestial, 2022). Hain Celestial’s goal is to continue to increase the percentage of renewable energy each year and to incorporate this goal into the company’s science-based emission targets. Hain Celestial plans to do this by assessing the feasibility of renewable energy and the feasibility of impactful energy-efficient projects for their offices and factories.

Hain Celestial developed an in-depth GHG data collection process for scope 1, 2 and 3 emissions while engaging with a climate consultant to improve the methodology of their FY 2022 greenhouse gas emissions by following the guidance developed by the Science Based Targets initiative, and by using the Greenhouse Gas Protocol Standard. In FY 2022, the company’s climate consultant improved data capture for all emissions and geography quantification methodology. In FY 2022, Scope 1 emissions totaled 47,468 metric tons of CO2e, making up 3% of the company’s overall emissions for FY 2022 (Hain Celestial, 2022). In FY 2022, Scope 2 location-based emissions totaled 22,425 metric tons of CO2e, and market-based emissions totaled 18,659 metric tons of CO2e (Hain Celestial, 2022). Scope 2 emissions in FY 2022 made up a total of 1% of the company’s overall emissions for the year (Hain Celestial, 2022). Scope 3 emissions totaled 1,720,112 metric tons of CO2e in FY 2022, making up 96% of the company’s overall emissions for FY 2022 (Hain Celestial, 2022). Due to the improved methodology used in FY2022 to calculate emissions, the company could not determine emissions increases or decreases compared to FY 2021 or previous years (Hain Celestial, 2022). As stated by strategic suppliers of Hain Celestial, they are working together with their climate consultant and engaging with their regional ESG leads in the data collection process and working collaboratively to identify emission reduction opportunities and conducting interviews within different areas of the business including procurement, packaging, and transportation to achieve their goal towards their emissions reduction target.

Hain Celestial’s waste management goals are implemented within the pillars and core values of its ESG strategy. In the upcoming year, Hain Celestial is expecting to focus on and make progress against zero waste, landfill, and food waste goals. In FY 2021, Hain Celestial partnered with waste vendors in the UK and Europe to help the company maximize the percentage of waste that is sent to recycling facilities and composted and used as animal feed (Hain Celestial, 2022). Hain Celestial has maintained waste diversion rates for 8 out of 14 global facilities since FY 2021, which diverts more than 99% of waste from landfills, even though they have faced difficulties launching zero-waste initiatives at their North American sites that were focused on addressing supply chain challenges, improving plant efficiencies, and meeting customer needs (Hain Celestial, 2022). Hain Celestial's future waste management goals include making progress towards increasing their waste diversion in North America and planning to focus on identifying ways to improve the tracking and measuring of waste diversion across their seven remaining facilities in North America in order to increase waste diversion (Hain Celestial, 2022). Hain Celestial has also set a zero-food waste management goal. Their goal is to halve food waste by 2030. Hain Celestial has already made significant progress towards its goal of reducing food waste. These ways include partnering with waste management contractors to recycle, compost and divert food waste to animal feed and donating 2.4 million pounds of products to hunger relief organizations, including Feed the Children and FareShare. Hain Celestial has a goal to achieve zero waste for its manufactured products by 2025 (Hain Celestial, 2022).

Social Impact

Diversity and inclusion have always been a high priority within the Hain Celestial company. The company believes the diversity of its people and employees is one of its greatest assets. Hain Celestial believes that diversity and inclusion are key components that drive their company to success and that different employee experiences and diverse employee backgrounds are crucial to helping the company thrive internationally and deliver innovative products to its customers (Hain Celestial, 2022). Hain Celestial is working towards this goal by establishing a Diversity and Inclusion Council in North America to help achieve its goal of creating and fostering a workplace that reflects on the global communities where they do business (Hain Celestial, 2022).

In FY 2021, Hain Celestial publicly reported and measured its employee demographics for the first time and has continued to do so ever since. In FY 2022, Hain Celestial stated that its global workforce was 41% female and 59% male, with 38% female talent in leadership and 62% male talent in leadership (Hain Celestial, 2022). Employee demographics were also measured by race and ethnicity. Demographic data from 2022 shows that 42% of employees are Hispanic or Latino, 38% of employees are white, 12% of employees are Black or African American, 5% are Asian, 1% are two or more races, and 0.25% are Native Hawaiian (Hain Celestial, 2022). The demographic data shows that Hain Celestial needs to make progress to increase female representation in leadership and increase diversity in leadership in the United States (Hain Celestial, 2022). Hain Celestial reported that they are working towards this goal by developing a roadmap and a diverse pipeline of employees to help increase female representation in leadership positions and to help more employees advance into leadership roles (Hain Celestial, 2022).

Part 3: Financial Analysis of Franchise Group, Inc.

Income Statement Analysis

Horizontal Analysis

Vertical Analysis

The horizontal analysis and vertical analysis of Franchise Group Inc.’s income statements show how the company’s revenue and expenses have changed throughout the years. Looking at the tables above, you can see the increases and decreases that occurred on Franchise Group Inc.’s income statement from the last three years.

The first trend we will look at is Franchise Group’s net sales over the past three years. Starting with the year 2020, net sales were reported at $2.03 million on December 26th. The following year sales jumped to $3.26 million, increasing 60.4% at the end of 2021. In 2022 sales were still increasing for Franchise Group, but not as high as the increase from 2020 to 2021. Net sales were $4.4 million at the end of 2022, growing at a rate of 35.1%. From the trend of increasing sales from the last three years, one would be able to decipher that Franchise Group's revenue would continue to increase in 2023. Concluding that they will increase sales but probably at a lower increase percentage than 35.1%.

The second category we will look at is how Franchise Group’s operating income has been changing over the years. Operating income was around $52,500 at the end of 2020. Having a huge percent increase of 331.2% from 2020 to 2021, Franchise Group ended that year with an operating income of $226,400. Similar net sales from 2021 to 2022, operating income was still on the increase but not as much as it had increased from 2020 to 2021. In 2022 Franchise Group ended the year with $291,200 in operating income, which is only a 28.6% increase from the following year. With the trend of increasing operating expenses, you can assume that the trend will continue to happen the following year. As in net sales, you can see that the company’s operating income is most likely going to increase again in 2023. One would imagine that the increase in percent change would be somewhere under 25%.

Finally, we will look at net earnings attributable to the company. Ending the 2020 year with net earnings of $25,064, Franchise Group had their biggest percent change on the whole table, with a 1349.4% increase by the end of 2021. This brought their net earnings to $363,800, only to go into the negatives the following year. At the end of 2022, Franchise Group's net earnings were -$68,600. This was a massive hit for them, decreasing 118.9%. Although Franchise Group was facing problems with their goodwill that year, looking at the trends in the other categories on the income statement, with all the increasing trends in the major areas, you would believe that their net earnings will increase the following year.

Cash Flow Analysis

A company’s cash flow statement is how we can analyze how well a company is able to generate cash and use/invest the generated cash. A cash flow statement is an insight into a company’s financial stability. You can determine a company’s financial stability or predict where a company will end up based on aspects of its cash flow statement. Every company needs to examine their cash flow statement to understand how well they are at generating cash. This will allow them to allocate money to pay bills and plan business activities and company operations. If you look at Franchise Group's cash flow statement, there is a lot of information that can be used to tell us how well they are able to generate money.

Franchise Group’s cash flow statement is full of things that help them determine how well they are at generating cash and how much money they will have for what business ventures they want to endure. There are three “groups” to a cash flow statement, operating activities, investing activities, and financial activities. I will be going over a few aspects of the cash flow statement and explain what it means to the company and its ability to generate or use/ invest the cash generated. The first category I will be talking about is their operating activities section. I will go over a few of the important things to look at while interpreting this section. The first thing that you can look at under the operating activities is the net income/loss. In 2020 the company ended with a net income of $27,000 and shot up to a net income of $364,000 by the end of 2021. This huge jump in income shows that the company was able to generate a lot more money for this year, pay expenses, and invest in new business ventures, investing the generated cash to further the company. In 2022, however, the company took a hit with net income, having it fall to $68,000 because of the goodwill problems that were faced that year. Another thing we can look at for the company under operations activities is the net cash provided by operating activities. That indicates if there was any additional money that came into or went out of the company. It could be from changes in net income, or any adjustments made for the company. You can see that in 2020, $241,000 was brought into the company. In 2021 there was still additional money brought into the company but not as much as the previous year. In 2021 the net cash provided was $106,000, which is still good because the company’s net cash provided was positive but not as much as the previous year. In 2022, the company’s net cash was negative, meaning that more money had left the company than been brought into the company. That year $37,000 had left the company for expenses and other uses needed.

The next section of the cash flow statement is the investing activities. This section shows cash gained or spent by the company in relation to investment activities, for instance, PP&E and loans. If we look at proceeds from the sale of property, plant, and equipment, it will show us the cash generated for the company through them. In 2020, $38,000 was generated through the sale of either of those. In 2021, $13,000 was gained through the sale of PP&E, not as much as the previous year, but at least it was still positive. A company always wants to have money generated from those activities every year. In 2022, $274,000 was gained through the sale of PP&E. This was a huge increase in percent change for the company this year, having been the only cash-gaining activity in this section of the investing activities. PP&E is just one of the parts of the investing activities section; we will look at net cash provided by investing activities for Franchise Group over the years. Money has been leaving the company through investing activities for the years 2020 and 2021. In 2020, the company spent $341,000 on investing activists. That was a place where most of their money was put to use. The same is true for 2021, having used almost a million dollars, which wasn’t the best for Franchise Group because it was such a huge number for them. By the end of 2022, Franchise Group had generated $216,000 through investment activities. This was great for the company because they had finally generated money from this section of the cash flow.

The last section of the cash flow statement is the financing activities. This part shows the movement of cash between the company and the owners, investors, and creditors. This is a very important section on the cash flow statement for the company and investors. It shows how well a company can raise and manage its funds. One of the things we can look at is proceeds from secured debt obligations. This is the second most generating area on the company's financial activities sheet. Not having this in 2020, but after at the end of 2021, the proceeds for Franchise Group was $400,000. The following year in 2022, the proceeds decreased a little but are still up there at $382,000 for the company. Then we can look at net cash provided by financing activities. In 2020 the company generated $206,000 from the financing section of the business. In 2021 the company drove up this section and generated almost a million dollars. When 2021 was over, the company was at $950,000, a huge increase from the previous year. That was only for a short time because, at the end of 2022, there had been $390,000 that had left the company through their financing activity use through dividend payment, repayment of long-term debt, repayment of secured debt and others.

Ratio & Trend Analysis of Company’s Financial Statements

Franchise Group, Inc. Ratio Analysis

Profitability Ratios

The company’s gross profit margin ratio over three years fluctuated from 42.84% in 2020 to 42.40% in 2022. This suggests fluctuating operational efficiency or market conditions, leading to a decline in profitability in 2021 and a partial rebound in 2022. The next graph shows the Profit Margin Ratio over three years: 1.23 in 2020, a peak of 11.18 in 2021, and a drop to -1.56 in 2022, indicating a loss in the final year.

The company’s return on equity (ROE) over three years is displayed on the left in the bar chart above. In 2020, Franchise Group’s ROE was positive at 6.5%, considerably higher at 47.7% in 2021, and negative at -16.3% in 2022. This suggests that there will be a loss in 2022 after a time of great profitability in 2021. The company’s Return on Assets (ROA) decreased dramatically to -1.89% in 2022 after showing a notable improvement to 9.30% in 2021, suggesting a deterioration in asset profitability and efficiency.

Efficiency Ratios

The bar graph on the left shows how the company’s total asset turnover fell in 2021 relative to 2020 before rising in 2022 and exceeding that level. This suggests that the company’s revenue-generating asset utilization dropped in 2021 and then increased in 2022. The three-year inventory turnover rates are displayed in the bar chart. It didn’t reach the 2020 level in 2022, although it did climb in 2022 after declining in 2020. This implies variations in the

efficiency with which inventory was utilized or sold across these years.

The accounts receivable turnover ratio shows how well a company can collect its revenue and, therefore, how efficient they are at using its assets. The turnover ratio measures the number of times a company collects its accounts receivable over a period, for instance, every year. As you can see from the chart, the company collected the most from their accounts receivable in 2020. They collected 30 times during that year. After that, their turnover ratios fell hard, having them only collect their accounts receivable 6 times in 2021. A low turnover ratio is harmful to a company, implying the company had a poor collection process. In 2022 their turnover ratio increased to 9, and there is still a long way to go to get back to their collection rate in 2020. Even though there is not a big increase in turnover rate, it is still good to see that the ratio is increasing, and the company will maintain that progress in the coming years.

Liquidity Ratios

Over the course of the three years shown, the company’s Current Ratio demonstrates that its capacity to pay its short-term commitments with its short-term assets has improved. Though more financial data would be required for a thorough study, this is typically a positive sign. Franchise Group’s Quick Ratio has increased from 0.497 in 2020 to 0.718 in 2021, suggesting that the company’s capacity to use its liquid assets to pay short-term commitments has improved. The ratio then decreased to 0.614 in 2022, suggesting a decline in liquidity from the year before but a level that was still higher than in 2020. The Operating Cash Flow Coverage Ratio has significantly decreased from 0.165 in 2020 to 0.034 in 2021 and then to -0.012 in 2022, indicating a decline in the company’s ability to generate sufficient revenue to cover its bills, potentially leading to operational insolvency in 2022.

Solvency Ratios

Times interest earned grew dramatically from 0.06 in 2020 to 0.20 in 2021, demonstrating a better capacity to use earnings to pay interest. The company’s time interest earned dropped to 0.14 in 2022, indicating a worse ability than in 2020 to pay interest costs compared to 2021. There was a rise in the ratio of Total Liabilities to Total Assets from 2020 to 2022, reaching 88.4%. This suggests that the company’s financial stability may be at risk due to the faster growth of liabilities than assets. This could impact the company’s sustainability, debt levels, and stakeholder appraisal of its financial strategy. The “Cash from Operations to Current Liabilities” ratio for a corporation in the bar graph declines from 2020 to 2022. A positive ratio of 0.4 was seen in 2020; however, it declined to 0.1 in 2021 and went negative in 2022, suggesting that the firm is not producing enough cash from operations to pay its short-term commitments, which may be an indication of impending financial hardship.

Competitor Ratio Analysis and Comparison

As previously discussed in the company background section, Franchise Group, Inc. competes within the consumer staples sector. Based on this, the competitor ratio analysis is based on two companies similar in size that compete in the same sector as Franchise Group, Inc. The two companies Franchise Group’s ratios will be compared to are Avantax, Inc. and Nu Skin Enterprises.

Profitability Ratios

The top left bar chart shows how Franchise Group’s gross profit margin compares to their competitors, Avantax and Nu Skin Enterprises. From 2020 through 2023, each company had around the same gross profit margin. Franchise Group has the second-highest gross profit margin, at around 42. Nu Skin Enterprises also had a very high gross profit margin of around 74.95 for the last three years, almost double the margin of Franchise Group. Coming in at the lowest from 2020-2022 is Avantax, which is usually around 30 for throughout the last three years.

The top right chart shows the profit margins of the three companies from 2020-2022. In 2020 Franchise Group was in the middle again, with a profit margin of 1.2. Leading the way was Nu Skin Enterprises again, with a profit margin of 7.4, and the lowest by a considerable margin was Avantax, with a profit margin of -62.8. The following year Franchise Group took the lead with a margin of 11.2, followed by Nu Skin Enterprises at 5.5 and Avantax at 1.2. The last year on the chart shows how Avantax made another huge leap to take the lead at a margin of 63.1, followed by Nu Skin at 4.7, and Franchise Group last decreased to -1.6 percent. This was Franchise Group’s lowest profit margin for the last three years.

The bottom left chart shows the company's return on equity. For the first two years, Franchise Group had the greatest return on equity at 6.5 in 2020 and 47.7 in 2021. Second is Nu Skin Enterprises at .21 in 2020 and .16 in 2021. Avantax had the lowest return on equity, with a return on equity of -1.1 in 2020 and .02 in 2021. In 2022, Franchise Group decreased significantly to -16.3. This resulted in them coming in last place to their competitors. In the lead was Avantax with a return of .57 and then Nu Skin Enterprises with a return of .12.

The last category for profitability ratios is the return on assets ratio, the bottom right chart. It follows the same trend as the return on equity for these companies. Franchise Group was in the middle for the first two years at .59 in 2020 and 4.9 in 2021. While Nu Skin Enterprises was in the lead at 9.7 in 2020 and then 7.7 in 2021. Avantax was in last again these first two years at -32.2 in 2020 and then at .72 in 2021. In 2022, Avantax took a huge jump to 43.6, with Nu Skin in second at 5.7 and Franchise Group decreasing to -1.8.

Efficiency Ratios

The chart on the left shows how the three company's total asset turnovers compare to one another. In all three years, the companies rated the same amongst each other. From 2020 to 2023, Nu Skin Enterprises had the highest total asset turnover. In 2020 the company had a total asset turnover of 1.3. In 2021 it increased slightly to 1.4 and dropped to 1.2 in 2022. Franchise Group had the second-highest total asset turnover at 1.09 in 2020, decreasing to .83 and then increasing again to its highest turnover in 2022 to 1.2. Avantax had the lowest total asset turnover out of all three companies, with a turnover of .51 in 2020, increasing to .61 in 2021 and increasing again to .69 in 2022.

The next chart shows the inventory turnover ratio for each company. All three years, the companies each maintained around the same total inventory turnover amount. Avantax had the highest inventory turnover, with a turnover of 13.46 in 2020. Following that, the company increased its turnover to 16.18 in 2021 and had a slight decrease to 15.43 in 2022 while still maintaining the lead. The company with the second highest inventory turnover was Franchise Group, with a turnover of 3.84 in 2020, decreasing in 2021 to a turnover of 2.85 and then back up to 3.44 in 2022. The lowest turnover out of the three companies was Nu Skin Enterprises, ending 2020 with a 2.09. The following year they had a turnover of 1.69 and decreased again to 1.82 in 2022.

The last chart on the right shows the accounts receivable turnover comparison of all three companies. In 2020 Franchise Group had the highest turnover at 30.14, and Nu Skin Enterprises had the second highest accounts receivable turnover at 40.74. Avantax had the lowest turnover out of all the companies, at 14.05. In 2021, Franchise Group dropped to its lowest turnover of 6.67. In front of them was Avantax, remaining around the same at 14.22, and then Nu Skin Enterprises increasing to 65.27. The last year had the same trend as 2021, where Franchise Group had an accounts receivable turnover of 9.5, Avantax’s turnover was 14.88, and Nu Skin Enterprises’ turnover was 46.99.

Liquidity Ratios

Displayed above are the three companies' current ratios and quick ratios. Avantax is in the lead for both current and quick ratios, except in the company’s quick ratio in 2021. In 2020 Avantax had a current ratio of 1.98 and a quick ratio of 1.98. Following them was Nu Skin Enterprises, with a current ratio of 1.66 and a quick ratio of 1.477. Last, for 2020, was Franchise Group, which had a current ratio of 1.04 and a quick ratio of .49. In 2021, Avantax was in the lead with a current ratio of 1.79 and a quick ratio of 1.42; the only time Avantax was not in the lead. For Nu Skin Enterprises in 2021, they had a current ratio of 1.503 and were in the lead for 2022 as well, with a quick ratio of 1.64. In last place again for this year was Franchise Group, with a current ratio of 1.31 and a quick ratio of .71. Although both ratios increased from the previous year, they were still not as high as their competitors. The last year 2022, had Avantax continuing at the top with a current ratio and a quick ratio of 2.27, both of which were increases from 2021. Then came Nu Skin Enterprises, with a current and quick ratio of 2.115. Finally, there was the Franchise Group, with a current ratio of 1.39 and a quick ratio of .61.

The last chart for liquidity ratios is cash from operations to current liabilities. From 2020 to 2022, the companies compare the same with one another. The highest cash from operations to current liabilities was Nu Skin Enterprises at .70 in 2020, decreasing to then .27 in 2021 and increasing to .30 in 2022. Then comes Franchise Group at .44 in 2020, decreasing to .09 in 2021 and finally decreasing again to -.04 in 2022. The company ratio with the lowest cash from operations to current liabilities was Avantax, which was shown to have been negative from 2020 through 2022. In 2020 they were at -.23, decreasing to -.26 in 2021 and then having their highest year at -.16 in 2022.

Solvency Ratios

The top left chart shows the companies’ debt ratios. Franchise Group has the highest debt ratio from 2020 to 2022, at 79.2 in 2020. After that, in 2021, Franchise Group’s debt ratio increased to 80.5 and increased again the following year in 2022 to 88.4. The next company is Avantax, which ended 2020 with a debt ratio of 70.7. The following year, Avantax had a debt ratio of 68.1 and ended 2021 at the lowest with a ratio of 22.9. In last for 2020 and 2021 was Nu Skin Enterprises, with debt ratios of 54.3 and 52.1, respectively. Then, ending 2022 in second with a ratio of 50.7.

The next solvency ratio is Franchise Group and competitors' times interest earned ratio. In 2020, Nu Skin Enterprises was at the top with a TIE of 0.15, followed by Franchise Group with a TIE of .06, and then Avantax at -2.37. In 2021, Franchise Group took the lead over Nu Skin Enterprises, having a TIE of .20 and Nu Skin Enterprises decreasing to 0.13. Then came Avantax, increasing to -.32, but still in last. Avantax’s times interest earned ratio in 2022 was similar to its ratio in 2021 in the fact that Franchise Group was in the lead at .14, with Nu Skin Enterprises right behind them at .08 and Avantax following at -0.06.

The last solvency ratio to be discussed is the company's operating cash flow coverage ratio. In 2020, Nu Skin Enterprises had a ratio of .36, while Franchise Group had a ratio of 0.17, and Avantax had a ratio of .04. At the end of 2021, all companies decreased. Still at the top was Nu Skin Enterprises with a ratio of 0.14, then Franchise Group at a ratio of 0.03, and Avantax hit the negatives with a ratio of -0.03. The last year on the chart shows the companies in 2022. Avantax increased to 0.53 while Nu Skin Enterprises decreased to .12 in second place, and Franchise Group decreased to the negatives at -0.01.

Part 4: Recent Developments and SWOT Analysis

Recent Company Developments:

There have been many recent developments within the past 12 months for Franchise Group. To begin with, Franchise Group recently completed a merger and acquisition when they were bought by Irradiant Partners (Kaminsky, 2023). As a result of Franchise Group being purchased by Irradiant Partners, Franchise Group’s common stock and preferred stock will now cease trading on the open market and be delisted from the Nasdaq Global Select Market. This will be put into place as of August 21, 2023. Additionally, the Franchise Group will complete the redemption of all outstanding shares of its Series A Preferred Stock at a par value of $0.01 per share as of August 22, 2023 (Kaminsky, 2023). Lastly, it is recommended that readers of this press release do not look at forward statements related to Franchise Group due to the impact of this acquisition by Irradiant Partners.

Next, to expand upon this merger between Franchise Group and Irradiant Partners, it is key to discuss the details of the merger. To start off with, Irradiant Partners purchased Franchise Group for $2.8 billion (Riley, 2023). After this acquisition, Irradiant Partners then put $216.5 million of new capital into the transaction and then invested $280 million of additional equity capital to ensure they acquired all the outstanding and issued common and preferred stock of Franchise Group. This is significant because potential and current investors in Franchise Group must be aware and knowledgeable about this information related to the acquisition.

Finally, Irradiant Partners entered into a new credit agreement with its existing lenders for a $600 million secured credit facility (Riley, 2023). This allowed Irradiant Partners to finance their equity investment in Franchise Group and retire its previous $380 million credit facility. This is significant because it shows that Irradiant Partners is placing a large emphasis on their acquisition of Franchise Group and intends not to just hold the company as an investment but to continue to grow the company and diversify its portfolio.

Another recent development related to Franchise Group is related to one of their brands known as the Vitamin Shoppe. An extension of the Vitamin Shoppe is a brand called True You, and on February 21, 2023, Vitamin Shoppe announced the launch of True You Beauty which is an extension of True You. True You Beauty includes vitamins and supplements that cater to the needs of women at every stage of their lives (Lipke, 2023). In addition, this extension of True You will include body washes, scrubs, lotions, and body butter for women of all ages (Lipke, 2023). True You Beauty will be sold at all the Vitamin Shoppe locations and online stores beginning in March of 2023. This is a significant recent development because it shows how the Vitamin Shoppe brand is beginning to cater not only to men but women as well. Typical supplements and vitamins are catered to men who focus on their fitness and training, but now with the extension of True You Beauty, the company is starting to broaden its target customer segment by attracting women of all ages with this line.

Finally, it is important to note the recent development that Franchise Group is being investigated by Schall Law Firm for potential violations of securities laws by the company (Franchise Group) and their executives (Gohil, 2023). This investigation came into place on May 26, 2023 (Gohil, 2023). In addition, there has been a lot of recent scrutiny over the past few months based on the way Franchise Group conducts its business and the way it follows the laws put in place by the SEC. All investors who have incurred financial losses due to their investments in Franchise Group have been contacted by Schall Law Firm and have been encouraged to reach out to the firm or the SEC. This is significant because it appears that Schall Law Firm is attempting to gather a number of investors who have suffered from financial losses related to their investments in Franchise Group to begin the proceedings of a potential class action lawsuit against Franchise Group. This is a development that must be monitored by potential investors in Franchise Group because it can result in the stock plummeting or dropping significantly.

Recent Industry Developments:

To start off with, one of Franchise Group’s leading brands is their Vitamin Shoppe which focuses on vitamins and supplements. There have been numerous hot trends in 2023 related to the vitamin and supplements industry. One trend has been that there has been an increase in spending on products that aid and support sleep (Elmadjian, 2023). Sleep supplement sales have more than doubled in the past five years and have been at the forefront of many discussions related to the supplement industry (Elmadjian, 2023). Products such as melatonin, elderberry, and CBD products (gummies) are the supplements that have risen in sales and have been favored in 2023 by consumers. There has been a large growth related to these products due to almost 20% of Gen Z purchasing these types of sleep support products. This makes a lot of sense since many people who take vitamins and supplements are very proactive about their health. Many of these people train with weights or run, which makes the sleep component even more important. An adequate amount of sleep each night will allow for the muscle tissue to recover faster and grow, which is key.

Additionally, another hot trend in 2023 has been supplements and vitamins that support joint and connective tissue. The most trending supplement of this group has been collagen (Elmadjian, 2023). Consumers have been spending over $2 billion on collagen products each year, and this number will continue to grow in 2023 (Elmadjian, 2023). This is noteworthy because collagen is found in a pill form and powder at many supplement stores. It would be wise for Franchise Group to continue researching and producing this collagen product. Next, many consumers are seeking supplements that support their hormone health. For example, 1 in 5 American women who struggle with infertility are seeking out hormone-balancing supplements (Elmadjian, 2023). This is significant because this growth in the supplement industry has been largely caused and supported by women. It is key to note that Vitamin Shoppe just extended its product line for True You Beauty and should begin to include vitamins for hormone support for women in this line due to the massive growth and need for hormone-balancing supplements. Finally, it is noted that another supplement line to watch for the end of 2023 and 2024 is pet supplements (Elmadjian, 2023). Pet supplements have been growing at a rapid pace and are projected to continue to grow due to the vast amount of information related to the benefits of pet supplements that have been provided to consumers. This is important because Franchise Group has a pet supplies brand that could begin to tap into this growing market.

Next, there have been great technological developments that have begun to impact the vitamin and supplement industry extraordinarily. To begin with, experts are predicting a 3.4% growth rate each year over the next five years for the health supplement industry due to key technological advancements (Bencic, 2023). This is significant because the health supplement industry has only been growing at a 1.8% rate over the previous five years, from 2018 to 2022 (Bencic, 2023). One such technological advancement that has contributed to almost double the growth rate in this industry has been freeze-drying. Freeze-drying is the process of removing water from a substance that allows the product to retain its nutritional value and quality (Bencic, 2023). This process of freeze-drying has been especially beneficial and useful for producing powdered supplements such as vitamins, protein powders, and pre-workouts. This is due to the fact that freeze-drying preserves the active and key ingredients in the supplement and allows the body to absorb these ingredients much more optimally. In addition, other supplement companies have paired this process with smart packaging, which allows companies to extend the shelf life of these supplements to always have a greater supply in store. Between freeze-drying and smart packing, many companies have been able to grow and meet the greater demand for vitamins and supplements.

These two important technological advancements in the vitamins and supplements industry are important because they are two ways that other vitamin companies have been able to meet and supply the greater demand for their supplements. Currently, Franchise Group does not employ either technological advancement due to this being primarily mainstream in Australia and other foreign countries (Bencic, 2023). We should note this due to the rapid growth rate of the vitamins and supplements industry; Franchise Group may have trouble meeting and adequately supplying this great demand by not being able to retain larger shelf lives for their products. This could have a large impact on the future success of Franchise Group by not adapting to the new technologically advanced ways of their respective industry.

SWOT Analysis:

Strengths

There are various strengths associated with Franchise Group that will provide a favorable return to investors. These strengths include:

- Broad Range of Products: Allows for customers to have a variety of choices when selecting supplements and recently extended their True You Beauty line to appeal to women

- Availability and Reliance: Franchise Group’s Vitamin Shoppe offers all their products in-store and online which is a key benefit for customers.

- Formidable Reputation: Vitamin Shoppe has continued to scale and expand to suit and respond to the present needs of their customers.

- Health and Wellness: Franchise Group is in a current supplement industry that is continuing to grow. This growth rate is expected to continue over the next five years as well.

Weaknesses

There are also an abundance of weaknesses associated with Franchise Group that should be noted. These weaknesses include:

- Operation Costs: Franchise Group’s Vitamin Shoppe is a brick-and-mortar store that is expensive due to rent payments, employee wages, electricity, and utilities. This makes it even more of a hardship for Vitamin Shoppe to be competitive when other online competitors do not have to worry about these costs.

- Competition from Online Competitors: It is much more efficient for people to order their supplements from online stores that will deliver to their doors than go to brick-and-mortar stores. In addition, the rise of e-commerce has made it even easier for consumers to order supplements online.

- Acquisition by Irradiant Partners: Irradiant Partners' acquisition of Franchise Group will raise questions as to why they needed to be acquired by a different company. This will also result in a new brand culture which is definitely a negative aspect related to the acquisition.

Opportunities

There are many opportunities that Franchise Group could analyze and ponder to continue to have success in their industry. These opportunities include:

- Technological Advancements: Franchise Group has the opportunity to begin using freeze-drying and smart packaging to allow for the most optimal supplements and meet the growing demand that is forecasted for the future.

- Online Marketing: Franchise Group can begin to grow its online presence and market its supplements with a heavier focus on online business. This could allow them the opportunity to grow exponentially by reaching a broader customer segment.

- Social Media Influencers: The fitness industry is full of social media influencers with large platforms, and partnering with them could allow Vitamin Shoppe to have a greater online presence.

- Expanding into Pre-Made Meals: Due to the expected growth in the health industry, a current opportunity for Franchise Group could be to start supplying meal plans to their customers for a weekly or monthly fee.

Threats

Finally, there are some significant threats from competitors and legal issues that are facing Franchise Group. These threats include:

- SEC Violations: Franchise Group and their executives are being investigated for SEC violations that could lead to a potential lawsuit and their stock dropping.

- Consumer Preferences: As seen in the popular supplement trends for 2023, supplements such as collagen and hormone-balancing vitamins have been at the forefront of consumer needs. Fast-changing consumer preferences will be a threat for Franchise Group in the coming years.

- Online stores and E-commerce: Online retail is and will continue to be a large threat to Franchise Group’s brick-and-mortar stores. They must adapt to have an online presence, or their demise may be near.

Part 5: Summary and Final Recommendation

On August 18th, 2023, at 5:31 p.m., the market price of Franchise Group, Inc.’s stock was approximately $29.88 (Franchise Group, Inc., 2019). At the current market price, we would not recommend purchasing additional shares, and if you are a current stockholder, we recommend selling those shares immediately. This is because the company recently became delisted from the NASDAQ Global Select Market due to a recent merger agreement they entered, previously discussed in the critical issues section and recent developments section. While company management and executives explain that they did this to improve the value it will bring to its public stockholders, they have also shown by delisting from NASDAQ that the company alone was unable to keep up with the growing competition within the business environment it operates in. As a result, we believe investors should not have confidence in this stock. Also, if a current stockholder holds shares of a stock after it is delisted, while shareholders could still own the stock, we believe its value is likely to decline significantly not being on the stock exchange, and this decline will cause a loss of confidence for investors as it is not certain that they will be relisted in the future or keep its value. This is why we recommend that potential stockholders do not buy any more shares. If stockholders already have shares, they should sell them to forgo any future losses and risks that may occur as a result of the company being delisted.

Summary:

Franchise Group, Inc. is a company with a diverse portfolio of recognized brands and businesses operating in the franchising industry. It has over 3,000 brand locations and 15,000 brand associates. The company's mission is to create a thriving environment for its operating companies and associates through partnerships with strong management teams committed to growth via franchising. Franchise Group operates in over 12 countries and is listed on the NASDAQ Global Market. Brian R. Khan serves as the CEO, President, and Director, while Eric Seeton is the Chief Financial Officer.

The company has faced various critical issues, primarily due to the impact of the COVID-19 pandemic. Store closures, supply chain disruptions, competition, and stock price volatility have challenged its financial performance. While revenues have increased, retained earnings and net earnings have fluctuated, and the company incurred significant transaction and acquisition-related costs.

Franchise Group's auditor, Deloitte & Touche LLP, identified acquisitions as a critical audit matter, focusing on the fair value estimation of acquired assets and liabilities, particularly intangible assets. Management discusses their critical accounting policies and estimates related to goodwill, non-amortizing intangible assets, business combinations, purchase price allocation, and long-lived assets.

ESG Performance Report:

To establish an aspirational ESG model, Hain Celestial, a company in the consumer staples sector, was selected. Hain Celestial focuses on improving ESG metrics, embedding ESG into its culture, and setting specific ESG goals. The company has three ESG pillars: Healthier Planet, Healthier Products, and Healthier People.

Hain Celestial made progress in renewable energy procurement, waste management, and diversity and inclusion. They increased the purchase of renewable electricity, reduced waste going to landfills, and set goals for reducing food waste. They also focused on diversity and inclusion by establishing a Diversity and Inclusion Council and tracking employee demographics.

Recommendation:

Franchise Group, Inc. should adopt an ESG strategy that aligns with its mission and values, similar to Hain Celestial's approach. Embedding ESG criteria into all functional processes can help the company make responsible, long-term decisions and enhance its ESG performance. Setting specific ESG goals and tracking progress is essential. Prioritizing renewable energy procurement, waste reduction, and diversity and inclusion initiatives can contribute to a more sustainable and socially responsible business.

Given the challenging financial issues faced by Franchise Group, implementing a robust ESG strategy can enhance its reputation, attract socially responsible investors, and contribute to long-term sustainability and success.

Part 6: Bibliography

Badcock & More Home Furniture. (2023). About Us- Our History. Badcock. Retrieved from https://www.badcock.com/about-us

Bencic, E. (2023, April 20). How technology will drive the health supplements industry forward. retailbiz. Retrieved from http://www.retailbiz.com.au/topics/supply-chain/how-technology-will-drive-the-health-supplements-industry-forward/

Elmadjian, M. (2023, January 3). 2023 Trends In The Vitamin And Supplement Industry. DaVinci Laboratories. Retrieved from http://blog.davincilabs.com/blog/2023-trends-in-vitamin-and-supplement-industry

Franchise Group, Inc ., (2023), Retrieved from https://franchisegrp.com/

Franchise Group, Inc., (2022). SEC filing details - Form 10-K. Retrieved from Franchise Group, Inc. Annual Reports: https://www.annualreports.com/Company/franchise-group-inc

Franchise Group, Inc., (FRG). (2019). Retrieved from Microsoft Start (MSN) https://www.msn.com/en-us/money/stockdetails/fi-a23yk2?duration=3Y

GlobeNewswire. (2023, August 8). Franchise Group, Inc. Announces Second Quarter Fiscal Year 2023 Financial Results. Retrieved from Globe Newswire Franchise Group, Inc. https://www.globenewswire.com/news-release/2023/08/08/2721086/0/en/Franchise-Group-Inc-Announces-Second-Quarter-Fiscal-Year-2023-Financial-Results.html

GlobeNewswire. (2023, May 10). Franchise Group, Inc. Announces Definitive Agreement to Be Acquired by a Consortium Led by Management Group. GlobeNewswire. Retrieved from https://www.globenewswire.com/en/news-release/2023/05/10/2665413/0/en/Franchise-Group-Inc-Announces-Definitive-Agreement-to-Be-Acquired-by-a-Consortium-Led-by-Management-Group.html

Gohil, P. (2023, May 26). Schall Law Firm Investigates Claims against Franchise Group, Inc. - Investors with Losses Contact Firm. World Litigation Forum. Retrieved from http://worldlitigationforum.org/news/schall-law-firm-investigates-claims-against-franchise-group-inc-investors-with-losses-contact-firm/

Hain Celestial. (2022). 2022 ESG Report. Hain Celestial ESG Reports. Retrieved from https://www.hain.com/impact/esg-reports/

Insider. (2021, February 23). What is Value Proposition - Definition by Insider. Insider. Retrieved from http://useinsider.com/glossary/value-proposition/

Kaminsky, A. (2023, August 21). Franchise Group, Inc. Announces Completion of Merger. GlobeNewswire. Retrieved from http://www.globenewswire.com/news-release/2023/08/21/2728680/0/en/Franchise-Group-Inc-Announces-Completion-of-Merger.html

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Lipke, D. (2023, February 21). The Vitamin Shoppe® Launches TrueYouTM Beauty with Advanced Bodycare Formulas Expertly Crafted to Nourish Skin, Empowering Every Woman’s Brilliant Self to Shine Through. The Vitamin Shoppe Press Room. Retrieved from http://press.vitaminshoppe.com/2023-02-21-The-Vitamin-Shoppe-R-Launches-TrueYou-TM-Beauty-with-Advanced-Bodycare-Formulas-Expertly-Crafted-to-Nourish-Skin-Empowering-Every-Woman%e2%80%99s-Brilliant-Self-to-Shine-Through/ .

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https://www-capitaliq-com.ezproxy.hofstra.edu/CIQDotNet/company.aspx?companyId=30798&fromSearchProfiles=true

Sylvan Learning. (2023). Locations: Find a Tutor Near Me. Sylvan Learning Locations. Retrieved from https://www.sylvanlearning.com/locations

Part 7: Appendix

Franchise Group, Inc.

Income Statement

Balance Sheet

Statement of Cash Flows

Franchise Group, Inc. > Financials > Ratios
	Latest Filings		Period Type: Annual
	Latest on Right		Decimals: Capital IQ (Default)
Ratios
For the Fiscal Period Ending	12 months Dec-26-2020	12 months Dec-25-2021	12 months Dec-31-2022
Profitability
Return on Assets %	2.1%	4.9%	4.8%
Return on Capital %	2.5%	5.8%	5.6%
Return on Equity %	4.1%	33.4%	(11.6%)
Return on Common Equity %	3.2%	32.0%	(13.0%)
Margin Analysis
Gross Margin %	42.8%	41.0%	42.4%
SG&A Margin %	40.3%	34.0%	35.8%
EBITDA Margin %	5.7%	9.1%	8.5%
EBITA Margin %	2.8%	7.2%	6.9%
EBIT Margin %	2.6%	7.0%	6.6%
Earnings from Cont. Ops Margin %	0.5%	5.9%	(1.6%)
Net Income Margin %	1.2%	11.2%	(1.6%)
Net Income Avail. for Common Margin %	0.4%	5.6%	(1.8%)
Normalized Net Income Margin %	(1.6%)	1.8%	0.2%
Levered Free Cash Flow Margin %	7.4%	(14.4%)	0.9%
Unlevered Free Cash Flow Margin %	8.9%	(13.5%)	3.0%
Asset Turnover
Total Asset Turnover	1.3x	1.1x	1.2x
Fixed Asset Turnover	3.2x	3.6x	3.9x
Accounts Receivable Turnover	32.0x	46.6x	38.6x
Inventory Turnover	3.9x	3.9x	3.6x
Short Term Liquidity
Current Ratio	1.0x	1.3x	1.4x
Quick Ratio	0.4x	0.7x	0.6x
Cash from Ops. to Curr. Liab.	0.4x	0.1x	NM
Avg. Days Sales Out.	11.4	7.8	9.6
Avg. Days Inventory Out.	94.5	92.4	103.2
Avg. Days Payable Out.	64.4	47.6	48.4
Avg. Cash Conversion Cycle	41.5	52.6	64.5
Long Term Solvency
Total Debt/Equity	285.7%	340.8%	647.6%
Total Debt/Capital	74.1%	77.3%	86.6%
LT Debt/Equity	225.7%	254.4%	522.7%
LT Debt/Capital	58.5%	57.7%	69.9%
Total Liabilities/Total Assets	79.2%	80.5%	88.4%
EBIT / Interest Exp.	0.5x	1.7x	0.9x
EBITDA / Interest Exp.	2.3x	4.1x	1.9x
(EBITDA-CAPEX) / Interest Exp.	1.9x	3.7x	1.8x
Total Debt/EBITDA	4.9x	4.8x	4.2x
Net Debt/EBITDA	4.2x	4.2x	4.1x
Total Debt/(EBITDA-CAPEX)	6.0x	5.2x	4.6x
Net Debt/(EBITDA-CAPEX)	5.2x	4.6x	4.4x

Altman Z Score	1.52	1.52	1.91
Growth Over Prior Year
Total Revenue	905.9%	60.4%	35.1%
Gross Profit	988.2%	53.4%	39.7%
EBITDA	NM	157.4%	26.0%
EBITA	NM	311.6%	28.9%
EBIT	NM	331.1%	28.7%
Earnings from Cont. Ops.	NM	1,654.1%	NM
Net Income	NM	1,351.4%	NM
Normalized Net Income	NM	NM	(86.5%)
Diluted EPS before Extra	NM	1,810.1%	NM
Accounts Receivable	(26.8%)	60.8%	64.6%
Inventory	0.7%	122.7%	9.5%
Net PP&E	4.1%	82.6%	(4.3%)
Total Assets	42.3%	111.8%	(7.2%)
Tangible Book Value	NM	NM	NM
Common Equity	207.2%	98.0%	(44.8%)
Cash from Ops.	NM	(56.1%)	NM
Capital Expenditures	498.2%	15.7%	12.4%
Levered Free Cash Flow	NA	NM	NM
Unlevered Free Cash Flow	NA	NM	NM
Dividend per Share	200.0%	55.6%	42.9%
Compound Annual Growth Rate Over Two Years
Total Revenue	NA	301.6%	47.2%
Gross Profit	NA	308.6%	46.4%
EBITDA	NA	NM	80.1%
EBITA	NA	NM	130.3%
EBIT	NA	NM	135.5%
Earnings from Cont. Ops.	NA	NM	NM
Net Income	NA	NM	NM
Normalized Net Income	NA	186.9%	NM
Diluted EPS before Extra	NA	NM	NM
Accounts Receivable	NA	8.5%	62.7%
Inventory	NA	49.7%	56.1%
Net PP&E	NA	37.9%	32.2%
Total Assets	NA	73.6%	40.2%
Tangible Book Value	NA	NM	NM
Common Equity	NA	146.7%	4.6%
Cash from Ops.	NA	NM	NM
Capital Expenditures	NA	163.1%	14.0%
Levered Free Cash Flow	NA	NA	(49.0%)
Unlevered Free Cash Flow	NA	NA	(14.7%)
Dividend per Share	NA	116.0%	49.1%
Compound Annual Growth Rate Over Three Years
Total Revenue	NA	NA	179.3%
Gross Profit	NA	NA	185.7%
EBITDA	NA	NA	NM
EBITA	NA	NA	NM
EBIT	NA	NA	NM
Earnings from Cont. Ops.	NA	NA	NM
Net Income	NA	NA	NM
Normalized Net Income	NA	NA	3.6%
Diluted EPS before Extra	NA	NA	NM
Accounts Receivable	NA	NA	24.7%
Inventory	NA	NA	34.9%
Net PP&E	NA	NA	22.1%
Total Assets	NA	NA	40.9%
Tangible Book Value	NA	NA	NM
Common Equity	NA	NA	49.8%
Cash from Ops.	NA	NA	NM
Capital Expenditures	NA	NA	98.1%
Levered Free Cash Flow	NA	NA	NA
Unlevered Free Cash Flow	NA	NA	NA
Dividend per Share	NA	NA	88.2%
Compound Annual Growth Rate Over Five Years
Total Revenue	NA	NA	NA
Gross Profit	NA	NA	NA
EBITDA	NA	NA	NA
EBITA	NA	NA	NA
EBIT	NA	NA	NA
Earnings from Cont. Ops.	NA	NA	NA
Net Income	NA	NA	NA
Normalized Net Income	NA	NA	NA
Diluted EPS before Extra	NA	NA	NA
Accounts Receivable	NA	NA	NA
Inventory	NA	NA	NA
Net PP&E	NA	NA	NA
Total Assets	NA	NA	NA
Tangible Book Value	NA	NA	NA
Common Equity	NA	NA	NA
Cash from Ops.	NA	NA	NA
Capital Expenditures	NA	NA	NA
Levered Free Cash Flow	NA	NA	NA
Unlevered Free Cash Flow	NA	NA	NA
Dividend per Share	NA	NA	NA

Franchise Group, Inc. Ratios

Source: https://www.macrotrends.net/stocks/delisted/FRG/franchise/financial-statements

Competitor Financial Statements and Ratios

Avantax, Inc.

Source: https://www.macrotrends.net/stocks/charts/AVTA/avantax/financial-statements

Income Statement

Balance Sheet

Cash Flow Statement

Ratios

Nu Skin Enterprises

Source: https://www.macrotrends.net/stocks/charts/NUS/nu-skin-enterprises/financial-statements

Income Statement

Balance Sheet

Cash Flow Statement

Ratios

1