Furniture store American Freight is set to close all of its 328 locations across the United States as a part of Chapter 11 bankruptcy proceedings by its parent company, Franchise Group Inc.
The closure is part of a restructuring agreement between the Franchise Group and 80 percent of its first lien lenders.
“As part of this strategy, [Franchise Group] has determined to wind down American Freight, which has struggled due to sustained inflation and macroeconomic challenges facing the large durable goods sector,” the holding company said in a news release.
As the first lien lenders’ part of the agreement, they pledged $250 million in debtor-in-possession financing. Alongside available cash reserves, this would allow the Franchise Group to continue to pay wages and provide benefits to employees as usual, maintain relied-upon customer programs, and pay vendors for ongoing services, the company said.
This financial stabilization will secure the survival of Franchise Group’s other retail chains—Pet Supplies Plus, The Vitamin Shoppe, and Buddy’s Home Furnishings—during the restructuring process.
Franchise Group did not say whether it had plans to reallocate a portion of American Freight’s 3,000 employees to its other chains. However, President and CEO Andrew Laurence emphasized the strategic nature of the agreement.
“Today’s announcement to de-lever our balance sheet is a pivotal step forward in enabling our market-leading businesses Pet Supplies Plus, The Vitamin Shoppe, and Buddy’s Home Furnishings to realize their full potential,” he said.
“Strengthening [Franchise Group]’s balance sheet will allow us to enhance our support for these businesses as they advance their growth trajectories.”
According to court documents, Pet Supplies Plus and The Vitamin Shoppe each employ over 4,000 people; Buddy’s Home Furnishings has approximately 230 employees in its 34 company-operated stores, excluding franchises.
Closing sales at American Freight are being managed by Hilco Consumer-Retail.
“Our goal is to deliver outstanding value to customers during this full chain closing sale,” said Ian Fredericks, CEO of Hilco Consumer-Retail in a statement. “Everything is on sale and must be sold, and we recommend shopping early for the best selection.”
American Freight’s website now features a big “Going out of business sale!” offering up to 30 percent off the lowest ticketed prices, up to 55 percent off open box appliances, and even higher discounts on specific items.
American Freight isn’t the first discount retailer to go belly-up this year. Bob’s Stores said it was shutting down permanently in July, 99 Cents Only Stores went out of business in April.
In September, discount retailer Big Lots filed for bankruptcy after announcing earlier that it would close 300 of its 1,400 stores in an effort to remain in business. The company is currently in the process of restructuring.
American Freight, founded in 1994, bought direct from manufacturers to sell directly in their warehouse-style stores. By cutting out the middleman, the chain was able to offer in-store and online access to furniture, mattresses, new and out-of-box home appliances, and home accessories at low prices.