Franchise Group: A Master Class In Capital Allocation

Sep. 07, 2022 8:30 AM ETFranchise Group, Inc. (FRG)89 Comments
Petar Mirkovic profile picture
Petar Mirkovic
1.49K Followers

Summary

  • Brian Kahn, sitting at the helm of the Franchise Group, is displaying a master class in capital allocation that turned a relatively negligible company into a formidable franchise holding conglomerate.
  • Management incentives are completely aligned with the rest of the shareholders as the CEO and the rest of the insiders own more than 30% of the company and are still buying more.
  • A degrading macroeconomic environment and a downgrade in guidance resulted in tremendous down-pressure being applied to the company's stock price, which is now down 37.74% year-to-date.
  • The $1.1B market cap has a $500mm buy-back program approved and in place while at the same time distributing 25% of EBITDA in terms of dividends to the shareholders resulting in a 7.43% yield.
  • A multi-layered approach to creating shareholder value has seen investors enjoy the company delivering a five-fold market alpha while at the same time collecting extremely generous dividend distributions.

Young woman scanning barcode with smartphone

Ergin Yalcin

Franchise Group (NASDAQ:FRG) is a very unique and intriguing company that is led by top-class management with skin in the game that is successfully executing a brilliant business model creating significant shareholder value through a multilayered approach. The

Franchise Group YTD Price Performance Benchmarked to S&P500

FRG YTD Price Performance (Seeking Alpha)

Brand Portfolio Overview as seen in the investor presentation

Brand Portfolio Overview (FRG August Investor Presentation)

Overview of the TVS as reported in the investor presenation

The Vitamin Shop Overview (FRG August Investor Presentation)

American Freight Overview as seen in the August investor presentation

American Freight Overview (FRG August Investor Presentation)

Pet Supplies Plus Overview as seen in the investor presentation

Pet Supplies Plus Overview (FRG August Investor Presentation)

Sylvian Learning Overview as seen in the August investor presentation

Sylvian Learning Overview (FRG August Investor Presentation)

Badcock Home Furniture Overview as seen in the presentation

Badcock Home Furniture Overview (FRG August Investor Presentation)

Company Ownership Structure as per TIKR

Company Ownership Structure (TIKR Terminal)

Insider Trading History

Insider Trading (OpenInsider)

Franchise Group Dividend Growth per TIKR

FRG Dividend Growth (TIKR Terminal)

Shares Outstanding Quarterly Change per TIKR Terminal

FRG Shares Outstanding (TIKR Terminal)

This article was written by

Petar Mirkovic profile picture
1.49K Followers
On a journey from law to investing. Following in the footsteps of Charlie Munger. A subscriber to the ideas and principles of focus and value investing.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We plan to initiate a position in the company and make it a core holding over the course of the upcoming weeks and months.

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