American Freight is closing all of its stores. Bankruptcy filing warns of possible paycheck delays for laid-off employees

It’s not been a great year for retail chains. Throughout 2024, bankruptcies at many well-known retail brands have led to store closures and lost jobs. And now in the final months of the year, there is another.

Franchise Group, Inc. has announced that it is closing one of its branded retailers, American Freight Appliances & Furniture, better known simply as American Freight. Here’s what you need to know:

What is American Freight?

American Freight is an appliance and furniture chain owned by Franchise Group. The chain was founded in 1994 and operates warehouse-style stores where customers can buy everything from mattresses to coffee makers. According to Franchise Group’s bankruptcy filing, American Freight operates roughly 341 stores in 41 states. Of those, 329 locations are company-owned.

American Freight isn’t the only retail chain owned by Franchise Group. The conglomerate also owns other popular retailers including Pet Supplies Plus, The Vitamin Shoppe, and Buddy’s Home Furnishings. Those stores will continue to operate, however, while Franchise Group has announced that it will be closing all American Freight stores.

Why are American Freight stores closing?

American Freight stores are closing because its owner, Franchise Group, is filing for Chapter 11 bankruptcy protection. Its goals during bankruptcy proceedings include reducing the company’s debt and enhancing its liquidity, and also aims to strengthen three of its brands: Pet Supplies Plus, The Vitamin Shoppe, and Buddy’s Home Furnishings.

Unfortunately for American Freight and its employees, Franchise Group seems to believe that the brand is not saving.

Announcing the company’s bankruptcy plans, CEO Andrew Laurence said, “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. Each of these businesses has a demonstrated value proposition and provides great products and services to customers, which they will continue to do seamlessly during this process.”

Left out of his comments was American Freight, which Franchise Group said in a press release that it would be shuttering. It said the furniture and appliance chain has been struggling “due to sustained inflation and macroeconomic challenges facing the large durable goods sector.”

What does this mean for American Freight workers?

Unfortunately, it seems that a “substantial” number of American Freight employees will be laid off during the store closing procedures, according to a document filed with the United States Bankruptcy Court for the District of Delaware.

But things may be even worse for some of the employees. Besides losing their jobs, a docket submitted by Franchise Group to the court also states that some employees may not be paid in a timely matter for their final work as the law in many states requires.

American Freight employees may see delayed wage payments

As part of winding down American Freight stores, the company will be holding going-out-of-business sales to help move the remaining inventory. It will need employees to operate these stores while those sales are going on. However, the company admits that “a substantial number of employees” will also be terminated during the closing sales.

To help protect employees, many states have what are known as “fast pay laws,” which require companies to pay remaining owed wages to an employee as close as possible to the time they are laid off. (Some states even mandate that final paychecks be paid “immediately.”) But despite these legal requirements, Franchise Group has warned it may be unable to do this.

“To be clear, the Debtors intend to pay terminated employees as expeditiously as possible and under normal payment procedures,” the court document states. “However, American Freight’s payroll system will simply be unable to process the payroll information associated with these terminations in a manner that will be compliant with the Fast Pay Laws.”

Franchise Group explains that under normal termination proceedings, when an employee is laid off, American Fright’s payroll department has no problem processing payments as required under fast pay law rules. However, the company warns, “Given the number of employees who will likely be terminated during the Store Closing Sales, this process could easily take several days, making compliance with the Fast Pay Laws burdensome to the Debtors’ estates, if not impossible.”

In short, some American Freight’s workers will be working their final days at the company, helping to close its stores, yet may not receive their wages for such work in a timely manner.

We’ve reached out to Franchise Group to ask for more information about how long of a delay employees might expect. We’ll update this post if we hear back.

When are American Freight stores closing?

Franchise Group says it initiated the winding down of American Freight stores today, November 5, as well as commencing the stores’ going-out-of-business sales. The sales will be available both online and in-store. You can find your closest American Freight location by using the company’s store locator tool here.