Franchise Group Inc.'s (FRG) fiscal-year 2022 operating performance was weaker than we expected, particularly due to the performance of American Freight, which dragged down its overall results. We expect challenging macroeconomic conditions will negatively affect the home furnishing segment and pressure the company's operating margins in 2023. Therefore, we revised our outlook on FRG to negative from stable and affirmed all of our ratings, including our 'B+' issue-level rating on its first-lien term loan and 'B-' issue-level rating on its second-lien term loan. The negative outlook reflects that we could lower our rating on FRG over the next 12 months if its operating performance faces a greater-than-forecast level of pressure and it is unable to improve American Freight's execution. In
