Nov 2 (Reuters) - B. Riley Financial-backed Franchise

Group is preparing to file for bankruptcy as soon as this

weekend, Bloomberg News reported on Saturday citing people with

knowledge of the plans.

Franchise Group, which owns The Vitamin Shoppe, will seek

Chapter 11 protection with a plan in place for senior lenders

including HPS Investment Partners to take control of the firm,

the report added.

B. Riley has been navigating heightened turmoil

since August, when it warned that its exposure to Franchise

could result in a writedown and losses for the second quarter

ended June 30.

B. Riley, Franchise Group and HPS Investment Partners did

not immediately respond to Reuters' requests for comment.

In August, co-founder and co-CEO Bryant Riley had offered to

buy the investment bank for $7 per share.

B. Riley had participated in the management-led buyout of

Franchise last year. Its dealings with Franchise's former CEO,

Brian Kahn, came under review after Bloomberg News reported that

he was a co-conspirator in a securities fraud involving Prophecy

Asset Management.

Kahn has denied the allegation, saying he never knew that

Prophecy was allegedly defrauding investors.

An external investigation and an internal review earlier

this year cleared B. Riley of any wrongdoing.

The investment bank agreed to sell a portion of its

traditional wealth management business to Stifel on

Friday in a deal expected to fetch between $27 million and $35

million in cash.

In October, it also sold the Great American unit, which

helps companies determine the value of their assets, to

investment firm Oaktree Capital in a $386 million deal.