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Fat Brands, Inc

FAT
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Business Summary

FAT Brands Inc. operates as a multi-brand restaurant company, primarily functioning as a franchisor of quick service, fast casual, casual dining, and polished casual dining concepts globally. The company's business model is "asset light," generating revenue through initial franchise fees and ongoing royalties based on franchisee sales, which is designed to provide strong profit margins and an attractive free cash flow profile while minimizing restaurant operating risks . As of December 29, 2024, FAT Brands had approximately 2,300 restaurants open or under construction, with about 92% being franchised, and directly owned and operated 181 restaurants , . System-wide sales for fiscal year 2024 reached $2.4 billion .

The company's core business model revolves around franchising, where it charges franchisees an initial fee, typically ranging from $20,000 to $50,000 per store, and an ongoing royalty fee of between 0.75% to 7.0% of net sales , . Franchisees also generally pay an advertising fee based on net sales for local and brand marketing . This model emphasizes recurring revenue streams from royalties and advertising fees, complemented by transactional income from initial franchise fees and restaurant sales from company-owned locations. The primary customer segments are the franchisees themselves, who operate the restaurants, and the end consumers who frequent these establishments.

FAT Brands' portfolio includes 18 restaurant brands across four categories: Quick Service, Fast Casual, Casual Dining, and Polished Casual Dining . Quick Service brands include Round Table Pizza, Marble Slab Creamery, Great American Cookies (GAC), Hot Dog on a Stick (HDOS), Pretzelmaker, and Fazoli's . Fast Casual brands are Fatburger, Johnny Rockets, Elevation Burger, and Yalla Mediterranean . Casual Dining encompasses Buffalo's Cafe and Buffalo's Express, Hurricane Grill & Wings, Ponderosa Steakhouse / Bonanza Steakhouse, and Native Grill & Wings . The Polished Casual Dining category features Twin Peaks and Smokey Bones, which are owned and operated through its majority-owned subsidiary, Twin Hospitality Group Inc. .

For the fiscal year ended December 29, 2024, FAT Brands reported total revenues of $592.652 million . This was an increase from $480.457 million in the fiscal year ended December 31, 2023 , primarily driven by the acquisition of Smokey Bones in September 2023 and new restaurant openings . Royalties contributed $90.035 million , restaurant sales $413.480 million , advertising fees $39.473 million , factory revenue $37.949 million , franchise fees $6.487 million , and other revenue $5.228 million . The company reported a net loss of $189.847 million for fiscal year 2024 , compared to a net loss of $90.110 million in fiscal year 2023 . Basic and diluted loss per common share was $(11.60) for fiscal year 2024, compared to $(5.85) for fiscal year 2023. Total costs and expenses for fiscal year 2024 were $644.872 million , leading to a loss from operations of $(52.220) million . Cash and restricted cash totaled $67.389 million as of December 29, 2024 . Total debt, net of current portion, was $1,208.997 million as of December 29, 2024, with a current portion of long-term debt of $49.241 million .

Year-over-year, total revenues increased by $112.195 million , . Royalties decreased from $94.036 million in fiscal 2023 to $90.035 million in fiscal 2024 , . Restaurant sales significantly increased by $114.451 million, from $299.029 million in fiscal 2023 to $413.480 million in fiscal 2024 , . Advertising fees remained relatively stable at $39.473 million in fiscal 2024 compared to $39.490 million in fiscal 2023 , . Factory revenue also remained stable at $37.949 million in fiscal 2024 compared to $37.983 million in fiscal 2023 , . Franchise fees increased from $4.979 million in fiscal 2023 to $6.487 million in fiscal 2024 , . The net loss widened from $90.110 million in fiscal 2023 to $189.847 million in fiscal 2024 , . Total costs and expenses increased by $186.745 million, from $458.127 million in fiscal 2023 to $644.872 million in fiscal 2024 , .

During the fiscal year, a significant operational development was the acquisition of Smokey Bones in September 2023 . In January 2025, the company distributed approximately 5% of the fully-diluted shares of Class A Common Stock of Twin Hospitality Group Inc. to its common stockholders, and Twin Hospitality began trading as a standalone publicly traded company listed on NASDAQ under the symbol "TWNP" . FAT Brands retained the remaining shares of Twin Hospitality outstanding immediately following the distribution and will continue to consolidate its financial statements . The company also refinanced all of Twin Hospitality I, LLC's secured notes on November 21, 2024, through the issuance and sale of four tranches of fixed rate secured notes totaling $416.7 million .

Business Outlook

Management's growth strategy includes organically growing the new store pipeline and attracting new franchisees, with a current pipeline of approximately 1,000 restaurants under development . The company believes that worldwide markets for its brands are not saturated and can support a significant increase in units through new franchisee relationships . There is strong new franchisee activity and continued demand from existing franchise partners to develop other brands within the portfolio .

A key growth area is the expansion of the company's factory business, which operates a manufacturing facility in Atlanta, Georgia, currently at approximately 40% capacity . The strategy is to expand the facility's production by offering batter to other brand categories within the portfolio and by entering into third-party manufacturing contracts . Another significant growth opportunity lies in the Polished Casual Dining category, specifically with the Twin Peaks brand. Twin Peaks has grown from 85 units to 115 units since its acquisition in October 2021 . The company plans to pursue continued growth for Twin Peaks through additional company-owned and franchised units .

Driving store growth through co-branding is also a strategic focus. The company franchises co-branded Fatburger / Buffalo's Express, Johnny Rockets / Hurricane Grill and Wings, Great American Cookies / Marble Slab Creamery, and Pretzel Maker / Great American Cookie locations . Additionally, it tri-brands Fat Burger / Buffalo's Express / Hot Dog on a Stick and Great American Cookies / Marble Slab Creamery / Pretzel Maker locations . Co-branding and tri-branding are estimated to result in a 20%-30% increase in average unit volume compared to stand-alone locations with minimal incremental cost to franchisees . The acquisition strategy reinforces co-branding, as complementary acquired brands are expected to be offered to existing franchisees on a co-branded basis .

Operationally, the company aims to optimize its capital structure. In 2021, acquisitions were funded primarily through whole-business securitization facilities, which significantly reduced the net cost of capital . The company has refinanced and may continue to refinance these notes, potentially seeking an investment rating on a portion of the notes to further reduce capital costs . The company also plans to continue expanding internationally, leveraging its significant global presence with franchised stores in 34 countries, including 46 states within the United States, Washington D.C., and Puerto Rico . Further penetration of Middle Eastern and Asian markets is targeted, particularly through expanding the number of units of several existing brands .

Planned capital allocation includes potential future acquisitions of new brands that enhance existing categories . The management platform is designed to cost-effectively and seamlessly scale with new restaurant concept acquisitions, especially within existing restaurant categories . The company has identified additional categories of potential acquisitions that appeal to a broad base of U.S. and international customers and would be accretive to the existing portfolio . As of December 29, 2024, the company does not have any material commitments for capital expenditures .

Risk Factors

FAT Brands faces several material risks, including significant outstanding indebtedness under its whole-business securitization facilities, which totaled $1.3 billion as of December 29, 2024 , exposing the company to default risk and lender remedies if sufficient cash flow is not generated to meet payment obligations . The company is also subject to pending government charges, including a May 10, 2024 indictment by the U.S. Department of Justice for two violations of Section 402 of the Sarbanes-Oxley Act related to extending credit of $2.65 million to its former CEO in 2019 and 2020 , . Concurrently, the SEC filed a complaint alleging violations of various securities laws for fiscal periods covering 2017 through 2020, including failure to disclose related party transactions, maintain proper books and records, and making false statements regarding liquidity . These governmental actions and related stockholder litigation, including a putative civil securities class action lawsuit filed in June 2024 , could lead to substantial expenses, fines, penalties, or other remedies, and materially adversely affect the company's business, financial condition, and reputation . Furthermore, the company's subsidiary, Fog Cutter Acquisition, LLC, is a party to environmental litigation seeking damages in the range of $12.0 million to $22.0 million , for which reserves have been recorded, but an unfavorable outcome exceeding these reserves could have a material adverse effect .

Management Priorities

Management's message to shareholders emphasizes the company's "asset light" franchisor model, which is designed to provide strong profit margins and an attractive free cash flow profile while minimizing restaurant operating company risk . They highlight the scalability of their management platform, enabling the addition of new stores and restaurant concepts with minimal incremental corporate overhead and significant synergies . Management's strategic priorities include organically growing the new store pipeline and attracting new franchisees, expanding the factory business, capitalizing on growth opportunities in the Polished Casual Dining category, driving store growth through co-branding, optimizing the capital structure, continuing international expansion, and acquiring new brands that enhance existing categories . The company has provided specific guidance regarding its dividend policy, stating that under a letter agreement executed in November 2024, it agreed not to pay a dividend on its common stock until at least $25,000,000 in proceeds from Qualified Equity Offerings have been used to prepay the Twin Securitization Notes . This restriction does not apply to dividends on the outstanding Series B Cumulative Preferred Stock .

View Source Annual Report on SEC.gov ↗

References

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  13. [13] Item 7, MD&A — Consolidated statement of operations data
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  15. [15] Item 7, MD&A — Results of Operations
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  28. [28] Item 7, MD&A — Liquidity and Capital Resources
  29. [29] Item 10, Debt
  30. [30] Item 10, Debt
  31. [31] Item 7, MD&A — Consolidated statement of operations data
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  37. [37] Item 7, MD&A — Results of Operations
  38. [38] Item 1, Business
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  40. [40] Item 7, MD&A — Twin Securitization Notes
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  59. [59] Item 7, MD&A — Capital Expenditures
  60. [60] Item 1A, Risk Factors
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  69. [69] Item 7, MD&A — Executive Overview
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  72. [72] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  73. [73] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  74. [74] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Analysis on 5/21/2026