FAT Brands Reports Strong Expansion Despite Financial Losses

FAT Brands Inc. Reports Fiscal Year Financial Results

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LOS ANGELES - FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) announced its fiscal fourth quarter and full fiscal year 2024 financial results, covering its operations through December 29, 2024.

In a compelling statement, Andy Wiederhorn, Chairman of FAT Brands, reflected on the company's achievements throughout 2024, emphasizing the opening of 92 new restaurants and signing over 250 franchise agreements. This aggressive growth saw the development pipeline expand to a total of 1,000 locations. As he looks to 2025, Wiederhorn indicates an ambition to open over 100 additional restaurants, highlighting robust consumer demand and ample opportunities for franchisees.

Co-CEOs Ken Kuick and Rob Rosen offered insights into strategic maneuvers that are shaping the company's future. The notable spin-out of Twin Hospitality Group Inc. is a critical highlight, providing stockholders with the chance to partake directly in the Twin Peaks brand's growth while furnishing FAT Brands with necessary capital to enhance its growth trajectory. Ken Kuick underscored the goal of maximizing value creation from Twin Hospitality for shareholders.

Rob Rosen expanded on the company's refranchising strategy, stating their initiative to refranchise 57 Fazoli’s locations, which will result in a remarkable shift to near 100% franchised operations by downsizing company-owned locations significantly.

Key Financial Highlights for Fourth Quarter 2024

In comparison to the fourth quarter of fiscal year 2023, total revenue for the fourth quarter of 2024 decreased by 8.4% to $145.3 million from $158.6 million. This decline was impacted by a 14th operational week contributing to previous year's revenue.

• Total revenue revealed an $11.3 million loss correlated with lower same-store sales and closures of two Smokey Bones locations.
• The loss from operations amounted to $39.3 million, a stark contrast to the $3.1 million recorded previously.
• Net loss reached $67.4 million, or $4.06 per diluted share, compared to $26.2 million, or $1.68 per diluted share from the prior year.
• Adjusted EBITDA fell to $14.4 million, down from $27 million, highlighting the significant impacts of earlier operational decisions.
• Similarly, adjusted net loss adjusted to $29.9 million, equating to $1.87 per diluted share.

Overview of Full Fiscal Year 2024

Full-year performance illustrated intriguing trends; total revenue surged by 23.4% to $592.7 million compared to $480.5 million in the previous fiscal year. Notably, the growth occurred despite a slight decline in same-store sales of 2.5%.

• Operational loss for the year reached $52.2 million, a decline from a prior income of $22.3 million in fiscal year 2023.
• Net loss for the year was substantial at $189.8 million, equivalent to $11.60 per diluted share.
• Adjusted EBITDA stood at $62.4 million, falling from $91.2 million previously.
• Adjusted net loss reflected substantial growth, landing at $128.9 million or $8.02 per diluted share.

Strategic Overview and Future Directions

The financial results elicit a blend of caution and optimism for FAT Brands. Recovering from setbacks marked by significant losses, the company is leveraging its vast franchise network to enhance overall performance and brand presence.

General and administrative expenses climbed by $4.2 million, primarily driven by significant store closure costs. Interestingly, the company noted an $8 million decrease in cost related to restaurant revenues, signifying strategic adjustments amid changing market conditions.

Importance of Refranchising Strategy

FAT Brands is resolutely focusing on refranchising to foster continuous growth. By reducing company-operated locations, especially in the Fazoli’s brand, they are driving efficiency and enhancing franchisor relations, a crucial step toward a revamped business model.

Invitation to Explore Growth Opportunities

With an ever-expanding development pipeline and a commitment to customer delight, FAT Brands remains optimistic about the future. The recent spin-off of Twin Peaks has notably opened pathways for innovation and strategic repositioning.

Frequently Asked Questions

What fiscal year is FAT Brands reporting on?

FAT Brands is reporting on fiscal year 2024, covering their financial results as of December 29, 2024.

How did total revenue perform in the fourth quarter?

Total revenue decreased by 8.4% to $145.3 million compared to the fourth quarter of 2023.

What are the predictions for restaurant openings in 2025?

FAT Brands anticipates the opening of over 100 new restaurants in 2025 as part of their growth strategy.

What adjustments has the company made regarding its franchises?

The company has initiated plans to refranchise several locations, ensuring a nearly 100% franchised model in their operations.

How is FAT Brands addressing its financial challenges?

Through strategic refocusing on franchising, synergies, and operational efficiencies, FAT Brands aims to navigate its financial challenges effectively.

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