很棒的美國曲奇。Great American Cookies(我們稱之爲「GAC」)於1977年在佐治亞州亞特蘭大成立，當時是一家依靠單一巧克力曲奇配方的單一商店。1978年，廣汽開始了特許經營業務，並推出了完整的餅乾和布朗尼系列。在過去的30年裏，廣汽集團進一步擴大了其在全美商場的存在，並顯著擴大了其產品供應。廣汽集團以其標誌性的餅乾蛋糕、標誌性口味和新鮮烘焙的美食菜單而聞名。廣汽在美國、巴林、關島和沙特阿拉伯擁有特許經營店。
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棍子上的熱狗。HotDog on a Stick(我們稱之爲「HDOS」)是主要位於加利福尼亞州和美國西部地區購物中心的快餐店的特許經營商。1946年，HDOS創始人戴夫·巴納姆在加利福尼亞州聖莫尼卡開設了他的第一個熱狗攤位。HDOS提供蘸了麪糊和菜籽油的土耳其弗蘭克，還有新鮮擠壓的檸檬水、熱狗麪包、芝士棒、漏斗蛋糕棒和炸薯條。
布法羅咖啡館和布法羅快車。布法羅咖啡館(Everyone Are Family)於1985年在佐治亞州羅斯韋爾成立，是一家以家庭爲主題的休閒餐飲概念餐廳，以雞翅和13種獨特的自制雞翅醬、漢堡、捲餅、牛排、沙拉和其他經典的美國菜餚而聞名。布法羅咖啡館提供全面的酒吧和餐桌服務，爲朋友和家人提供獨特的用餐體驗，讓他們可以在享受豐富菜單的同時，一起享用一頓親密的晚餐或隨意觀看體育賽事。從2011年開始，Buffalo『s Express是作爲Buffalo』s Cafe的快速休閒、佔地面積更小的變體開發和推出的，提供全套菜單的限量版，重點是雞翅、捲餅和沙拉。目前水牛城的快遞門店與Fatburger門店聯合使用品牌，爲我們的加盟商提供互補的概念，共享廚房空間，並導致更高的平均單位銷量(與獨立的Fatburger門店相比)。
Our Fresh, Authentic and Tasty values are the anchor that inspires our marketing efforts. Our resolve to maintain our premium positioning, derived from the FAT Brands’ values, is reinforced by our management platform, capital light business model, experienced and diverse global franchisee network and seasoned and passionate management team. Although our marketing and advertising programs are concept-specific, we believe that our restaurant customers appreciate the value of their experiences visiting our establishments and, thus, the core of our marketing strategy is to engage and dialogue with customers at our restaurant locations as well as through social media.
Our Fresh, Authentic and Tasty values are an invitation for restaurant customers to align with FAT Brands’ commitment to consistently deliver freshly prepared, made-to-order food that restaurant customers desire. We are dedicated to keeping a fresh perspective on our concepts, perfecting our existing menu offerings as well as introducing appealing new items. We ensure that any changes are consistent with the core identity of our brands, and we will not adapt our brands to be all things to all people.
Our marketing initiatives include a robust mix of local community marketing, in-store campaigns, product placements, partnerships, promotions, social media, influencer marketing, traditional media and word of mouth advertising. Corresponding with the evolutionary shift in how restaurant customers receive content and engage with media and brands today, we have also dramatically increased our focus on mobile, social, and digital advertising to leverage the content we generate from public relations and experiential marketing to better connect with restaurant customers, sharing information about new menu offerings, promotions, new store openings and other relevant FAT Brands information. We communicate with restaurant customers in creative and organic ways that we believe fortifies our connections with them and increases brand awareness.
Site Selection and Development
Our franchisees work alongside our franchise development department during the search, review, leasing and development process for a new restaurant location. Typically, it takes between 60 and 90 days from the time we sign an agreement with a franchisee until that franchisee signs a lease. When selecting a location, our team assists franchisees in seeking locations based on a variety of factors, including but not limited to traffic patterns, access, visibility, building constraints, competition, activity generators and lease terms.
Supply Chain Assistance
FAT Brands is committed to seeking out and working with best-in-class suppliers and distribution networks on behalf of our franchisees. Our Fresh, Authentic and Tasty vision guides us in how we source and develop our ingredients, always looking for the best ways to provide top quality food that is as competitively priced as possible for our franchisees and their customers. We utilize a third-party purchasing and consulting company that provides distribution, rebate collection, product negotiations, audits and sourcing services focusing on negotiating distributor, vendor and manufacturer contracts, thereby ensuring that our brands receive meaningful buying power for our franchisees.
Our team has developed a reliable supply chain and continues to focus on identifying additional back-ups to avoid or minimize any possible interruption of service and product globally for our franchisees. Domestically, FAT Brands has distribution agreements with broadline national distributors as well as regional providers. Internationally, our franchisees have distribution agreements with different providers market-by-market. We utilize distribution centers operated by our distributors. Our broadline national distributors are the main purchasing link in the United States among many of our suppliers, and distribute most of our dry, refrigerated and frozen goods, non-alcoholic beverages, paper goods and cleaning supplies. Internationally, distributors are also used to provide the majority of products to our franchisees.
Food Safety and Quality Assurance. Food safety is one of our top priorities of FAT Brands. As such, we maintain rigorous safety standards for our menu offerings. We have carefully selected preferred suppliers that adhere to our safety standards, and our franchisees are required to source their ingredients from these approved suppliers. Furthermore, our commitment to food safety is strengthened through the direct relationship between our Supply Chain and Field Consultant Assistance teams.
FAT Brands restaurants utilize a variety of back-office, computerized and manual, point-of-sale systems and tools. We utilize these systems following a multi-faceted approach to monitor restaurant operational performance, food safety, quality control, customer feedback and profitability.
The point-of-sale systems are designed specifically for the restaurant industry and we use many customized features to evaluate operational performance, provide data analysis, marketing promotional tracking, guest and table management, high-speed credit card and gift card processing, daily transaction data, daily sales information, product mix, average transaction size, order modes, revenue centers and other key business intelligence data. Utilizing these point-of-sale systems back-end, web-based, enterprise level, software solution dashboards, our home office and Franchise Operations Consultant Support staff are provided with real-time access to detailed business data which allows for our home office and Franchise Operations Consultant Support staff to closely, and remotely, monitor stores performance and assist in providing focused and timely support to our franchisees. Furthermore, these systems supply sales, bank deposit and variance data to our accounting department on a daily basis, and we use this data to generate daily sales information and weekly consolidated reports regarding sales and other key measures for each restaurant with final reports following the end of each period.
In addition to utilizing these point-of-sale systems, FAT Brands utilizes systems which provide detailed, real-time (and historical) operational data for all locations, allowing our management team to track product inventories, equipment temperatures, repair and maintenance schedules, intra-shift team communications, consistency in following standard operating procedures and tracking of tasks. FAT Brands also utilizes a web-based employee scheduling software program providing franchisees, and their management teams, increased flexibility and awareness of scheduling needs allowing them to efficiently, and appropriately, manage their labor costs and store staffing requirements/needs. Lastly, FAT Brands utilizes a proprietary customer feedback system allowing customers to provide feedback in real-time to our entire management team, franchisees and store managers.
Field Consultant Assistance
In conjunction with utilizing the FAT Brands Management Information Systems, FAT Brands has a team of dedicated Franchise Operations Consultant Support staff who oversee designated market areas and specific subsets of restaurants. Our Franchise Operations Consultant Support staff work in the field daily with franchisees, and their management teams, to ensure that the integrity of all FAT Brands concepts are upheld and that franchisees are utilizing the tools and systems FAT Brands requires in order to provide input to our franchisees to assist them to optimize and accelerate their profitability. FAT Brands Franchise Operations Consultant Support staff responsibilities include the following, many of which are performed on a rotating basis (but are not limited to):
•Conducting announced and unannounced store visits and evaluations;
•Continuous training and re-training of new and existing franchise operations;
•Conducting quarterly workshops for franchisees and their management teams;
•Development and collection of monthly profit and loss statements for each store;
•Store set-up, training, oversight and support for pre- and post- new store openings;
•Training, oversight and implementation of in-store marketing initiatives; and
•Inspections of equipment, temperatures, food-handling procedures, customer service, products in store, cleanliness, and team member attitude.
Training, Pre-Opening Assistance and Opening Support
FAT Brands offers Executive level and Operational level training programs to its franchisees, pre-opening assistance and opening assistance. Once open, FAT Brands continually provides ongoing operational and marketing support to our franchisees with the intention of offering advice to their management teams that they can use if they choose to more effectively operate their restaurants and increasing their stores financial profitability.
Our franchised and company owned restaurants compete in the quick service, fast casual, casual and polished casual dining categories of the restaurant industry, a highly competitive industry in terms of price, service, location, and food quality. The restaurant industry is often affected by changes in consumer trends, economic conditions, demographics, traffic patterns, and concern about the nutritional content of food. Furthermore, there are many well-established competitors with substantially greater financial resources than the Company's, including several national, international, regional and local store franchisors and operators. The restaurant industry also has few barriers to entry and new competitors may emerge at any time.
Seasonality and Effects of Weather
While some of our brands are subject to seasonal fluctuations in their sales and may be affected by inclement weather, our business overall does not experience significant seasonal variability in its financial performance. Holidays and severe weather in certain regions, including hurricanes, tornados, thunderstorms, snow and ice storms, prolonged extreme temperatures and similar conditions, may impact restaurant sales volumes in some of the markets in which we operate. In addition, the risk of increasingly severe weather due to climate change or the risk that those events happen more frequently could increasingly affect our operations in the future.
Intellectual Property
We own, domestically and internationally, valuable intellectual property including trademarks, service marks, trade secrets and other proprietary information related to our restaurant and corporate brands. This intellectual property includes logos and trademarks which are of material importance to our business. Depending on the jurisdiction, trademarks and service marks generally are valid as long as they are used and/or registered. We seek to actively protect and defend our intellectual property from infringement and misuse.
Human Capital Resources
We believe that our employees are critical to our success and seek to provide a working environment which encourages personal growth and success in our workforce. We believe that we have good relations with our employees and offer competitive compensation and benefits customary to our industry. Our benefits package for qualified employees includes employer paid health insurance and opportunities for stock-based incentives.Our restaurant employees receive continuing training and have the opportunity to advance in responsibility and leadership.
We believe that communication is key to the effectiveness of our workforce and schedule regular weekly conference calls with all of our corporate employees, updating them on the direction of the business, important developments within our company and the industry and key milestones to be achieved. We also encourage our employees to be involved in their communities and directly operate two charities - The Seeds of Compassion Fund, Inc., a charitable foundation that provides disaster relief to local communities, and FAT Brands Foundation, a charitable foundation that was organized and seeded by FAT Brands and which seeks additional contributions from our employees, franchise partners and brand partners. From time to time, we also sponsor meal events for first responders and medical professionals during local disasters.
As of December 29, 2024, we had approximately 7,131 employees, including approximately 2,089 full time employees.This amount includes approximately 1,714 full-time and 5,042 part time employees at restaurants which we own and operate.As an equal opportunity employer, all qualified applicants receive consideration without regard to race, national origin, gender, gender identity, sexual orientation, protected veteran status, disability, age or any other legally protected status.
A significant component of our growth strategy includes the opening of new domestic and international franchised restaurants. Our franchisees face many challenges associated with opening new restaurants, including:
•identification and availability of suitable restaurant locations with the appropriate size; visibility; traffic patterns; local residential neighborhood, retail and business attractions; and infrastructure that will drive high levels of customer traffic and sales per restaurant;
•competition with other restaurants and retail concepts for potential restaurant sites and anticipated commercial, residential and infrastructure development near new or potential restaurants;
•ability to negotiate acceptable lease arrangements;
•availability of financing and ability to negotiate acceptable financing terms;
•recruiting, hiring and training of qualified personnel;
•completing their construction activities on a timely basis;
•obtaining all necessary governmental licenses, permits and approvals and complying with local, state and federal laws and regulations to open, construct or remodel and operate our franchised restaurants;
•unforeseen engineering or environmental problems with the leased premises;
•avoiding the impact of adverse weather during the construction period; and
•other unanticipated increases in costs, delays or cost overruns.
As a result of these challenges, our franchisees may not be able to open new restaurants as quickly as planned or at all. Our franchisees have experienced, and expect to continue to experience, delays in restaurant openings from time to time and have abandoned plans to open restaurants in various markets on occasion. Any delays or failures to open new restaurants by our franchisees could materially and adversely affect our growth strategy and our results of operations.
Negative publicity relating to one of our franchised restaurants could reduce sales at some or all of our other franchised restaurants.
Our success is dependent in part upon our ability to maintain and enhance the value of our brands, consumers’ connection to our brands and positive relationships with our franchisees. We may, from time to time, be faced with negative publicity relating to food quality, public health concerns, restaurant facilities, customer complaints or litigation alleging illness or injury, health inspection scores, integrity of our franchisees or their suppliers’ food processing, employee relationships or other matters, regardless of whether the allegations are valid or whether or not the Company is held to be responsible. The negative impact of adverse publicity relating to one franchised restaurant may extend far beyond that restaurant or franchisee involved to affect some or all our other franchised restaurants. The risk of negative publicity is particularly great with respect to our franchised restaurants because we are limited in the manner in which we can control a franchisee’s operations and messaging, especially on a real-time basis. The considerable expansion in the use of social media over recent years can further amplify any negative publicity that could be generated by such incidents. A similar risk exists with respect to unrelated food service businesses, if consumers associate those businesses with our own or franchised operations. Additionally, employee claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination may also create negative publicity that could adversely affect us and divert our financial and management resources that would otherwise be used to benefit the future performance of our operations. A significant increase in the number of these claims or an increase in the number of successful claims would have a material adverse effect on our business, financial condition and results of operations. Consumer demand for our products and our brands’ value could diminish significantly if any such incidents or other matters create negative publicity or otherwise erode consumer confidence in us or our products, which would likely result in lower sales and could have a material adverse effect on our business, financial condition and results of operations.
Our brands’ value may be limited or diluted through franchisee and third-party activity.
Although we monitor and regulate certain aspects of franchisee activities under the terms of our franchise agreements, franchisees or other third parties may refer to or make statements about our brands that do not make proper use of our trademarks or required designations, that improperly alter trademarks or branding, or that are critical of our brands or place our brands in a context that may tarnish our reputation. This may result in dilution of, or harm to, our intellectual property or the value of our brands. Franchisee noncompliance with the terms and conditions of our franchise agreements may reduce the overall goodwill of our brands, whether through the failure to meet health and safety standards, engage in quality control or maintain product consistency, or through the participation in improper or objectionable business practices. Moreover, unauthorized third parties may use our intellectual property to trade on the goodwill of our brands, resulting in consumer confusion or dilution of our brands’ value. Any reduction of our brands’ goodwill, consumer confusion, or reputational dilution is likely to impact sales, and could materially and adversely impact our business and results of operations.
Risks Relating to Our Business and Operations
We have significant outstanding indebtedness under our whole-business securitization facilities, which require that we generate sufficient cash flow to satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default and lender remedies.
We have financed our acquisitions and operations through the issuance of notes by four special purpose, wholly-owned financing subsidiaries, which own substantially all of our operations. The Company acts as the manager of each of these
subsidiaries under a Management Agreement and performs management, franchising, distribution, intellectual property and operational functions on behalf of the subsidiaries for which it receives a management fee. The aggregate principal balance of the indebtedness under our whole-business securitization facilities was $1.3 billion as of December 29, 2024. Subject to contractual restrictions, we and our financing subsidiaries may incur additional indebtedness for various purposes, including to fund future acquisitions, the construction of company-owned restaurants and operational needs. The terms of our outstanding indebtedness provide for significant principal and interest payments, and subjects us to certain financial and non-financial covenants, including a debt service coverage ratio calculation, as defined in the applicable Indentures for these facilities. If certain covenants are not met, the indebtedness under these facilities may become partially or fully due and payable on an accelerated schedule. Our ability to meet the payment obligations under our debt depends on our ability to generate significant cash flow in the future. We cannot assure you that our business will generate cash flow from operations, or that other capital will be available to us, in amounts sufficient to enable us to meet our payment obligations under our Indentures and to fund our other liquidity needs. If we are not able to generate sufficient cash flow to service these obligations, we may need to refinance or restructure our debt, sell unencumbered assets (if any) or seek to raise additional capital. If we are unable to implement one or more of these options, we may not be able to meet these payment obligations, and the imposition of remedies by the note holders could materially and adversely affect our business, financial condition and liquidity.
We may pursue opportunistic acquisitions of additional brands, and we may not find suitable acquisition candidates or successfully operate or integrate any brands that we may acquire.
As part of our growth strategy, we may opportunistically acquire new brands and restaurant concepts. Although we believe that opportunities for future acquisitions may be available from time to time, competition for acquisition candidates may exist or increase in the future. Consequently, there may be fewer acquisition opportunities available to us as well as higher acquisition prices. There can be no assurance that we will be able to identify, acquire, manage or successfully integrate additional brands or restaurant concepts (including brands and concepts that we have already acquired) without substantial costs, delays or operational or financial problems.
The difficulties of integration include coordinating and consolidating geographically separated systems and facilities, integrating the management and personnel of the acquired brands, maintaining employee morale and retaining key employees, implementing our management information systems and financial accounting and reporting systems, establishing and maintaining effective internal control over financial reporting, and implementing operational procedures and disciplines to control costs and increase profitability.
In the event we are able to acquire additional brands or restaurant concepts, the integration and operation of such acquisitions may place significant demands on our management, which could adversely affect our ability to manage our existing restaurants. In addition, we may be required to obtain additional financing to fund future acquisitions, but there can be no assurance that we will be able to obtain additional financing on acceptable terms or at all.
Food safety and foodborne illness concerns may have an adverse effect on our business.
We and our franchisees rely on computer systems to process transactions and manage our business, and a disruption or a failure of such systems or technology could harm our ability to effectively manage our business.
Network and information technology systems are integral to our business. We utilize various computer systems, including our franchisee reporting system, by which our franchisees report their weekly sales and pay their corresponding royalty fees and required advertising fund contributions. When sales are reported by a franchisee, a withdrawal for the authorized amount is initiated from the franchisee’s bank on a set date each week based on gross sales during the week ended the prior Sunday. This system is critical to our ability to accurately track sales and compute royalties and advertising fund contributions and receive timely payments due from our franchisees. Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Any damage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on our business and subject us to litigation or actions by regulatory authorities. Despite the implementation of protective measures, our systems are subject to damage and/or interruption as a result of power outages, computer and network failures, computer viruses and other disruptive software, security breaches, catastrophic events, and improper usage by employees. Such events could result in a material disruption in operations, a need for a costly repair, upgrade or replacement of systems, or a decrease in, or in the collection of, royalties and advertising fund contributions paid to us by our franchisees. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability which could materially affect our results of operations. It is also critical that we establish and maintain certain licensing and software agreements for the software we use in our day-to-day operations. A failure to procure or maintain these licenses could have a material adverse effect on our business operations.
Our business may be adversely affected by cybersecurity incidents, which result in unauthorized access, theft, modification or destruction of confidential information that is stored in our systems or by third parties on our behalf.
Cybersecurity incidents or other unauthorized access to systems may result in disruption to our operations, corruption or theft of critical data, confidential information or intellectual property. As reliance on technology continues to grow and more business activities have shifted online, the risk associated with any cybersecurity incidents have grown. While we and our third-
party vendors have implemented security systems and infrastructure to prevent, detect and/or mitigate the risk of unauthorized access to technology systems or platforms, there can be no assurance that these measures will be effective. Any cybersecurity or similar incident involving confidential information of our business, our franchisees or our restaurant customers could result in negative publicity, damage to our reputation, a loss of revenues, disruption of our business, litigation and regulatory actions. Additional capital investments might be required to remediate any problems, infringements, misappropriations or other third-party claims.
The retail food industry in which we operate is highly competitive.
The retail food industry in which we operate is highly competitive with respect to price and quality of food products, new product development, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance of properties. If consumer or dietary preferences change, if our marketing efforts are unsuccessful, or if our franchisees’ restaurants are unable to compete successfully with other retail food outlets in new and existing markets, our business could be adversely affected. We also face growing competition as a result of convergence in grocery, convenience, deli and restaurant services, including the offering by the grocery industry of convenient meals, including pizzas and entrees with side dishes. Competition from delivery aggregators and other food delivery services has also increased in recent years, particularly in urbanized areas. Increased competition could have an adverse effect on our sales, profitability or development plans, which could harm our financial condition and operating results.
We have experienced and continue to experience inflationary conditions with respect to the cost for food, labor, construction and utilities, and we may not be able to increase prices or implement operational improvements sufficient to fully offset inflationary pressures on such costs, which may adversely impact our revenues and results of operations.
The profitability of our company-owned restaurants and franchised restaurants depends in part on our ability to anticipate and react to changes in food and other supply costs, including labor costs, construction costs, and utility costs. Prices may be affected by general economic conditions, increased competition, supply shortages and interruptions due to weather, disease, inflation, and other conditions and factors beyond our control.Our inability to anticipate and respond effectively to one or more adverse changes in any of these factors could have a significant adverse effect on our results of operations and financial condition. We expect inflationary pressures and other fluctuations impacting the price of these items to continue to impact our business. Our attempts to offset cost pressures, such as through implementing operational efficiencies and increasing menu pricing, may not be successful. To the extent price increases are not sufficient to adequately offset higher costs or do not do so in a timely manner, or if such price increases result in significant decreases in revenue volume due to loss in customer retention, our revenues from sales may be adversely affected, and as a result our business, results of operations, and financial condition may also be materially and adversely affected.
Supply chain shortages or interruptions in the availability and delivery of food and other supplies may increase costs or reduce revenues.
The food products sold by our franchisees and in our company-owned restaurants, and the raw materials used in their these restaurants, are sourced from a variety of domestic and international vendors, suppliers and distributors. We, along with our franchisees, are also dependent upon third parties to make frequent deliveries of food products and supplies that meet our specifications at competitive prices. Shortages or interruptions in the supply of food items, raw materials and other supplies to our franchisees’ restaurants could adversely affect the availability, quality and cost of items we use and the operations of our franchisees’ and company-owned restaurants. If such shortages result in increased cost of food items and supplies, we and our franchisees may not be able to pass along all of such increased costs to restaurant customers.
Such shortages or disruptions could be caused by inclement weather, natural disasters, increased demand, problems in production or distribution, restrictions on imports or exports, the inability of vendors to obtain credit, political instability in the countries in which suppliers and distributors are located, the financial instability of suppliers and distributors, suppliers’ or distributors’ failure to meet our standards, product quality issues, inflation, the price of gasoline, other factors relating to the suppliers and distributors and the countries in which they are located, food safety warnings or advisories or the prospect of such pronouncements, the cancellation of supply or distribution agreements or an inability to renew such arrangements or to find replacements on commercially reasonable terms, or other conditions beyond our control or the control of our franchisees or us. Increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with global climate change, could have a significant impact on the price, availability and timing of delivery of some of our ingredients.
A shortage or interruption in the availability of certain food products, raw materials or supplies could increase costs and limit the availability of products critical to our franchisees’ and company-owned restaurant operations, which in turn could
lead to restaurant closures and/or a decrease in sales and therefore, and a reduction in our revenues and royalty fees paid to us. In addition, failure by a key supplier or distributor to our franchisees to meet its service requirements could lead to a disruption of service or supply until a new supplier or distributor is engaged, and any disruption could have an adverse effect on our franchisees and therefore our business. See “Business—Supply Chain Assistance.”
Climate change and the shift to more sustainable business practices could negatively affect our business or damage our reputation.
Climate change may increase the risk of severe weather or the risk that those events happen more frequently, which could cause negatively affect restaurant sales volumes in some of the markets in which we operate and may result in decreased availability or less favorable pricing for certain commodities used in our products, such as beef, chicken and dairy. In addition, climate change may increase the frequency or severity of natural disasters and other extreme weather conditions, which could disrupt our supply chain generally or otherwise impact demand for our products. Also, concern over climate change and other sustainable business practices may result in new or increased legal and regulatory requirements or generally accepted business practices, which could significantly increase our costs. Legislative, regulatory or other efforts to combat climate change or other environmental concerns could result in future increases in the cost of raw materials, taxes, transportation and utilities, which could affect our results of operations and necessitate future investments in facilities and equipment. In addition, a failure to reduce our greenhouse gas emissions or adopt other sustainable business practices or the perception of a failure to act responsibly with respect to the environment or to effectively respond to regulatory requirements concerning climate change or other sustainable business practices can lead to adverse publicity, diminish the value of our brands and result in an adverse effect on our business.
Our business may be adversely impacted by changes in consumer discretionary spending, general economic conditions, or consumer behavior.
We may incur additional costs in connection with the defense or settlement of existing and any future stockholder litigation, including the stockholder litigation that has been brought against us and certain of our directors. See "Part I, Item 3. Legal Proceedings" below. Subject to certain limitations, we are obligated to indemnify our directors in connection with the litigation and any related litigation or settlement amounts, which may be time-consuming, result in significant expense and divert the attention and resources of our management away from our operating business matters. An unfavorable financial outcome that exceeds coverage provided under our insurance policies, could have an adverse effect on our financial condition and results of operations and could harm our reputation.
We could be party to litigation that could adversely affect us by increasing our expenses, diverting management attention or subjecting us to significant monetary damages and other remedies.
We may become involved in legal proceedings involving consumer, employment, real estate related, tort, intellectual property, breach of contract, securities, derivative and other litigation. Plaintiffs in these types of lawsuits often seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may not be accurately estimated. Regardless of whether any such claims have merit, or whether we are ultimately held liable or settle, such litigation may be expensive to defend and may divert resources and management attention away from our operations and negatively impact reported earnings. With respect to insured claims, a judgment for monetary damages in excess of any insurance coverage could adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations may also adversely affect our reputation, which in turn could adversely affect our results of operations.
Our subsidiary Fog Cutter Acquisition, LLC is a party to environmental litigation which could result in significant legal expenses whether or not it is resolved favorably.
As described in this Annual Report under “Item 3. Legal Proceedings”, our subsidiary Fog Cutter Capital Group Inc. (now known as Fog Cutter Acquisition, LLC), is a party to litigation entitled Stratford Holding LLC v. Foot Locker Retail Inc. for alleged environmental contamination stemming from dry cleaning operations on a property which was included in a lease portfolio managed by a former subsidiary of Fog Cutter. The property owners seek damages in the range of $12 million to $22 million in the aggregate from all defendants. The Company is unable to predict the ultimate outcome of this matter, and reserves have been recorded on the balance sheet relating to this litigation. There can be no assurance that Fog Cutter Acquisition, LLC will be successful in defending against this action, and an unfavorable outcome in excess of the reserves could have a material adverse effect on our financial condition and results of operations.
If our operating and financial performance in any given period does not meet the guidance that we provide to the public, our stock price may decline.
We may provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in our public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts or if we reduce our guidance for future periods, the market price of our Class A Common Stock or Class B Common Stock may decline as well.
Our ability to pay regular dividends to our stockholders is subject to the discretion of our Board of Directors and may be limited by our holding company structure and applicable provisions of Delaware law.
While we have paid cash or stock dividends to holders of our Common Stock in each fiscal year since 2018 and our Series B Preferred Stock since it was first issued, our board of directors may, in its sole discretion, decrease the amount or frequency of cash or stock dividends or discontinue the payment of dividends entirely. In addition, as a holding company, we will be dependent upon the ability of our operating subsidiaries to generate earnings and positive cash flows and distribute them to us so that we may pay cash dividends to our stockholders. Our ability to pay cash dividends will be subject to our consolidated operating results, cash assets and requirements and financial condition, the applicable provisions of Delaware law which may limit the amount of funds available for distribution to our stockholders, our compliance with covenants and financial ratios related to existing or future indebtedness, and our other agreements with third parties. Under a letter agreement that we executed in November 2024 in connection with the refinancing of the Twin Securitization Notes, we agreed not to pay a dividend on our common stock until at least $25,000,000 in proceeds from Qualified Equity Offerings (as defined in the Base Indenture for the Twin Securitization Notes) have been used to prepay the Twin Securitization Notes. In addition, each of the companies in the corporate chain must manage its assets, liabilities and working capital in order to meet all of its cash obligations, including the payment of dividends or distributions.
Our business is substantially dependent upon our computer systems, devices and networks to collect, process and store the data necessary to conduct most aspects of our business. We have developed and maintain a cybersecurity program, which includes people, processes, and technology aimed at defending our computer systems, devices and networks against increasingly sophisticated threats.
We recognize the importance of protecting both our information and operations from threats that could disrupt our business, put our assets at risk or compromise our customer and employee data. Our cybersecurity program is implemented and maintained using information security tools, policies and a dedicated team responsible for monitoring our networks, providing training to our employees, analyzing the evolution of new threats and strategies for mitigating such threats and seeking to continually harden our cybersecurity posture. The program is periodically exercised, reviewed, updated, and vetted through third-party audits, assessments, and tests with the goal of validating its effectiveness in reducing risk, as well as evaluating its compliance with legal and regulatory requirements. We assess, identify and manage our material risks from cybersecurity threats by employing the following:
•Identification of critical systems – we seek to identify which operational or information technology, if compromised or exploited, would result in operational disruption or data compromise. We aim to protect the entire environment at an enterprise level where practical, combined with additional layered, risk-based controls designed to safeguard against cybersecurity threats. This strategic, defense-in-depth, and risk-based approach to cybersecurity provides a methodology designed to identify, protect, detect, respond, and recover from cybersecurity incidents.
•Network segmentation – we use a combination of firewalls and routers to provide network segmentation seeking to provide us with network zone protection.
•Access controls – we leverage several security capabilities to attempt to enforce access, authorization and authentication to relevant systems, technology, and controls. A least-privilege methodology is applied for localized client workstations, servers, and applications. Security capabilities for access control include physical, administrative, and technical controls that combine to provide a defense-in-depth approach designed to protect our cyber assets from unauthorized use.
•Continuous monitoring, detection, and auditing – we employ various technologies, tactics, and procedures aimed to continuously monitor, baseline, and detect threats, and audit our network and systems. In addition, we use a combination of technology tools with outside managed security service providers designed to capture, analyze and respond to security anomalies.
•Patch management – we use a network vulnerability scanning tool that continually scans, and reports identified vulnerabilities in servers and workstations in certain networks. Vulnerability scanner reports are used to drive patching and remediation efforts and are also used as a tool to evaluate the effectiveness of efforts to seek to ensure patches are applied timely. Application and infrastructure subject matter experts subscribe to various third-party vendor security notifications to receive proactive notifications on, among other things, bugs, security flaws and mitigations, related to operational and information systems.
The above cybersecurity risk management processes are integrated into our overall risk management program. Cybersecurity threats are understood to be wide reaching and to intersect with various other enterprise risks. In addition to assessing our own cybersecurity preparedness, we also consider cybersecurity risks associated with our use of third-party service providers based on the potential impact of a disruption of the services to our operations and the sensitivity of data shared with the service providers.
We regularly engage independent third parties to periodically assess our cybersecurity posture.These assessments include penetration tests, purple team activities, health checks and point-specific technical cybersecurity assessments of key systems. Some of these assessments are performed with internal audit oversight and tested in regular intervals.
Impact of Risks from Cybersecurity Threats
As of the date of this Annual Report, we are not aware of any previous cybersecurity threats, including as a result of previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us. We acknowledge that cybersecurity threats are continually evolving, and the possibility of future cybersecurity incidents remains. Despite the implementation of our cybersecurity processes, our security measures cannot guarantee that a significant cybersecurity attack will not occur. While we devote resources to our security measures designed to protect our systems and information, no security measure is infallible. See Item 1A. Risk Factors for additional information about the risks to our business associated with a breach or other compromise to our information and operational technology systems.
Our Board of Directors oversees the execution of our cybersecurity strategy and the assessment of cybersecurity risks, along with the actions that we may take seeking to mitigate and address those cybersecurity risks.The position of Chief Information Officer (CIO), which is currently vacant, leads our cybersecurity initiatives, managing a dedicated cybersecurity team focused on implementing and overseeing a robust cybersecurity program.The cybersecurity team has related academic degrees, certifications, and real-world experience in managing cybersecurity incidents and risks. The cybersecurity program emphasizes proactive prevention, detection, mitigation, and remediation of potential cybersecurity incidents. To promote transparency and informed decision-making, the CIO and cybersecurity team provide periodic updates regarding cybersecurity risks and initiatives to both our Cyber Incident Response Steering Committee and the Board of Directors. This ensures alignment and clarity among all stakeholders concerning our cybersecurity posture. By nurturing collaboration between our board, executive leadership, and cybersecurity professionals, we are devoted to protecting our digital assets and maintaining stakeholder trust. Our commitment to enhancing our cybersecurity framework equips FAT Brands to effectively address the dynamic threat landscape.
ITEM 2. PROPERTIES
Our corporate headquarters, including our principal administrative, sales and marketing, customer support, and research and development operations, are located in Beverly Hills, California, comprising approximately 15,000 square feet of space, pursuant to a lease that expires on January 31, 2031.
Our subsidiary, GFG Management, LLC, leases an approximately 16,000 square foot warehouse location in Atlanta, GA under a lease expiring on May 31, 2029.
Our subsidiary, GAC Supply, LLC, owns and operates an approximately 40,000 square foot manufacturing and production facility in Atlanta, Georgia and the underlying real property, which supplies our franchisees with cookie dough, pretzel dry mix and other ancillary products.
Our subsidiary, Twin Restaurant Holding, LLC, leases offices in Dallas, TX comprising approximately 8,300 square feet under a lease expiring on April 30, 2025.
Our subsidiary, Fazoli's Holdings, LLC, leases offices located in Lexington, KY comprising approximately 19,200 square feet under a lease expiring on April 30, 2027.
Our subsidiary, Smokey Bones, LLC, leases offices located in Plantation, Florida comprising approximately 6,000 square feet under a lease expiring in February 2033.
In addition to the above locations, certain of our subsidiaries directly own and operate restaurant locations, substantially all of which are located in leased premises. As of December 29, 2024, we owned and operated 181 restaurant locations. The leases have remaining terms ranging from less than 1 year to 25.8 years.
We believe that our existing facilities are in good operating condition and adequate to meet our current and foreseeable needs. Additional information related to our operating leases are disclosed in Note 9.
ITEM 3. LEGAL PROCEEDINGS
Government Investigations and Litigation
In December 2021, the U.S. Attorney’s Office for the Central District of California (the “U.S. Attorney”) and the U.S. Securities and Exchange Commission (the “SEC”) informed the Company that they had opened investigations relating to the Company and our former CEO, Andrew Wiederhorn, and were formally seeking documents and materials concerning, among other things, the Company’s December 2020 merger with Fog Cutter Capital Group Inc. (“FCCG”), transactions between those entities and Mr. Wiederhorn, as well as compensation, extensions of credit and other benefits or payments received by Mr. Wiederhorn or his family from those entities prior to the merger.
On May 10, 2024, the U.S. Department of Justice (“DOJ”) indicted the Company on two violations of Section 402 of the Sarbanes-Oxley Act for directly and indirectly extending and/or arranging for the extension of credit in 2019 and 2020 to former CEO Andrew Wiederhorn in the amount of $2.65 million. These charges allege that the Company, through its subsidiary Fatburger N.A., transferred approximately $600,000 to Mr. Wiederhorn in the form of a personal loan on January 30, 2019, and lent approximately $2 million in 2020 to its former parent company FCCG which indirectly funded a personal loan from FCCG
to Mr. Wiederhorn. The indictment also includes charges against Mr. Wiederhorn, the Company’s former CFO, Rebecca Hershinger, and the Company’s former tax advisor, William Amon, on violations of various federal tax and other laws related to loans from FCCG to Mr. Wiederhorn.
Concurrently with the DOJ’s charges, the SEC filed a complaint against the Company, claiming violations of Section 17(a)(2) of the Securities Act of 1933; Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(k), and 14(a) of the Securities Exchange Act of 1934; and Rules 10b-5(b), 12b-20, 13a-1, 13a-13, 14a-3, and 14a-9 thereunder. The SEC’s claims pertain principally to allegations that, for fiscal periods covering 2017 through 2020, the Company failed to disclose certain related party transactions, failed to disclose the salaries of Mr. Wiederhorn’s adult children working at the Company, failed to maintain proper books and records and internal accounting controls, made false or misleading statements regarding the Company’s liquidity and use of proceeds from certain transactions, and directly or indirectly extended credit to Mr. Wiederhorn in the form of a personal loan. The SEC’s complaint also names Mr. Wiederhorn, Ms. Hershinger, and the Company’s SVP of Finance, Ron Roe, as defendants. The SEC is seeking injunctive relief, disgorgement, and civil monetary penalties.
The Company is evaluating these charges and intends to vigorously defend itself against them.
Derivative Litigation
James Harris and Adam Vignola, derivatively on behalf of FAT Brands, Inc. v. Squire Junger, James Neuhauser, Edward Rensi, Andrew Wiederhorn, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc., and FAT Brands Inc., nominal defendant (Delaware Chancery Court, Case No. 2021-0511-NAC). On June 10, 2021, plaintiffs James Harris and Adam Vignola, putative stockholders of the Company, filed a stockholder derivative action (“Harris I”) in the Delaware Court of Chancery nominally on behalf of the Company against the Company’s current and former directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn) and the Company’s current and former majority stockholders, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc. Plaintiffs assert claims of breach of fiduciary duty, unjust enrichment and waste of corporate assets arising out of the Company’s December 2020 merger with Fog Cutter Capital Group, Inc. Since it was originally filed, the parties engaged in motion practice and substantial discovery, and the Company’s Board appointed a Special Litigation Committee. On June 3, 2024, the Court granted the United States’ request to extend the stay of all proceedings in this matter pending resolution of the charges in United States v. Wiederhorn, et al., 2:24-CR-295-RGK (C.D. Cal.). In January 2025, the principal parties to this matter participated in a mediation in Wilmington, DE and agreed in principle to settle this matter and the Harris II litigation. The settlement is subject to final documentation and approval of the Delaware court, as well as non-objection by the United States. We are obligated to indemnify our current and former directors in connection with defense costs for the lawsuit and any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect on our financial condition. The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management.
James Harris and Adam Vignola, derivatively on behalf of FAT Brands, Inc. v. Squire Junger, James Neuhauser, Edward Rensi, Andrew Wiederhorn and Fog Cutter Holdings, LLC, and FAT Brands Inc., nominal defendant (Delaware Chancery Court, Case No. 2022-0254-NAC). On March 17, 2022, plaintiffs James Harris and Adam Vignola, putative stockholders of the Company, filed a stockholder derivative action (“Harris II”) in the Delaware Court of Chancery nominally on behalf of the Company against the Company’s current and former directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn) and the Company’s majority stockholder, Fog Cutter Holdings, LLC. Plaintiffs assert claims of breach of fiduciary duty in connection with the Company’s June 2021 recapitalization transaction. Since it was originally filed, the parties engaged in motion practice and substantial discovery, and the Company’s Board appointed a Special Litigation Committee. In January 2025, the principal parties to this matter participated in a mediation in Wilmington, DE and agreed in principle to settle this matter and the Harris I litigation. The settlement is subject to final documentation and approval of the Delaware court, as well as non-objection by the United States. We are obligated to indemnify our current and former directors in connection with defense costs for the lawsuit and any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect on our financial condition. The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management.
Richard Collura v. Andrew A. Wiederhorn, et al. (Delaware Chancery Court, Case No. 2024-1305-NAC). In December 2024, plaintiff Richard Collura, a putative stockholder of the Company, filed a stockholder derivative action in the Delaware Court of Chancery nominally on behalf of the Company against certain of the Company’s current and former officers and directors (Andrew Wiederhorn, Kenneth Kuick, Robert Rosen, Ron Roe, John Allen, Kenneth Anderson, Donald Berchtold, Tyler Child, Lynne Collier, Mark Elenowitz, James Ellis, Peter Feinstein, Amy Forrestal, Matthew Green, Squire Junger, John Metz, James Neuhauser, Edward Rensi, Carmen Vidal, Mason Wiederhorn, Taylor Wiederhorn and Thayer Wiederhorn), and the Company’s majority stockholder, Fog Cutter Holdings, LLC. Plaintiff alleges that Mr. Wiederhorn and certain of the other defendants engaged in an unlawful scheme to distribute money to Mr. Wiederhorn and his family for their own personal benefit through 2020, which they allege attracted the attention of the U.S. Attorney’s office and the SEC, and that the Company indicated in public statements and filings that it was cooperating with the government investigations but allegedly was not
actually cooperating and investigating the scheme, which caused the Company’s stock price to fall. Defendants dispute the premises and allegations of the lawsuit and intend to vigorously defend against the claims. We cannot predict the outcome of this lawsuit. This lawsuit does not assert any claims against the Company. However, subject to certain limitations, we are obligated to indemnify our current and former directors in connection with defense costs for the lawsuit and any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect on our financial condition. The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management.
Other Litigation
Mitchell Kates v. FAT Brands, Inc., Andrew Wiederhorn, Kenneth J. Kuick and Robert G. Rosen (United States District Court for the Central District of California, Case No. 2:24-cv-04775-MWF-MAA). On June 7, 2024, plaintiff Mitchell Kates, a putative investor in the Company, filed a putative class action lawsuit against the Company, Andrew Wiederhorn, Kenneth J. Kuick and Robert G. Rosen, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Rule 10b-5 promulgated thereunder, alleging that the defendants made false and misleading statements and omitted material facts necessary to make statements not misleading in the Company’s reports filed with the SEC under the 1934 Act related to the subject matter of the government investigations and litigation discussed above, the Company’s handling of these matters and its cooperation with the government. Plaintiff alleges that the Company’s public statements wrongfully inflated the trading price of the Company’s common stock, preferred stock and warrants. Plaintiff is seeking to certify the complaint as a class action and is seeking compensatory damages in an amount to be determined at trial. Plaintiff’s motion for appointment as lead plaintiff, filed on August 6, 2024, remains sub judice. As this matter is still in the early stages, we cannot predict the outcome of this lawsuit.
Stratford Holding LLC v. Foot Locker Retail Inc. (U.S. District Court for the Western District of Oklahoma, Case No. 5:12-cv-772-HE). In 2012 and 2013, two property owners in Oklahoma City, Oklahoma sued numerous parties, including Foot Locker Retail Inc. and our subsidiary Fog Cutter Capital Group Inc. (now known as Fog Cutter Acquisition, LLC), for alleged environmental contamination on their properties, stemming from dry cleaning operations on one of the properties. The property owners seek damages in the range of $12.0 million to $22.0 million. From 2002 to 2008, a former Fog Cutter subsidiary managed a lease portfolio, which included the subject property. Fog Cutter denies any liability, although it did not timely respond to one of the property owners’ complaints and several of the defendants’ cross-complaints and thus is in default. The parties are currently conducting discovery. The court has vacated the current trial date and has not yet reset the trial date. The Company is unable to predict the ultimate outcome of this matter, however, reserves have been recorded on the balance sheet of FAT Brands relating to this litigation. There can be no assurance that the defendants will be successful in defending against these actions.
SBN FCCG LLC v FCCGI (Los Angeles Superior Court, Case No. BS172606). SBN FCCG LLC (“SBN”) filed a complaint against Fog Cutter Capital Group, Inc. (“FCCG”) in New York state court for an indemnification claim (the “NY case”) stemming from an earlier lawsuit in Georgia regarding a certain lease portfolio formerly managed by a former FCCG subsidiary. In February 2018, SBN obtained a final judgment in the NY case for a total of $0.7 million, which included $0.2 million in interest dating back to March 2012. SBN then obtained a sister state judgment in Los Angeles Superior Court, Case No. BS172606 (the “California case”), which included the $0.7 million judgment from the NY case, plus additional statutory interest and fees, for a total judgment of $0.7 million. In May 2018, SBN filed a cost memo, requesting an additional $12,411 in interest to be added to the judgment in the California case, for a total of $0.7 million. In May 2019, the parties agreed to settle the matter for $0.6 million, which required the immediate payment of $0.1 million, and the balance to be paid in August 2019. FCCG wired $0.1 million to SBN in May 2019, but has not yet paid the remaining balance of $0.5 million. The parties have not entered into a formal settlement agreement, and they have not yet discussed the terms for the payment of the remaining balance.
SBN FCCG LLC v FCCGI (Supreme Court of the State of New York, County of New York, Index No. 650197/2023). On January 13, 2023, SBN filed another complaint against FCCG in New York state court for an indemnification claim stemming from a lawsuit in Oklahoma City regarding the same lease portfolio formerly managed by Fog Cap (the “OKC Litigation”), and a bankruptcy proceeding involving Fog Cap (the “Bankruptcy Proceeding”). SBN alleges that under a February 2008 stock purchase agreement, Fog Cutter is required to indemnify SBN and its affiliates. According to the complaint, SBN has, at the time of filing the complaint, incurred costs subject to indemnification of approximately $12 million. On March 11, 2024, the court issued an order granting FCCG’s motion to dismiss SBN’s complaint without prejudice to refile the complaint, if at all, once the underlying proceedings (the OKC Litigation and the Bankruptcy Proceeding) were complete. On April 10, 2024, SBN filed a notice of appeal of the trial court's order dismissing SBN's complaint. We are unable at this time to express any opinion as to the eventual outcome of this matter or the possible range of loss, if any.
The Company is involved in other claims and legal proceedings from time-to-time that arise in the ordinary course of business, including those involving the Company’s franchisees. The Company does not believe that the ultimate resolution of
these actions will have a material adverse effect on its business, financial condition, results of operations, liquidity or capital resources. As of December 29, 2024, the Company had accrued an aggregate of $5.1 million for the specific matters mentioned above and claims and legal proceedings involving franchisees as of that date.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Class A Common Stock, par value $0.0001 per share, is traded on the NASDAQ Capital Market under the ticker symbols “FAT” and our Class B Common Stock, par value $0.0001 per share, is traded on the NASDAQ Capital Market under the ticker symbol "FATBB."
Holders of Our Common Stock
As of February 24, 2025, there were 37 stockholders of record of our Class A Common Stock and 35 stockholders of record of our Class B Common Stock. The number of record holders does not include persons who held such shares in nominee or “street name” accounts through brokers.
Dividend Policy
The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors. The amount and size of any future dividends will depend upon our future results of operations, financial condition, capital levels, cash requirements and other factors. There can be no assurance that we will declare and pay dividends in future periods. Under a letter agreement that we executed in November 2024 in connection with the refinancing of the Twin Securitization Notes, we agreed not to pay a dividend on our common stock (FAT and FATBB) until at least $25,000,000 in proceeds from Qualified Equity Offerings (as defined in the Base Indenture for the Twin Securitization Notes) have been used to prepay the Twin Securitization Notes. Such restriction does not apply to dividends on our outstanding Series B Cumulative Preferred Stock (FATBP).
Equity Compensation Plan Information
We maintain a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, FAT Brands Inc. and its subsidiaries. The purpose of the Plan is to help attract, motivate and retain qualified personnel and thereby enhance stockholder value. Awards which lapse or are forfeited become available again for grant. See Note 14 in our consolidated financial statements for more details on our share-based compensation.
The following table sets forth information as of December 29, 2024, with respect to compensation plans under which equity securities that we have authorized for issuance:
Plan Category
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
3,885,664
$
7.88
1,860,240
Equity compensation plans not approved by security holders
We do not have a program in place to repurchase our own Common Stock or Preferred Stock and as of December 29, 2024, we have not repurchased any of these securities except for the cancellation of shares issued under the Plan.
ITEM 6. [RESERVED].
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
Business overview
FAT Brands Inc. is a leading multi-brand restaurant franchising company that develops, markets, and acquires primarily quick-service, fast casual, casual dining and polished casual restaurant concepts around the world. As of December 29, 2024, the Company owned eighteen restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli's, Twin Peaks, Smokey Bones, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses. At December 29, 2024, the Company had approximately 2,300 locations open or under construction, of which approximately 92% were franchised.
Under our franchised business model, we generate revenue by charging franchisees an initial franchise fee as well as ongoing royalties. This asset light franchisor model provides the opportunity for strong profit margins and an attractive free cash flow profile while minimizing restaurant operating company risk, such as long-term real estate commitments or capital investments. Our scalable management platform enables us to add new stores and restaurant concepts to our portfolio with minimal incremental corporate overhead cost, while taking advantage of significant corporate overhead synergies. The acquisition of additional brands and restaurant concepts as well as expansion of our existing brands are key elements of our growth strategy.
Our revenues are derived primarily from two sales channels, franchised restaurants and company owned restaurants, which we operate as one segment. The primary sources of revenues are the sale of food and beverages at our company restaurants and the collection of royalties, franchise fees and advertising revenue from sales of food and beverages at our franchised restaurants.
Results of Operations
We operate on a 52-week or 53-week fiscal year ending on the last Sunday of the calendar year. In a 52-week fiscal year, each quarter contains 13 weeks of operations. In a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations, which may cause our revenue, expenses and other results of operations to be higher due to an additional week of operations. The 2024 fiscal year is a 52-week year. The 2023 fiscal year was a 53-week year.
The following table summarizes key components of our consolidated results of operations for the fiscal years ended December 29, 2024 and December 31, 2023.
(In Thousands) For the Fiscal Years Ended
December 29, 2024
December 31, 2023
Consolidated statement of operations data:
Revenues
Royalties
$
90,035
$
94,036
Restaurant sales
413,480
299,029
Advertising fees
39,473
39,490
Factory revenue
37,949
37,983
Franchise fees
6,487
4,979
Other revenue
5,228
4,940
Total revenues
592,652
480,457
Costs and expenses
General and administrative expense
128,564
93,117
Cost of restaurant and factory revenues
393,131
282,887
Depreciation and amortization
41,528
31,131
Impairment of goodwill and other intangible assets
30,600
500
Refranchising loss
1,949
2,873
Advertising expense
49,100
47,619
Total costs and expenses
644,872
458,127
(Loss) income from operations
(52,220)
22,330
Total other expense, net
(140,380)
(118,695)
Loss before income tax benefit
(192,600)
(96,365)
Income tax benefit
(2,753)
(6,255)
Net loss
$
(189,847)
$
(90,110)
Net loss for the fiscal year ended December 29, 2024, totaled $189.8 million consisting of revenues of $592.7 million less costs and expenses of $644.9 million, other expense of $140.4 million, and income tax benefit of $2.8 million. Net loss for the fiscal year ended December 31, 2023, totaled $90.1 million consisting of revenues of $480.5 million less costs and expenses of $458.1 million, other expense of $118.7 million plus an income tax benefit of $6.3 million.
Revenues consist of royalties, franchise fees, advertising fees, restaurant sales, factory revenues, and other revenue. We earned revenues of $592.7 million for the fiscal year ended December 29, 2024 compared to $480.5 million for the fiscal year ended December 31, 2023. The increase of $112.2 million is primarily driven by revenue from our acquisition of Smokey Bones in September 2023 and revenues from new restaurant openings.
Costs and expenses consist of general and administrative expense, cost of restaurant and factory revenues, depreciation and amortization, impairment of goodwill and other intangible assets, refranchising losses and advertising expense. Our costs and expenses increased from $458.1 million in the 2023 fiscal year to $644.9 million in the comparable period of
2024, primarily due to the acquisition of Smokey Bones in September 2023 and increased activity from Company-owned restaurants.
General and administrative expenses increased $35.4 million for the fiscal year ended December 29, 2024, compared to the prior year, primarily due to the acquisition of Smokey Bones in September 2023 and increased professional fees related to pending litigation.
Cost of restaurant and factory revenues are related to the operations of our company-owned restaurant locations and factory produced dough and batter and increased $110.2 million, or 39.0%, to $393.1 million in fiscal 2024 compared to fiscal 2023, primarily due to the acquisition of Smokey Bones in September 2023 and increased costs at company-owned restaurant.
Depreciation and amortization increased $10.4 million in fiscal year 2024 compared to fiscal year 2023, primarily due to the acquisition of Smokey Bones in September 2023 and depreciation of new property and equipment at company-owned restaurant locations.
We recorded non-cash impairment charges for goodwill and other intangible assets of $30.6 million and $0.5 million during the fiscal years ended December 29, 2024 and December 31, 2023, respectively.
Refranchising net loss for the fiscal year ended December 29, 2024, was comprised of restaurant operating costs, net of food sales, of $0.9 million, and $1.0 million in net loss related to the sale or closure of refranchised restaurants. Refranchising net loss for the fiscal year ended December 31, 2023, was comprised of restaurant operating costs, net of food sales, of $3.0 million, partially offset by $0.1 million in net gains related to the sale or closure of refranchised restaurants.
Advertising expense increased $1.5 million for the fiscal year ended December 29, 2024, compared to the prior year. These expenses vary in relation to advertising revenues.
Total other expense, net for the fiscal year ended December 29, 2024 was $140.4 million and consisted primarily of net interest expense of $138.3 million and net losses on extinguishment of debt in the amount of $1.8 million. Total other expense, net for the fiscal year ended December 31, 2023 was $118.7 million and consisted primarily of net interest expense of $117.5 million and net losses on extinguishment of debt in the amount of $2.4 million.
We recorded an income tax benefit of $2.8 million for the year ended December 29, 2024, compared to an income tax benefit of $6.3 million for the fiscal year ended December 31, 2023. These tax results were based on a net loss before taxes of $192.6 million for fiscal year 2024 and $96.4 million for fiscal year 2023.
Liquidity and Capital Resources
Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations, acquisitions, and expansion of franchised restaurant locations and for other general business purposes. Our primary sources of funds for liquidity during the fiscal year ended December 29, 2024 consisted of cash on hand at the beginning of the period and net proceeds of $85.9 million from the sale of secured debt as discussed in Note 10 of the accompanying consolidated financial statements.
We are involved in a world-wide expansion of franchise locations, which will require significant liquidity, primarily from our franchisees. If real estate locations of sufficient quality cannot be located and either leased or purchased, the timing of restaurant openings may be delayed. Additionally, if we or our franchisees cannot obtain capital sufficient to fund this expansion, the extent of or timing of restaurant openings may be reduced or delayed.
We also may acquire additional restaurant concepts. These acquisitions typically require capital investments in excess of our normal cash on hand. We would expect that future acquisitions will necessitate financing with additional debt or equity transactions. If we are unable to obtain acceptable financing, our ability to acquire additional restaurant concepts likely would be negatively impacted.
We have liabilities of$91.8 millionrelating to put options exercised by others on our Series B Cumulative Preferred Stock. The Company has contractual options pursuant to the put/call agreements to extend this repayment via incremental interest payments and there are capital market options that the Company may consider. We believe that we have sufficient liquidity to meet our liquidity needs and capital resource requirements for at least the next twelve months primarily through currently available cash and cash equivalents, cash flows from operations and access to the capital markets.
As of December 29, 2024, we had cash and restricted cash totaling $67.4 million.
Debt Issuances (Whole-Business Securitizations)
We financed our acquisitions and operations through the issuance of notes by five special purpose, wholly-owned financing subsidiaries identified below, which own substantially all of our operations. The Company acts as the manager of each of these subsidiaries under a Management Agreement and performs management, franchising, distribution, intellectual property and operational functions on behalf of the subsidiaries and receives a management fee.
FAT Brands Royalty I, LLC
On April 26, 2021, FAT Brands Royalty I, LLC (“FB Royalty”), a special purpose, wholly-owned subsidiary of FAT Brands, completed the Offering of three tranches of fixed rate senior secured notes. Net proceeds totaled $140.8 million, which consisted of the combined face amount of $144.5 million, net of debt offering costs of $3.0 million and original issue discount of $0.7 million. A portion of the proceeds was used to repay and retire notes issued in 2022 under the Base Indenture (the "2020 Securitization Notes"). The payoff amount totaled $83.7 million, which included principal of $80.0 million, accrued interest of $2.2 million and prepayment premiums of $1.5 million.
On July 6, 2022, FB Royalty issued an additional $76.5 million aggregate principal amount of three tranches of fixed rate senior secured notes (in millions):
Closing Date
Class
Seniority
Principal Balance
Coupon
Final Legal Maturity Date
7/6/2022
A-2
Senior
$42.7
4.75%
7/25/2051
7/6/2022
B-2
Senior Subordinated
$14.2
8.00%
7/25/2051
7/6/2022
M-2
Subordinated
$19.6
9.00%
7/25/2051
Of the $76.5 million aggregate principal amount, $30.0 million was sold privately during the third quarter of 2022, resulting in net proceeds of $27.1 million (net of debt offering costs of $0.6 million and original issue discount of $2.3 million). The remaining $46.5 million in aggregate principal was sold privately on October 21, 2022, when the Company entered into an Exchange Agreement with the Twin Peaks sellers and redeemed 1,821,831 shares of the Company’s 8.25% Series B Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and unpaid dividends to the date of redemption, in exchange for $46.5 million aggregate principal amount of secured debt ($43.2 million net of debt offering costs and original issue discount).
Prior to the redemption, the Twin Peaks sellers held 2,847,393 shares of Series B Cumulative Preferred Stock, which shares were issued to it on October 1, 2021 as partial consideration for the Company’s acquisition of Twin Peaks.
Pursuant to the Exchange Agreement, (i) at any time prior to July 25, 2023, the Company may call from the Twin Peaks sellers all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.86, plus any accrued plus unpaid interest thereon; (ii) at any time on or after the date of the Exchange Agreement, the Company may call from the Twin Peaks sellers, and at any time on or after July 25, 2023, the Twin Peaks sellers may put to the Company, all or a portion of the Class A-2 Notes and/or Class B-2 Notes at the outstanding principal balance multiplied by 0.94, plus any accrued plus unpaid interest thereon; and (iii) at any time on or after July 25, 2023, the Company may call from the Twin Peaks sellers, and the Twin Peaks sellers may put to the Company, all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.91, plus any accrued plus unpaid interest thereon. If the Company does not remit the applicable call price or put price upon a duly exercised call or put, as applicable, the amount owed by the Company will accrue interest at 10% per annum, which interest is due and payable in cash monthly by the Company. On July 13, 2023, pursuant to the Exchange Agreement, the Twin Peaks sellers exercised their put option. During the first quarter of fiscal 2024, the Company paid $1.0 million to settle the 10% per annum interest in perpetuity and to settle the put option. As a result, as of December 29, 2024, the outstanding principal balance owned by the Twin Peaks seller is no longer subject to the put option.
FAT Brands GFG Royalty I, LLC
In connection with the acquisition of GFG, on July 22, 2021, FAT Brands GFG Royalty I, LLC (“GFG Royalty”), a special purpose, wholly-owned subsidiary of the Company, completed the issuance and sale in a private offering (the “GFG Offering”) of three tranches of fixed rate senior secured notes. Net proceeds totaled $338.9 million, which consisted of the
combined face amount of $350.0 million, net of debt offering costs of $6.0 million and original issue discount of $5.1 million. Substantially all of the proceeds were used to acquire GFG. Immediately following the closing of the acquisition of GFG, the Company contributed the franchising subsidiaries of GFG to GFG Royalty, pursuant to a Contribution Agreement.
On December 15, 2022, GFG Royalty issued an additional $113.5 million aggregate principal amount of three tranches of fixed rate senior secured notes as follows (in millions):
Closing Date
Class
Seniority
Principal Balance
Coupon
Final Legal Maturity Date
12/13/2022
A-2
Senior
$67.8
6.00%
7/25/2051
12/13/2022
B-2
Senior Subordinated
$20.2
7.00%
7/25/2051
12/13/2022
M-2
Subordinated
$25.5
9.50%
7/25/2051
Of the $113.5 million aggregate principal amount, $25.0 million was sold privately during the fourth quarter, resulting in net proceeds of $22.3 million (net of debt offering costs of $0.4 million and original issue discount of $2.3 million). The remaining $88.5 million in aggregate principal was issued to FAT Brands Inc. and has been eliminated in consolidation. In January 2023, an additional $40.0 million aggregate principal amount was sold privately, resulting in net proceeds of $34.8 million. On September 20, 2023, an additional $2.8 million aggregate principal amount was sold privately resulting in net proceeds of $2.5 million. In October 2023, $20.2 million aggregate principal amount previously issued to FAT Brands Inc. was sold privately resulting in net proceeds of $18.1 million. The remaining principal amount remains issued to FAT Brands, Inc., pending sale to third party investors as of December 29, 2024.
Twin Hospitality I, LLC (Formerly FAT Brands Twin Peaks I, LLC)
Prior Securitization Notes
In connection with the acquisition of Twin Peaks, on October 1, 2021, the Company completed the issuance and sale in a private offering through its special purpose, wholly-owned subsidiary, Twin Hospitality I, LLC (formerly FAT Brands Twin Peaks I, LLC), of an aggregate principal amount of $250.0 million. The net proceeds from the sale of the Notes were used by the Company to finance the cash portion of the purchase price for the acquisition of Twin Peaks Buyer, LLC and its direct and indirect subsidiaries. Net proceeds totaled $236.9 million, which consisted of the combined face amount of $250.0 million, net of debt offering costs of $5.6 million and original issue discount of $7.5 million. Substantially all of the proceeds were used to acquire Twin Peaks. Immediately following the closing of the acquisition of Twin Peaks, the Company contributed the franchising subsidiaries of Twin Peaks to Twin Hospitality I, LLC, pursuant to a Contribution Agreement.
On September 8, 2023, Twin Hospitality I, LLC issued an additional $98.0 million aggregate principal amount of 2 tranches of fixed rate secured notes to FAT Brands Inc., pending sale to third party investors. Of the $98.0 million aggregate principal amount, $48.0 million was sold privately during the third quarter of 2023 resulting in net proceeds of $45.2 million. A portion of the proceeds was used to purchase $14.9 million aggregate principal amount of outstanding Securitization Notes, which will be held pending re-sale to third party investors. In connection with the bonds repurchased, the Company recognized a $2.7 million net loss on extinguishment of debt. The remaining $50.0 million in aggregate principal of notes issued by Twin Hospitality I, LLC was issued to a wholly-owned subsidiary of FAT Brands, Inc., pending sale to third party investors.
On March 20, 2024, Twin Hospitality I, LLC issued an additional $50.0 million aggregate principal amount of one tranche of fixed rate secured notes to FAT Brands Inc., pending sale to third party investors. Of the $50.0 million aggregate principal amount, $38.8 million was sold privately during the first quarter of 2024 resulting in net proceeds of $36.4 million. A portion of the proceeds was used to purchase $7.4 million aggregate principal amount of outstanding Securitization Notes, which will be held pending re-sale to third party investors. In connection with the bonds repurchased, the Company recognized a $0.4 million net gain on extinguishment of debt. During the second quarter of 2024, the remaining $11.2 million in aggregate principal of notes was sold privately to a third party investor resulting in net proceeds of $10.7 million.
On November 21, 2024, Twin Hospitality I, LLC refinanced all of its above-referenced secured notes through the issuance and sale of four tranches of fixed rate secured notes to third party investors for a total aggregate principal amount of $416.7 million. Net Proceeds from the sale of the Twin Securitization notes were $407.5 million and consisted of $6.0 million of debt offering costs and $3.2 million of original issue discounts. The net proceeds from the sale of the Twin Securitization Notes was used to redeem all of the Prior Securitization Notes, which included principal of $388.8 million and accrued interest of $2.3 million, with the remainder to be used for working capital and general corporate purposes. The Company recognized a loss on extinguishment of debt of $2.4 million.
Also on November 21, 2024, the Company contributed Twin Hospitality I, LLC, to a new holding company, Twin Hospitality Group Inc., in anticipation of a planned listing of Twin Hospitality as a standalone public company. In January 2025, the Company distributed approximately 5% of the fully-diluted shares of Class A Common Stock of Twin Hospitality to our common stockholders, and Twin Hospitality began trading as a standalone publicly traded company listed on NASDAQ under the symbol "TWNP". The Company retained the remaining shares of Twin Hospitality outstanding immediately following the distribution. (See Note 19, Subsequent Events)
FAT Brands Fazoli's Native I, LLC
In connection with the acquisition of Fazoli's and Native Grill & Wings, on December 15, 2021, the Company completed the issuance and sale in a private offering through its special purpose, wholly-owned subsidiary, FAT Brands Fazoli's Native I, LLC, of an aggregate principal amount of $193.8 million. Net proceeds totaled $180.6 million, which consisted of the combined face amount of $193.8 million, net of debt offering costs of $3.8 million and original issue discount of $9.4 million. The proceeds were used to close the acquisitions of Fazoli's and Native, and to provide working capital for the Company. Immediately following the closing of the acquisition of Fazoli's and Native, the Company contributed the franchising subsidiaries of these entities to FAT Brands Fazoli's Native I, LLC, pursuant to a Contribution Agreement.
FB Resid Holdings 1, LLC
On July 8, 2023, FB Resid Holdings I, LLC (“FB Resid”), a special purpose, wholly-owned subsidiary of FAT Brands, completed the issuance of two tranches of fixed rate secured notes with a total aggregate principal amount of $150.0 million pursuant to a Base indenture, dated July 10, 2023 (the "FB Resid Indenture"). Of the $150.0 million aggregate principal amount, $105.8 million was sold privately, resulting in net proceeds of $105.3 million. A portion of the proceeds was used to purchase $64.6 million of outstanding Securitization Notes, which will be held pending re-sale to third party investors. The remaining $44.2 million in aggregate principal of notes issued by FB Resid was issued to a wholly-owned subsidiary of FAT Brands, Inc., pending sale to third party investors.
On November 21, 2024, the Company modified the terms of the outstanding notes issued by FB Resid pursuant to an Omnibus Amendment executed with the noteholders as well as with the Company’s other whole business securitization subsidiaries, FAT Brands Royalty I, LLC, FAT Brands GFG Royalty I, LLC, Twin Hospitality I, LLC (f/k/a FAT Brands Twin Peaks I, LLC) and FAT Brands Fazoli’s Native I, LLC (the “Existing Issuers”). The Omnibus Amendment amended the treatment of “Excess Amounts” under the Company’s current securitization transactions, other than Twin Hospitality I, LLC, upon (i) the occurrence of an Event of Default under the FB Resid Indenture or (ii) if the Controlling Class Representative (currently 3|5|2 Capital ABS Master Fund LP) has notified the FB Resid Trustee that certain Excess Amounts are required to satisfy clauses (i) through (xiii) of the Priority of Payments on the next applicable Monthly Allocation Date under the FB Resid Indenture. In such event, all such Excess Amounts must be deposited into a segregated account to be included in Retained Collections and deposited in the Collection Account under the FB Resid Indenture for application in accordance with the waterfall of payments under Section 5.10 of the FB Resid Indenture. The Omnibus Amendment also amended the FB Resid Indenture to provide that with respect to (i) any Mandatory Prepayment Amount and/or (ii) from and after the occurrence of any Event of Default (as such terms are defined in the FB Resid Indenture), payments of interest and principal with respect to the Class A-1 Notes and the Class A-2 Notes shall be made in accordance with the Applicable Class A Payment Priority (defined in the Omnibus Amendment), and no amounts may be paid on the Class A-1B Notes or Class A-2B Notes until amounts then due and owing to the Class A-1A Notes and the Class A-2A Notes shall have been paid in full in cash.
In addition, under the Omnibus Amendment, the Company and FB Resid agreed not to permit (i) any equity interests of any Existing Issuer to be sold, transferred or disposed, other than the transactions contemplated by the Twin Peaks Listing Event, or (ii) any Specified Additional Issuance (as defined in the FB Resid Indenture). In addition, the Omnibus Amendment added a new Event of Default under the FB Resid Indenture if the Issuer should fail, by July 31, 2026, to have prepaid or
purchased at least $20,000,000 of Class A-1A Notes and Class A-2A Notes held by the Controlling Class Representative or its managed funds. Also under the Omnibus Amendment, the Company agreed not to sell or otherwise dispose of any of its equity interests of Twin Hospitality until Twin Hospitality has used at least $75,000,000 of aggregate Qualified Equity Offering Proceeds (as defined in the Omnibus Amendment) or other proceeds to prepay the new Notes issued under the TWNP Indenture. The Company also agreed not to declare or pay any dividend or distribution in the form of equity interests in Twin Hospitality (i) until the third anniversary of the Closing Date (ii) or if any Potential Rapid Amortization Event, Rapid Amortization Event, Default or Event of Default has occurred or would result therefrom under the indentures of any Existing Issuer.
On November 21, 2024, the Company also entered into a Pledge and Security Agreement (the “Pledge Agreement”) and Securities Account Control Agreement (the “Control Agreement”) with UMB Bank, N.A., as trustee under the FB Resid Indenture and as securities intermediary (in such capacities, the “Pledge Trustee”). Under the Pledge Agreement, the Company pledged all of its shares of Class A Common Stock of Twin Hospitality (other than shares distributed to its shareholders at the time of the Twin Peaks Listing Event) (the “Pledged Shares”) along with all proceeds of the Pledged Shares for the payment and performance of all obligations of FB Resid under the FB Resid Indenture. The Company agreed that the “Applicable Percentage” (a formula that is defined in the Pledge Agreement) of any (i) proceeds of the sale or other disposal of Pledged Shares, (ii) dividend, distribution, rights, warrants or other consideration with respect to the Pledged Shares, and (iii) proceeds of any loan secured by the Pledged Shares (collectively, the “Proceeds”), will be applied to purchase first the Class A-2A Notes, and then the Class A-1A Notes, issued under the FB Resid Indenture at par plus any accrued and unpaid interest thereon and interest paid in kind. The Company also agreed that, if Twin Hospitality has not raised at least $25,000,000 in Qualified Equity Proceeds and is sold, then so long as either (i) the Issuer has repaid its debt in full under the TWNP Indenture or (ii) the Issuer’s noteholders have otherwise waived such payment and approved the sale in writing, then 50% of the Proceeds from the sale of Twin Hospitality will be applied to purchase first the Class A-2A Notes, and then the Class A-1A Notes, issued under the FB Resid Indenture at par plus any accrued and unpaid interest thereon and interest paid in kind. Also under the Pledge Agreement, upon the occurrence and during the continuance of an Event of Default and following the Grace Period, if applicable, under the FB Resid Indenture, all rights of the Company to vote or give consent with respect to the Pledged Shares shall be vested in the Pledge Trustee. Under the Control Agreement, the Company agreed to deposit all of the Pledged Shares at the time of the Twin Peaks Listing Event into a controlled account maintained by the Pledge Trustee, and the Pledge Trustee will distribute Proceeds of the Pledged Shares held in such account according to the Pledge Agreement. The Company will be entitled to enter any market order to sell Pledged Shares in a brokers’ transaction on an approved trading market, and may enter orders to sell Pledged Shares other than on a permitted trading market (i) with the prior written consent of the Pledge Trustee or (ii) in a trade to be executed within 5% of the 5-trading day volume weighted average price and with a value of at least $15,000,000. Upon an Event of Default under the FB Resid Indenture, the Controlling Class Representative will be entitled to exercise sole control of the Pledged Shares and direct sales or other dispositions of the Pledged Shares held in the controlled account.
Retained Notes
During 2024, the Company repurchased certain of its securitized notes to be held for resale to third party investors and sold certain of its securitized notes previously repurchased or issued and not sold (collectively, the "Retained Notes"). During 2024, cash proceeds from the sale of Retained Notes and cash used to repurchase Retained Notes was $108.2 million and $36.4 million including accrued interest, respectively. The $108.2 million includes the sale of $30.9 million aggregate principal Twin Peaks Securitization notes issued in 2024 in addition to securitization notes previously held in wholly-owned subsidiaries of Fat Brands Inc. As of December 29, 2024, the Company held $164.8 million of Retained Notes, which have been eliminated in consolidation.
We believe that we will be in compliance with our debt covenants and have sufficient sources of cash to meet our liquidity needs for the next twelve months.
Equity Issuances
On November 14, 2022, we entered into an ATM Sales Agreement (the "ThinkEquity Sales Agreement") with ThinkEquity LLC (the "Agent"), pursuant to which we may offer and sell from time to time through the Agent up to 21,435,000 maximum aggregate offering price of shares of our Class A Common Stock and/or 8.25% Series B Preferred Stock. The ThinkEquity Sales Agreement with the Agent was terminated in May 2024.
On July 19, 2024, we entered into an Equity Distribution Agreement (the “Noble Sales Agreement”) with Noble Capital Markets, Inc. (the “Sales Agent”), pursuant to which we may offer and sell from time to time through the Sales Agent
shares (the “Placement Shares”) of our Class A Common Stock and/or 8.25% Series B Cumulative Preferred Stock. During the three months ended December 29, 2024, pursuant to the Noble Sales Agreement, the Company sold and issued 169,247 shares of 8.25% Series B Cumulative Preferred Stock, at a weighted average share price of $9.73, paid the Sales Agent commissions of approximately $50,000 for such sales and received net proceeds of $1.6 million (net of fees and commissions) for such sales.
Comparison of Cash Flows
Our cash and restricted cash balance was $67.4 million as of December 29, 2024, compared to $91.9 million as of December 31, 2023.
The following table summarizes key components of our consolidated cash flows for the fiscal years ended December 29, 2024, and December 31, 2023:
(In thousands) For the Fiscal Years Ended
December 29, 2024
December 31, 2023
Net cash used in operating activities
$
(56.2)
$
(35.6)
Net cash used in investing activities
(26.5)
(59.8)
Net cash provided by financing activities
58.2
118.6
Net (decrease) increase in cash and restricted cash
$
(24.5)
$
23.1
Operating Activities
Net cash used in operating activities increased $20.6 million to $56.2 million in fiscal 2024 compared to $35.6 million in fiscal 2023, and is primarily related to higher debt service costs associated with our securitizations and by changes in working capital compared to fiscal 2023.
Investing Activities
Net cash used in investing activities was $26.5 million in fiscal 2024 compared to $59.8 million in fiscal 2023, and is primarily related to purchases of property and equipment in connection with company-owned restaurants. The $33.3 million decrease in fiscal 2024 when compared to fiscal 2023 is primarily attributable to the acquisition of Barbecue Integrated, Inc. in September, 2023. See Note 3 in our consolidated financial statements for more information on our mergers and acquisitions.
Financing Activities
Net cash provided by financing activities was $58.2 million in fiscal 2024 compared to $118.6 million in fiscal 2023, and is primarily comprised of proceeds from borrowings, partially offset by repurchases of previously issued securitized notes and dividends paid on our Class A and Class B Common Stock and our Series B Cumulative Preferred Stock. The $62.1 million decrease in fiscal 2024 compared to fiscal 2023 is primarily due to lower net proceeds from borrowings during fiscal 2024 compared to fiscal 2023. See Note 10 in our consolidated financial statements for more information on debt.
Dividends
The dividends declared on the Company's common stock by the Board of Directors during the fiscal year ended December 29, 2024 are as follows (in millions):
The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors. The amount and size of any future dividends will depend upon our future results of operations, financial condition, capital levels, cash requirements, and other factors. There can be no assurance that we will declare and pay dividends in future periods.
Capital Expenditures
As of December 29, 2024, we do not have any material commitments for capital expenditures.
Critical Accounting Policies and Estimates
Franchise Fees: The franchise arrangement is documented in the form of a franchise agreement. The franchise arrangement requires us to perform various activities to support the brand that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which includes the transfer of the franchise license. The services provided by us are highly interrelated with the franchise license and are considered a single performance obligation. Franchise fee revenue from the sale of individual franchises is recognized over the term of the individual franchise agreement on a straight-line basis. Unamortized non-refundable deposits collected in relation to the sale of franchises are recorded as deferred franchise fees.
The franchise fee may be adjusted at management’s discretion or in a situation involving store transfers between franchisees. Deposits are non-refundable upon acceptance of the franchise application. In the event a franchisee does not comply with their development timeline for opening franchise stores, the franchise rights may be terminated, at which point the franchise fee revenue is recognized in the amount of the non-refundable deposits.
Royalties: In addition to franchise fee revenue, we collect a royalty calculated as a percentage of net sales from our franchisees. Royalties range from 0.75% to 7.0% and are recognized as revenue when the related sales are made by the franchisees. Royalties collected in advance of sales are classified as deferred income until earned.
Advertising: We require advertising payments from franchisees based on a percent of their net sales. We also receive, from time to time, payments from vendors that are to be used for advertising. Advertising funds collected are required to be spent for specific advertising purposes. Advertising revenue and associated expense is recorded on the consolidated statement of operations. Assets and liabilities associated with the related advertising fees are reflected in the Company’s consolidated balance sheets.
Goodwill and other intangible assets: Goodwill and other intangible assets with indefinite lives, such as trademarks, are not amortized but are reviewed for impairment annually, or more frequently if indicators arise, as was done in 2024 and 2023. The Company recorded impairment charges of $30.6 million and $0.5 million relating to goodwill and other intangible assets during the fiscal years ended December 29, 2024 and December 31, 2023, respectively.
Property and Equipment: Property and Equipment are recorded at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The useful lives of our property and equipment typically range from 3 to 7 years. Upon retirement or other disposal of property and equipment, the cost and related amounts of accumulated depreciation are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds, is recorded in earnings. On an annual basis the Company assesses its property and equipment for impairment. The Company recognized impairment expense of $1.9 million and $0.5 million during the fiscal years ended December 29, 2024 and December 31, 2023, respectively and included in General and administrative expense on the Consolidated Statements of Operations.
Assets classified as held-for-sale: Assets are classified as held-for-sale when we commit to a plan to sell the asset, the asset is available for immediate sale in its present condition and an active program to locate a buyer at a reasonable price has been initiated. The sale of these assets is generally expected to be completed within one year. The combined assets are valued at the lower of their carrying amount or fair value, net of costs to sell and included as current assets on the Company’s consolidated balance sheet. Assets classified as held-for-sale are not depreciated. However, interest attributable to the liabilities associated with assets classified as held-for-sale and other expenses continue to be recorded as expenses in the Company’s Consolidated Statements of Operations.
Income taxes: We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.
We utilize a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon the ultimate settlement.
Share-based compensation: We have a stock option plan which provides for options to purchase shares of our common stock. For grants to employees and directors, we recognize an expense for the value of options granted at their fair value at the date of grant over the vesting period in which the options are earned. Cancellations or forfeitures are accounted for as they occur. Fair values are estimated using the Black-Scholes option-pricing model. (See Note 14 in our consolidated financial statements for more details on our share-based compensation.)
Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.
Recently Adopted Accounting Standards
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss. The amendments improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities. The Company adopted ASU No. 2023-07 for the fiscal year beginning January 1, 2024 and have applied this standard retrospectively for all periods presented on the Company's consolidated financial statements.
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement —Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In January 2025, the FASB issued update 2025-01—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The amendments require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting within annual reporting periods beginning after December 15, 2027. The Update should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require that public business entities on an annual basis disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The amendments also require that all entities disclose on an annual basis the income taxes paid disaggregated by jurisdiction. The amendments eliminate the requirement for all entities to disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or make a statement that an estimate of the range cannot be made. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is still evaluating the impact the adoption of this standard will have on its consolidated financial statements.
Off-Balance Sheet Arrangements
As of December 29, 2024, we did not have any off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 15 of Part IV of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements with accountants on any matter of accounting principles or practices, or financial statement disclosure required to be reported under this item.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officers and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officers and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our principal executive officers and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting also includes those policies and procedures that:
(a)Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(b)Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(c)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, our principal executive officers and principal financial officer concluded that our internal control over financial reporting was effective as of December 29, 2024.
Because we are a non-accelerated filer, we are not required to include an attestation report by our independent registered public accounting firm regarding the effectiveness of our internal control over financial reporting in this annual report as of December 29, 2024.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 29, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
During the fourth fiscal quarter of 2024, no director or officer of the Company adopted or terminated a "Rule 10-b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers and Directors
Below is a list of the names and ages, as of February 24, 2025, of our directors and executive officers, and a description of the business experience of each of them.
Name
Age
Position
Andrew A. Wiederhorn
59
Chairman of the Board of Directors
John S. Allen
72
Director
Donald J. Berchtold
79
Director
Tyler B. Child
49
Director
Lynne L. Collier
57
Director
Mark Elenowitz
54
Director (Lead Independent Director)
James G. Ellis
78
Director
Peter R. Feinstein
80
Director
Matthew H. Green
58
Director
John C. Metz
71
Director
Carmen Vidal
52
Director
Mason A. Wiederhorn
34
Director and Chief Brand Officer
Taylor A. Wiederhorn
36
Director and Chief Development Officer
Thayer D. Wiederhorn
36
Director and Chief Operating Officer
Kenneth J. Kuick
56
Co-Chief Executive Officer and Chief Financial Officer
Robert G. Rosen
58
Co-Chief Executive Officer and Head of Debt Capital Markets
Allen Z. Sussman
60
General Counsel and Corporate Secretary
Ron Roe
47
Senior Vice President of Finance
Andrew A. Wiederhorn is the founder of FAT Brands and served as a director of the Company since our inception in March 2017. He also served as President and CEO of FAT Brands and our principal operating subsidiaries from March 2017 until May 2023. He currently serves on the board of managers of our majority stockholder, Fog Cutter Holdings LLC, and was previously Chairman and CEO of our former parent company, Fog Cutter Capital Group Inc. Mr. Wiederhorn previously founded and served as the Chairman and Chief Executive Officer of Wilshire Financial Services Group Inc. and Wilshire Credit Corporation. Mr. Wiederhorn received his B.S. degree in Business Administration from the University of Southern California in 1987, with an emphasis in Finance and Entrepreneurship. He previously served on the Board of Directors of Fabricated Metals, Inc., The Boy Scouts of America Cascade Pacific Council, The Boys and Girls Aid Society of Oregon, University of Southern California Associates, Citizens Crime Commission of Oregon, and Economic Development Council for the City of Beverly Hills Chamber of Commerce. Mr. Wiederhorn brings to the Board his more than 20 years of experience with the Company and its predecessors, including as the Company’s founder, as well as his experience with sophisticated financial structures, mergers and acquisitions, strategic planning, and leadership and management of complex organizations.
On May 10, 2024, Mr. Wiederhorn was indicted on federal charges, alleging that Mr. Wiederhorn caused FAT Brands Inc. and an affiliate to distribute $47 million to him for his personal use and benefit, mischaracterized these distributions as loans, and failed to disclose the disbursements as reportable compensation. The indictment also alleges that Mr. Wiederhorn failed to pay personal income taxes in the amount of $7.7 million. Mr. Wiederhorn was charged with endeavoring to obstruct the administration of the Internal Revenue Code, tax evasion, wire fraud, making false statements and omitting material facts in statements to accountants in connection with audits and reviews, certifying faulty financial reports, and causing the Company to extend and maintain credit in the form of personal loan. Mr. Wiederhorn was also charged in a separate indictment for illegally possessing a firearm and ammunition after being convicted of a felony.
John S. Allen has served as a director of FAT Brands since September 2023. Mr. Allen is a retired restaurant operator, having served as the owner and operator of Pacific Way Bakery & Café. Mr. Allen received a Bachelor of Arts degree from the University of Illinois. Mr. Allen brings to the Board his experience and history in restaurant operations, management and finance.
Donald J. Berchtold has served as a director of FAT Brands since March 2023. Mr. Berchtold also serves as Chief Concept Officer of FAT Brands Inc., a role he has held since February 2018. Mr. Berchtold previously held the position of President and Chief Operating Officer of Fatburger North America Inc. and President and Chief Operating Officer of Fog Cutter Capital Group Inc. Mr. Berchtold also served as Senior Vice President of Wilshire Financial Services Group Inc. and its sister company, Wilshire Credit Corporation. Mr. Berchtold was the owner-operator of his own business that included a dinner house, catering company and other food service concepts and was an active member in the Restaurants of Oregon Association. Mr. Berchtold holds a Bachelor of Science degree in Finance and Marketing from Santa Clara University. Mr. Berchtold brings to the Board his more than 20 years of experience with the Company and its predecessors, his more than 50 years of experience in the restaurant and hospitality industries, his knowledge and experience in strategic planning, and leadership and management of complex organizations.
Tyler B. Child has served as a director of FAT Brands since March 2023. Ms. Child has approximately 10 years of experience in investment banking, working in Equity Capital Markets on the Syndicate Desk for JMP Securities LLC, Banc of America Securities, LLC, and Montgomery Securities. Ms. Child holds a bachelor’s degree in Communications and Spanish from Santa Clara University. Ms. Child brings to the Board her experience and history in investment banking and capital markets.
Lynne L. Collier has served as a director of FAT Brands since July 2022. Ms. Collier is an experienced capital market professional, with nearly 30 years of experience in public capital markets and a focus on the restaurant industry. Ms. Collier currently serves as Head of Consumer Discretionary for Water Tower Research, LLC, and previously served as a Managing Director in the Investor Relations Division of ICR Inc. from April 2021 to June 2022. Prior to that, Ms. Collier had a 25-year career in equity research as a sell-side Consumer Analyst, including for Loop Capital, Canaccord Genuity and Sterne Agee. Ms. Collier received a bachelor’s degree in Finance from Baylor University and an M.B.A. in Finance from Texas Christian University. Ms. Collier brings to the Board substantial expertise in financial analysis of companies in the restaurant and hospitality industries, and broad expertise in capital markets and investor relations generally.
Mark Elenowitz has served as a director of FAT Brands since April 2023. Mr. Elenowitz is a Wall Street veteran, who co-founded a boutique investment bank and its online capital formation platform BANQ®. He is a noted speaker at Small Cap and Reg A events, including the SEC Small Business Forum, and has been profiled in BusinessWeek, CNBC and several other publications. Mr. Elenowitz is also a member of the Depository Trust & Clearing Corporation (DTCC) Private Markets Executive Advisory Board, tasked with developing DTCC’s new Digital Securities Management (DSM) platform. Mr. Elenowitz currently serves as managing director of Tripoint Capital Management, Digital Offering LLC and Cambria Capital LLC, and is the President and co-founder of Horizon Fintex, a fintech company offering a suite of integrated securities software applications for compliant issuance through secondary trading of electronic securities. In addition, he is the co-creator of Upstream concept, a MERJ Exchange Market, a global stock exchange for digital securities and affiliate of the World Federation of Exchanges (WFE). Mr. Elenowitz is also a member of the Board of Directors of the Long Island Capital Alliance and the National Investment Banking Association, and sits on the advisory boards of several private companies. He is a graduate of the University of Maryland School of Business and Management with a Bachelor of Science degree in Finance. Mr. Elenowitz brings to the Board substantial expertise in capital markets, financial and strategic planning, complex financial transactions, mergers and acquisitions, and leadership of complex organizations.
James G. Ellis has served as a director of FAT Brands since September 2023. Mr. Ellis served as the Dean of the Marshall School of Business at the University of Southern California from 2007 until June 2019. Prior to his appointment as Dean in April 2007, Mr. Ellis was the Vice Provost, Globalization, for USC and prior to that was Vice Dean, External Relations. Mr. Ellis was also a professor in the Marketing Department of the Marshall School of Business from 1997 until retiring in 2021. Mr. Ellis continues to serve on the Boards of Directors of a number of other public and private companies, including Mercury General Corporation and J.G. Boswell Company. Mr. Ellis received a Bachelor of Business Administration degree from the University of New Mexico and MBA degree from Harvard Business School. Mr. Ellis brings to the Board substantial expertise in finance, marketing, financial accounting and complex financial transactions, and leadership and management of complex organizations.
Peter R. Feinstein has served as a director of FAT Brands since July 2023. Mr. Feinstein is an experienced operator of restaurant and entertainment properties, including SHAC, LLC, Fatburger franchises, Sugar Factory, El Dorado Cantina and Country Star Restaurants. Mr. Feinstein is also a retired certified public accountant, having served in senior management and audit roles with Kenneth Leventhal & Co. and Fox & Co. Mr. Feinstein graduated with a Bachelor of Science degree in Accounting from UCLA. Mr. Feinstein brings to the Board substantial expertise in financial and strategic planning, financial accounting, mergers and acquisitions, hospitality industry operations and management, and leadership and management of complex organizations.
Matthew H. Green has served as a director of FAT Brands since July 2023. Mr. Green is an experienced finance professional based in London, with over 30 years of experience as a merchant banker, focused primarily on the real estate, infrastructure, and energy sectors for clients including private equity firms, pension funds, sovereign wealth funds and family offices. Mr. Green received a bachelor’s degree in Business Administration from the University of Washington. Mr. Green brings to the Board his experience and history in debt finance and capital markets, real estate, and investment banking.
John C. Metz has served as a director of FAT Brands since July 2023. Mr. Metz is an experienced owner, operator and developer of restaurants and hospitality properties. Mr. Metz currently owns and operates approximately 70 franchised restaurants, including Hurricane Dockside Grill, Denny’s and Wahoo Seafood Grill restaurants. Mr. Metz received a Bachelor of Science degree in Hotel Administration and an M.B.A. from Cornell University. Mr. Metz brings to the Board his experience and history in restaurant operations and franchising, and financial and operational management of complex organizations.
Carmen Vidal has served as a director of FAT Brands since March 2023. Ms. Vidal has also served as International Legal Counsel & Director of International Franchise Development (Europe/Middle East/North Africa) for the Company since October 2021. Prior to that, Ms. Vidal served as Vice President of International Development for the Company. Ms. Vidal brings to the Board her substantial experience in international franchising and cross-border transactions, and long history with the Company and its predecessors.
Mason A. Wiederhorn has served as a director of FAT Brands since March 2023, and serves on the board of managers of the Company’s majority stockholder, Fog Cutter Holdings LLC. He has also served as the Chief Brand Officer of the Company since December 2021. Prior to that, Mr. Wiederhorn served as Creative Director of the Company, preceded by his role as Creative Director of Fatburger North America Inc. and Buffalo’s Franchise Concepts Inc., and Videographer for Fatburger North America Inc. Mr. Wiederhorn graduated from the Business of Cinematic Arts program at the University of Southern California Marshall School of Business. Mr. Wiederhorn brings to the Board his participation in the founding and growth of our Company and its predecessors, leadership skills, and background and education in the creative arts and promotion of our multiple brands.
Taylor A. Wiederhorn has served as a director of FAT Brands since March 2023, and serves on the board of managers of the Company’s majority stockholder, Fog Cutter Holdings LLC. He has also been the Chief Development Officer of the Company since October 2017. Previously, Mr. Wiederhorn served as Vice President - Franchise Marketing and Development for Fatburger North America from December 2011 until October 2017. Mr. Wiederhorn graduated from the USC Marshall School of Business with a Bachelor of Science degree in Business Administration with a concentration in Corporate Finance. Mr. Wiederhorn brings to the Board his participation in the founding and growth of the Company and its predecessors, leadership skills, management of our sales teams, and business background and education.
Thayer D. Wiederhorn has served as a director of FAT Brands since March 2023 and serves on the board of managers of the Company’s majority stockholder, Fog Cutter Holdings LLC. He has also been the Chief Operating Officer of the Company since November 2021, responsible for day-to-day operations and providing leadership to management to ensure the execution of both short-term and long-term business strategies. Prior to his role as Chief Operating Officer, Mr. Wiederhorn served as Chief Marketing Officer from March 2017, overseeing global branding and marketing initiatives. He also held several prior positions, including VP of Marketing for Fatburger North America Inc. and Buffalo’s Franchise Concepts Inc. from June 2012 to March 2017, and Director of Marketing for Fatburger from July 2011 to June 2012. Additionally, he served as Marketing Coordinator and Brand Development Agent for Fatburger in 2010 and 2011. Mr. Wiederhorn began his career working in Fatburger restaurants and food trucks. He holds a Bachelor of Science degree in Business Administration with an emphasis in Finance and Business Economics from the University of Southern California. Mr. Wiederhorn brings to the Board his deep involvement and insight in the founding and growth of the Company and its predecessors, along with his leadership expertise, marketing experience and formal business education.
Kenneth J. Kuick has served as the Company’s Co-Chief Executive Officer since May 2023, and Chief Financial Officer since May 31, 2021. Prior to joining the Company, Mr. Kuick served as Chief Financial Officer of Noodles & Company, a national fast-casual restaurant concept, from November 2018 to August 2020, where he was responsible for leading the Company’s finance, accounting and supply chain operations. Prior to that, Mr. Kuick served as Chief Accounting Officer of VICI Properties Inc., a real estate investment trust specializing in casino properties, from October 2017 to August 2018, where he was responsible for accounting, consolidated financial operations, capital markets transactions, treasury, internal audit, tax and external reporting. Prior to that, Mr. Kuick served as Chief Accounting Officer of Caesars Entertainment Operating Company, a subsidiary of Caesars Entertainment Corporation, and as Vice President, Assistant Controller for Caesars Entertainment Corporation. Mr. Kuick is a Certified Public Accountant and earned his Bachelor of Science degree in Accounting and Business Systems from Taylor University.
Robert G. Rosen has served as the Company’s Co-Chief Executive Officer and Head of Debt Capital Markets since May 2023. Prior to that, he served as Executive Vice President of Capital Markets since April 2021. Prior to joining the Company, he had been the Managing Member of Kodiak Financial Group LLC since 2004. Kodiak invests in credit classes of ABS and MBS securities, purchases individual real estate loans and portfolios, purchases and manages real estate developments and invests in private equity transactions as well as venture capital transactions. Mr. Rosen began his career in commercial banking, focusing on direct lending for Fleet Bank (then Fleet Norstar Bank) in Albany NY after completing their extensive management training program. This was followed in 1990 by a career on Wall Street, working for Bankers Trust (now Deutsche Bank) and Kidder Peabody in structured finance and investment banking focusing primarily on credit derivatives including securitizations, asset-based lending as well as financing and banking commercial banks and other originators of securitizable assets. After Kidder, Mr. Rosen joined Black Diamond Advisors and Black Diamond Securities (and ultimately Black Diamond Capital Management). He served as a Director and FINOP of the Black Diamond entities, with a continued focus on structured finance transactions and credit as well as portfolio management (banking, sales and trading) and servicing. Mr. Rosen continued his career at Bank of Tokyo Mitsubishi and several buy side firms. He continues to be a long-term consultant to Black Diamond Capital Management and serves on multiple advisory boards and committees of Black Diamond. Mr. Rosen holds an MBA and a BA degree from Union College in Managerial Economics.
Allen Z. Sussman has served as the Company’s General Counsel, Secretary and EVP for Corporate Development since March 2021. Prior to that time, Mr. Sussman was a partner at the law firm of Loeb & Loeb LLP in Los Angeles, California, specializing in corporate and securities law, and served as the primary outside corporate and securities counsel of FAT Brands. Prior to private practice, in the early 1990s Mr. Sussman served as an attorney with the Division of Enforcement of the U.S. Securities and Exchange Commission in Washington, DC. Mr. Sussman holds a B.S. degree in Industrial and Labor Relations from Cornell University and a J.D. degree from Boston University School of Law.
Ron Roe currently serves as the Company’s Senior Vice President of Finance. Prior to August 16, 2018, Mr. Roe served as the Chief Financial Officer since 2009 and served as the Vice President of Finance from 2007 to 2009. Prior to 2007, Mr. Roe was an acquisitions associate for Fog Cutter Capital Group Inc. He began his career as an investment banking analyst with Piper Jaffray. Mr. Roe attended UC Berkeley, where he earned a Bachelor of Arts degree in Economics.
Family Relationships
The family relationships among our directors and executive officers are reported below under "Item 13. Certain Relationships and Related Transactions, and Director Independence" and incorporated herein by reference.
Delinquent Section 16(a) Reports
Based solely on a review of Forms 3, 4 and 5 and amendments thereto furnished to us for the year ended December 29, 2024, our directors, officers, or beneficial owners of more than 10% of our common stock timely furnished reports on all Forms 3, 4 and 5.
Insider Trading Policy
We have adopted an Insider Trading Policy that governs the purchase, sale and other dispositions of our securities by our directors, officers and employees. We believe that our Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the Nasdaq listing standards applicable to us. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
Code of Ethics
We have adopted a written code of business ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the code under the Corporate Governance section of our website at https://ir.fatbrands.com. In addition, we intend to post on our website all disclosures that are required by law or the NASDAQ listing standards concerning any amendments to, or waivers from, any provision of the code.
During fiscal 2024, our Board of Directors held 25 meetings. Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and meetings of the committees of the Board of Directors on which he or she serves.
The following table sets forth the two standing committees of our Board and the members of each committee as of December 29, 2024 and the number of meetings held by our Board of Directors and the committees during 2024:
Director
Board of Directors
Audit Committee
Compensation Committee
Andrew A. Wiederhorn
Chair
Chair
John S. Allen
X
Donald J. Berchtold
X
Tyler B. Child
X
X
X
Lynne L. Collier
X
Chair
X
Mark Elenowitz
X
X
X
James G. Ellis
X
X
X
Peter R. Feinstein
X
X
X
Matthew H. Green
X
X
X
John C. Metz
X
X
Carmen Vidal
X
Mason A. Wiederhorn
X
Taylor A. Wiederhorn
X
Thayer D. Wiederhorn
X
Meetings in 2024:
25
5
5
To assist it in carrying out its duties, the Board of Directors has delegated certain authority to an Audit Committee and a Compensation Committee, the functions of which are described below.
Audit Committee
The Audit Committee is responsible for, among other matters:
•appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm;
•discussing with our independent registered public accounting firm their independence from management;
•reviewing with our independent registered public accounting firm the scope and results of their audit;
•approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
•overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;
•reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; and establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters.
Our Board of Directors has determined that each member of the Audit Committee meets the definition of “independent director” for purposes of serving on an audit committee under Rule 10A-3 and NASDAQ rules.
The Board of Directors has determined that each of Ms. Collier, Mr. Elenowitz, Mr. Feinstein and Mr. Ellis qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
The Board of Directors adopted a charter for the Audit Committee. A copy of the Audit Committee charter is available in the Corporate Governance section of our website at https://ir.fatbrands.com. The Audit Committee reviews and reassesses the adequacy of the charter on an annual basis.
Compensation Committee
The Compensation Committee of the Board is responsible for assisting our Board of Directors in discharging its responsibilities relating to the compensation of our Co-Chief Executive Officers, other executive officers and outside directors, as well as administering stock incentive plans. During the fiscal year ended December 29, 2024, there were no employee directors on the Compensation Committee and no Compensation Committee interlocks. The Compensation Committee is required to have a majority of independent directors. The current members of the Compensation Committee are Lynne Collier, Tyler Child, Mark Elenowitz, James Ellis, Peter Feinstein, Matthew Green, John Metz and Andrew Wiederhorn.
The Compensation Committee is responsible for the following, among other matters, as required from time to time:
•reviewing and recommending to our board of directors the compensation of our Co-Chief Executive Officers and other executive officers and the outside directors;
•conducting a performance review of our Co-Chief Executive Officers;
•administering the Company’s incentive-compensation plans and equity-based plans as in effect or as adopted from time to time by the Board of Directors;
•approving any new equity compensation plan or material change to an existing plan where stockholder approval has not been obtained; and
•reviewing our compensation policies.
In addition, the Compensation Committee has established a sub-committee of the Compensation Committee comprised solely of “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act. The sub-committee is available to administer the Company’s equity incentive plans if the Board deems it necessary to comply with Rule 16b-3 of the Exchange Act with respect to any equity awards.
The Board of Directors has adopted a charter for the Compensation Committee, a copy of which is available in the Corporate Governance section of our website at https://ir.fatbrands.com. The Compensation Committee reviews and reassesses the adequacy of the charter on an annual basis.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal years ended December 29, 2024 and December 31, 2023 awarded to, earned by, or paid to each individual who served as principal executive officer of the Company during fiscal 2024 and the other two most highly compensated executive officers. We refer to the individuals included in the Summary Compensation Table as our “named executive officers.”
Co-Chief Executive Officer, Co-President and Head of Debt Capital Markets
2023
550,000
2,200,000
—
2,148,000
—
4,898,000
Kenneth J. Kuick
2024
550,000
—
—
—
—
550,000
Co-Chief Executive Officer, Co-President and Chief Financial Officer
2023
532,439
1,000,000
—
268,495
1,669
1,802,603
Taylor A. Wiederhorn
2024
550,000
—
—
—
—
550,000
Chief Development Officer
2023
550,000
1,100,000
—
—
—
1,650,000
Thayer D. Wiederhorn
2024
550,000
—
—
—
—
550,000
Chief Operating Officer
2023
550,000
1,100,000
—
—
—
1,650,000
Explanatory Notes:
(1) Amounts shown represent the aggregate grant date fair value computed in accordance with Accounting Standards Codification 718. Assumptions used in the calculation of this amount for fiscal year ended December 29, 2024 are included in Note 14 to the Company’s consolidated financial statements for the fiscal year ended December 29, 2024, included in Part IV of this Annual Report on Form 10-K.
Executive Employment Agreements
There are no written employment agreements between the Company and any of its employees, other than Kenneth J. Kuick and Robert G. Rosen.
On May 5, 2023, the Company entered into an Employment Agreement (the “Kuick Agreement”) with Kenneth J. Kuick, who has served as the Company’s Co-Chief Executive Officer, Co-President and Chief Financial Officer since May 5, 2023. Pursuant to the Kuick Agreement, Mr. Kuick’s term as Co-Chief Executive Officer, Co-President and Chief Financial Officer will continue on an at-will basis, unless terminated as provided in the Kuick Agreement.
Pursuant to the Kuick Agreement, Mr. Kuick’s annual base salary is $550,000, subject to an annual merit-based increases in the sole discretion of the Board of Directors of the Company (the “Board”). Mr. Kuick will also be eligible for an annual discretionary bonus in the sole discretion of the Board, except that the annual bonus is guaranteed to be no less than $270,000 annually. Mr. Kuick’s eligibility to receive a bonus for any particular calendar year is subject to the achievement by him and the Company, as applicable, of personal and Company-wide targets to be established by the Company in the discretion of the Board.
Pursuant to the Kuick Agreement, Mr. Kuick will be eligible to receive awards of equity from time to time in the form of stock options, stock purchase rights and/or restricted stock awards. Such awards will be subject to the achievement by Mr. Kuick and the Company, as applicable, of personal and Company-wide targets to be established by the Company, on such terms and subject to such conditions as the Board shall determine as of the date of any such grant. In the event of a change in control (as defined in the Employment Agreement), Mr. Kuick’s continuous employment is involuntarily terminated without “cause” (as defined in the Employment Agreement), or Mr. Kuick resigns from continuous employment for “good reason” (as defined in the Kuick Agreement), and in any case other than as a result of his death or disability, then 100% of the equity awards that are then unvested will become fully vested. In addition, in the event that Mr. Kuick’s employment is terminated by the Company without “cause” or by Mr. Kuick for “good reason,” Mr. Kuick will be entitled to receive severance of six months of base salary payable on the Company’s regular payroll schedule.
The Kuick Agreement also entitles Mr. Kuick to participate in the benefit plans or programs that the Company may make available to employees and their families from time to time. The Kuick Agreement also provides for certain other
ancillary benefits, including the reimbursement of all reasonable business expenses. In addition, Mr. Kuick is entitled to 15 days of paid time off during each twelve-month period of employment.
On May 5, 2023, the Company entered into an Employment Agreement (the “Rosen Agreement”) with Robert G. Rosen, who has served as the Company’s Co-Chief Executive Officer, Co-President and Head of Debt Capital Markets since May 5, 2023. Pursuant to the Rosen Agreement, Mr. Rosen’s term as Co-Chief Executive Officer, Co-President and Head of Debt Capital Markets will continue on an at-will basis, unless terminated as provided in the Rosen Agreement.
Pursuant to the Rosen Agreement, Mr. Rosen’s annual base salary is $550,000, subject to an annual merit-based increases in the sole discretion of the Board of Directors of the Company (the “Board”). Mr. Rosen will also be eligible for an annual discretionary bonus in the sole discretion of the Board, except that the annual bonus is guaranteed to be no less than $270,000 annually. Mr. Rosen’s eligibility to receive a bonus for any particular calendar year is subject to the achievement by him and the Company, as applicable, of personal and Company-wide targets to be established by the Company in the discretion of the Board.
Pursuant to the Rosen Agreement, Mr. Rosen will be eligible to receive awards of equity from time to time in the form of stock options, stock purchase rights and/or restricted stock awards. Such awards will be subject to the achievement by Mr. Rosen and the Company, as applicable, of personal and Company-wide targets to be established by the Company, on such terms and subject to such conditions as the Board shall determine as of the date of any such grant. In the event of a change in control (as defined in the Rosen Agreement), Mr. Rosen’s continuous employment is involuntarily terminated without “cause” (as defined in the Rosen Agreement), or Mr. Rosen resigns from continuous employment for “good reason” (as defined in the Rosen Agreement), and in any case other than as a result of his death or disability, then 100% of the equity awards that are then unvested will become fully vested. In addition, in the event that Mr. Rosen’s employment is terminated by the Company without “cause” or by Mr. Rosen for “good reason,” Mr. Rosen will be entitled to receive severance of twelve months of base salary payable on the Company’s regular payroll schedule.
The Rosen Agreement also entitles Mr. Rosen to participate in the benefit plans or programs that the Company may make available to employees and their families from time to time. The Rosen Agreement also provides for certain other ancillary benefits, including the reimbursement of all reasonable business expenses. In addition, Mr. Rosen is entitled to 20 days of paid time off during each twelve-month period of employment.
The following table summarizes the outstanding equity award holdings of our named executive officers as of December 29, 2024.
Option Awards
Stock Awards
Name
Number of Securities Underlying Unexercised Options (#) Exercisable
Number of Securities Underlying Unexercised Options (#) Unexercisable
Option Exercise Price ($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested (#)
Market Value of Shares or Units of Stock That Have Not Vested ($)
Robert G. Rosen
100,000
—
11.43
11/16/2031
—
—
Co-Chief Executive Officer, Co-President and Head of Debt Capital Markets
133,333
266,667
5.37
4/26/2033
Kenneth J. Kuick
100,000
11.43
11/16/2031
—
—
Co-Chief Executive Officer, Co-President and Chief Financial Officer
16,667
33,333
5.37
4/26/2033
Taylor A. Wiederhorn
15,318
—
10.68
10/20/2027
—
—
Chief Development Officer
15,318
—
4.80
12/10/2028
100,000
—
11.43
11/16/2031
Thayer D. Wiederhorn
15,318
—
10.68
10/20/2027
—
—
Chief Operating Officer
15,318
—
4.80
12/10/2028
100,000
—
11.43
11/16/2031
The terms of the equity awards described above are set forth in the Company’s 2017 Omnibus Equity Incentive Plan (the “Plan”). The Plan is a comprehensive incentive compensation plan under which we can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, FAT Brands and its subsidiaries. The Plan, as amended, provides for a maximum of 5,000,000 shares available for grant and is administered by the Compensation Committee of the Board of Directors and its sub-committee described above under Item 10 – Compensation Committee.
Option Exercises and Stock Vested
None of the named executive officers acquired shares of the Company’s stock through exercise of options during the year ended December 29, 2024.
Granting of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
The Company does not grant equity awards in anticipation of the release of material nonpublic information (“MNPI”) that is likely to result in changes to the price of our Class A Common Stock, and does not time the public release of such information based on award grant dates. Equity awards are typically granted according to a predetermined schedule or based on an event such as the recipient’s appointment as an officer or director, to ensure consistency and avoid the appearance of timing based on MNPI. The Board and Compensation Committee do not consider MNPI when determining the timing of equity awards or in setting the terms of equity awards, such as grant size or vesting conditions. During the last completed fiscal year, the Company has not made awards to any named executive officer during the period beginning four business days before and ending one business day after the filing of a periodic report on Form 10-Q or Form 10-K or the filing or furnishing of a current report on Form 8-K, and it is the Company’s ongoing policy not to time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
DIRECTOR COMPENSATION
The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board of Directors. In setting director compensation, the Company considers the significant amount of time that our directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of members of the Board of Directors.
We pay each non-employee director serving on our Board of Directors $120,000 in annual cash compensation and an annual equity award of stock options to acquire 30,636 shares of our Class A common stock. The stock options issued to
directors are awarded under our 2017 Omnibus Equity Incentive Plan. The non-employee director compensation policy may be amended, modified or terminated at any time by our Board of Directors or Compensation Committee.
At various times upon the quarterly payment dates of the cash component of director compensation, the Board has allowed non-employee directors to receive their cash compensation in the form of Class A common stock of the Company at fair market value at the time the election is made. Under such arrangement, during fiscal 2024, the non-employee directors elected to receive only cash compensation.
The following table sets forth a summary of the compensation we paid or accrued to our directors for the fiscal year ended December 29, 2024. The compensation paid or accrued for 2024 to directors Donald J. Berchtold, Carmen Vidal, Mason A. Wiederhorn, Taylor D. Wiederhorn and Thayer A. Wiederhorn is disclosed below under the caption “Item 13. Certain Relationships and Related Transactions, and Director Independence”.
Name
Fees Earned or Paid in Cash ($)
Stock Awards ($)
Option Awards ($) (1)
Total ($)
Andrew A. Wiederhorn (2)
6,746,249
—
85,125
6,831,374
John S. Allen (3)
120,000
—
85,125
205,125
Donald J. Berchtold
(10)
—
(10)
(10)
Tyler B. Child (4)
120,000
—
85,125
205,125
Lynne L. Collier
120,000
—
85,125
205,125
Mark Elenowitz (5)
120,000
—
85,125
205,125
James G. Ellis (6)
120,000
—
85,125
205,125
Peter R. Feinstein (7)
120,000
—
85,125
205,125
Matthew H. Green (8)
120,000
—
85,125
205,125
John C. Metz (9)
120,000
—
85,125
205,125
Carmen Vidal
(10)
—
(10)
(10)
Mason A. Wiederhorn
(10)
—
(10)
(10)
Taylor A. Wiederhorn
(10)
—
(10)
(10)
Thayer A. Wiederhorn
(10)
—
(10)
(10)
Explanatory Notes:
(1)Amounts shown represent the grant date fair value calculated in accordance with Accounting Standards Codification 718. Assumptions used in the calculation of this amount are included in footnote 14 to the Company’s consolidated financial statements included in Part IV of this Annual Report on Form 10-K. During 2024, the directors were each granted options to purchase 30,636 shares of common stock.
(2)The amount reflects $6,317,750 of fees earned pursuant to Mr. Wiederhorn's consulting agreement, $308,499 of aggregate incremental cost to the Company of providing him with certain personal use of leased aircraft (based on the applicable hourly rate charged to the Company), and $120,000 of standard Board of Directors fees.
(3) Mr. Allen joined the Board of Directors in September 2023.
(4) Ms. Child joined the Board of Directors in March 2023.
(5) Mr. Elenowitz joined the Board of Directors in April 2023.
(6) Mr. Ellis joined the Board of Directors in September 2023.
(7) Mr. Feinstein joined the Board of Directors in July 2023.
(8) Mr. Green joined the Board of Directors in July 2023.
(9) Mr. Metz joined the Board of Directors in July 2023.
(10) See the applicable disclosure for this director below under "Item 13. Certain Relationships and Related Transactions, and Director Independence".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
PRINCIPAL STOCKHOLDERS
Common Stock
The following table sets forth information, as of February 24, 2025, with respect to the beneficial ownership of our Class A common stock and our Class B common stock by:
●
each person known by us to beneficially own more than 5% of our Class A common stock or Class B common stock;
●
each of our directors;
●
each of our named executive officers; and
●
all of our executive officers and directors as a group.
The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC and includes voting power (if applicable) or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power (if applicable) or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares subject to options, or other rights held by such person that are currently exercisable or will become exercisable within 60 days of the effective date of the disclosure, are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the address of all listed stockholders is c/o FAT Brands Inc., 9720 Wilshire Blvd., Suite 500, Beverly Hills, California 90212. Each of the stockholders listed below has sole voting power (if applicable) and sole investment power with respect to the shares beneficially owned by such stockholder unless noted otherwise, subject to community property laws where applicable.
As of February 24, 2025, there were issued and outstanding 16,521,884 shares of Class A common stock and 1,270,805 shares of Class B common stock.
All directors and executive officers as a group (18 persons)
2,607,211
(14)
14.5
%
112,944
8.9
%
8.9
%
†
Represents the voting power with respect to all shares of our Class A Common Stock and Class B Common Stock, voting as a single class, beneficially owned by the holder. Each share of Class A Common Stock is entitled to one vote per share and each share of Class B Common Stock is entitled to 2,000 votes per share.
*
Represents beneficial ownership of less than 1% of the class.
(1)
Based in part on a Schedule 13D/A filed on September 26, 2024 by Fog Cutter Holdings LLC, a limited liability company controlled by a board of managers comprised of Andrew A. Wiederhorn, Taylor A. Wiederhorn, Thayer D. Wiederhorn and Mason A. Wiederhorn. The address of Fog Cutter Holdings LLC is 9720 Wilshire Blvd., Suite 500, Beverly Hills, CA 90212.
(2)
Based in part on a Schedule 13G filed jointly on March 8, 2022 by HOT GFG LLC and Ms. Rachel Serruya. Ms. Serruya is the sole Director and President of HOT GFG LLC and may be deemed to have voting and investment power over these shares. Ms. Serruya disclaims beneficial ownership of such securities except to the extent of her indirect pecuniary interest therein, if any. The address provided by HOT GFG LLC is 210 Shields Court, Markham, Ontario, Canada L3R8V2.
(3)
Based in part on a Schedule 13D/A filed on August 25, 2022 by Gregory Fortunoff, with an address at 49 West 37th Street, New York, NY 10018. Mr. Fortunoff expressly disclaims beneficial ownership for all purposes of the shares beneficially owned by other persons.
(4)
Includes options to purchase 151,060 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure, and 100,000 shares of Class A Common Stock owned by Mr. Wiederhorn’s spouse, to which he disclaims beneficial ownership except to the extent of his pecuniary interest therein. Does not include unvested options to purchase an additional 40,848 shares of Class A Common Stock.
Includes options to purchase 133,333 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure. Does not include unvested options to purchase an additional 16,667 shares of Class A Common Stock.
(6)
Includes options to purchase 366,666 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure. Does not include unvested options to purchase an additional 133,334 shares of Class A Common Stock.
(7)
Includes options to purchase 20,424 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure. Does not include unvested options to purchase an additional 40,848 shares of Class A Common Stock.
(8)
Includes options to purchase 30,636 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure.
(9)
Includes options to purchase 41,848 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure. Does not include unvested options to purchase an additional 51,060 shares of Class A Common Stock.
(10)
Includes options to purchase 20,424 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure. Includes warrants to purchase 2,564 shares of Class A Common Stock. Does not include unvested options to purchase an additional 40,848 shares of Class A Common Stock.
(11)
Includes options to purchase 30,015 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure.
(12)
Includes options to purchase 105,636 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure.
(13)
Includes options to purchase 130,636 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure.
(14)
Includes options to purchase an aggregate of 1,424,706 shares of Class A Common Stock that have vested or will vest within 60 days of the effective date of the disclosure. Does not include unvested options to purchase an aggregate of 527,848 shares of Class A Common Stock.
Preferred Stock
The following table sets forth information, as of February 24, 2025, with respect to the beneficial ownership of our non-voting Series B Cumulative Preferred Stock (the “Series B Preferred Stock”) by each of our directors, each of our named executive officers, and all of our executive officers and directors as a group. As of February 24, 2025, there were 8,407,787 issued and outstanding shares of Series B Preferred Stock.
All directors and executive officers as a group (18 persons)
90,936
1.1
%
*
Represents beneficial ownership of less than 1% of the class.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Parent Company
As disclosed above under "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," Fog Cutter Holdings, LLC beneficially holds approximately 55.6% of the voting power with respect to all shares of our common stock.
Transactions with Related Persons
The following is a summary of (i) family relationships among our directors, director nominees, and executive officers, and (ii) reportable related person transactions since the beginning of our 2023 fiscal year (which began on December 26, 2022) or currently proposed to which we were or will be a party:
•in which the amount involved exceeds $120,000; and
•in which any director, director nominee, executive officer, stockholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.
Andrew Wiederhorn, our current Chairman of the Board and former President and Chief Executive Officer, entered into a written Separation, Cooperation, and Release Agreement (the “Separation Agreement”) and Consulting Agreement (the “Consulting Agreement”) with the Company on July 19, 2023. Under the Separation Agreement, Mr. Wiederhorn was entitled to receive any accrued but unpaid base salary and the value of any accrued and unused vacation through his resignation date in accordance with his Employment Agreement. In addition, Mr. Wiederhorn was entitled to receive a final bonus under his Employment Agreement for such portion of 2023 through his separation date in the amount of $950,000. Mr. Wiederhorn’s stock options will continue to vest after his resignation date as long as he continues to provide services to the Company as a consultant. Under the Separation Agreement, Mr. Wiederhorn provided a general release of the Company, and the Company released Mr. Wiederhorn from certain claims related to his employment and separation from the Company, subject in each case to certain exceptions. Mr. Wiederhorn also agreed to assist and cooperate with the Company in transitioning his duties, as well
as with any investigations, legal claims, or other matters related to his past employment. In addition, the Company agreed that, unless otherwise prohibited by applicable law, any attorney fees and expenses advanced to Mr. Wiederhorn by the Company in connection with the Company’s pending litigation and governmental investigations are awarded to him under the Separation Agreement. The Consulting Agreement provides that Mr. Wiederhorn will provide specified non-executive consulting services to the Company, including advice regarding corporate strategy, acquisitions, capital allocation, financing and restaurant/franchise operations. In consideration for such services, the Consulting Agreement provides that the Company will pay to Fog Cutter Consulting Corp., a company affiliated with Mr. Wiederhorn, an hourly fee of $1,850. In addition, while Mr. Wiederhorn remains a director of the Company, he will receive standard Board fees as a non-employee director. The Consulting Agreement also contains customary confidentiality obligations by Mr. Wiederhorn and an assignment to the Company of intellectual property developed by Mr. Wiederhorn in the course of providing consulting services to the Company.
John C. Metz joined our Board of Directors on July 11, 2023. Mr. Metz is the President and owner of RREMC Restaurants, LLC, which franchisees certain of the Company’s Hurricane Dockside Grill restaurants under standard franchise terms for the Company’s Hurricane brand. Under such arrangements, RREMC Restaurants, LLC pays to the Company a standard royalty rate on net sales plus marketing fees, which totaled approximately $549,600 since the beginning of our 2024 fiscal year and $692,975 for our 2023 fiscal year. In addition, in January 2022 Mr. Metz accepted a consulting fee from the Company of $160,000 in connection with the Company’s acquisition of Native Grill & Wings.
Thayer Wiederhorn serves as Chief Operating Officer and a member of the Board of Directors of the Company. He is the son of Andrew Wiederhorn, grandson of Donald Berchtold, nephew of Tyler Child and Jacob Berchtold, and brother of Taylor Wiederhorn and Mason Wiederhorn, none of whom have a material interest in Thayer Wiederhorn’s employment or share a household with him. For fiscal years 2023 and 2024 he received an annual base salary of $550,000, and a bonus of $1,100,000 for fiscal 2023. During those periods he also participated in the general welfare and benefit plans of the Company and vested in stock options to purchase an aggregate of 66,667 shares of the Company’s Class A common stock granted in previous years.
Taylor Wiederhorn serves as Chief Development Officer and a member of the Board of Directors of the Company. He is the son of Andrew Wiederhorn, grandson of Donald Berchtold, nephew of Tyler Child and Jacob Berchtold, and brother of Thayer Wiederhorn and Mason Wiederhorn, none of whom have a material interest in Taylor Wiederhorn’s employment or share a household with him. For fiscal years 2023 and 2024 he received an annual base salary of $550,000, and a bonus of $1,100,000 for fiscal 2023. During those periods he also participated in the general welfare and benefit plans of the Company and vested in stock options to purchase an aggregate of 66,667 shares of the Company’s Class A common stock granted in previous years.
Mason Wiederhorn serves as Chief Brand Officer and a member of the Board of Directors of the Company. He is the son of Andrew Wiederhorn, grandson of Donald Berchtold, nephew of Tyler Child and Jacob Berchtold, and brother of Thayer Wiederhorn and Taylor Wiederhorn, none of whom have a material interest in Mason Wiederhorn’s employment or share a household with him. For fiscal years 2023 and 2024 he received an annual base salary of $500,000, and a bonus of $1,000,000 for fiscal 2023. During those periods he also participated in the general welfare and benefit plans of the Company and vested in stock options to purchase an aggregate of 50,000 shares of the Company’s Class A common stock granted in previous years.
Donald Berchtold serves as Chief Creative Officer and a member of the Board of Directors of the Company. He is the father of director Tyler Child and grandfather of Thayer Wiederhorn, Taylor Wiederhorn and Mason Wiederhorn, none of whom have a material interest in Mr. Berchtold’s employment or share a household with him. For fiscal years 2023 and 2024 he received an annual base salary of $275,000, and a bonus of $75,000 for fiscal 2023. During those periods he also participated in the general welfare and benefit plans of the Company.
Jacob Berchtold serves as Chief Operating Officer of the Fast Casual Division of the Company, and has been involved in restaurant operations of the Company and its predecessors since 2005. He is the son of Donald Berchtold, brother of Tyler Child and uncle of Thayer Wiederhorn, Taylor Wiederhorn and Mason Wiederhorn, none of whom have a material interest in Jacob Berchtold’s employment or share a household with him. For fiscal years 2023 and 2024 he received an annual base salary of $350,000, and a bonus of $100,000 for fiscal 2023. During those periods he also participated in the general welfare and benefit plans of the Company and vested in stock options to purchase an aggregate of 50,000 shares of the Company’s Class A common stock granted in previous years.
Carmen Vidal serves as the Company’s International Legal Counsel and Director of International Franchise Development (Europe/Middle East/North Africa). For fiscal years 2023 and 2024 she received an annual base salary of $182,000 and a bonus of $50,000 for fiscal 2023. During those periods she also participated in the general welfare and benefit
plans of the Company and vested in stock options to purchase an aggregate of 16,666 shares of the Company’s Class A common stock granted in previous years.
Director Independence
From the inception of our Company in 2017 until March 2023, a majority of our Board was independent and we had a standalone, fully independent compensation committee, nominating and audit committees. In March 2023, the Board was refreshed and expanded to ten persons, and all four members of the board of managers of our majority stockholder joined the Company's Board of Directors (Andrew Wiederhorn, Mason Wiederhorn, Taylor Wiederhorn, and Thayer Wiederhorn). Since March 2023, the size of our Board was expanded to 14 persons and additional independent directors were appointed.
Currently, eight of our directors are considered independent within the meaning of the applicable rules and regulations of the SEC and the director independence standards of The NASDAQ Stock Market LLC ("NASDAQ") (Ms. Collier, Ms. Child, and Messrs. Allen, Elenowitz, Ellis, Feinstein, Green, and Metz). Mr. Elenowitz currently serves as the lead independent director on the Board of Directors.
Furthermore, the Board has determined that each member of the audit committee is "independent" under the applicable rules and regulations of the SEC and the director independence standards of NASDAQ applicable to the audit committee, as currently in effect.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Effective as of June 27, 2023, the Company engaged Macias, Gini & O'Connell, LLP ("MGO") to serve as the Company’s independent registered public accounting firm for the fiscal years ending December 29, 2024 and December 31, 2023. The decision to engage MGO was also approved by the Audit Committee of the Company’s Board of Directors.
The aggregate accounting fees paid to MGO for the years ended December 29, 2024 and December 31, 2023 are as follows (dollars in thousands):
December 29, 2024
December 31, 2023
Audit fees
$
1,940
$
992
Audit related fees
$
—
$
—
Other fees
$
—
$
—
Audit Committee Pre-Approval Policies and Procedures. The Audit Committee reviews the independence of our independent registered public accounting firm on an annual basis and has determined that MGO is independent. In addition, the Audit Committee pre-approves all work (and the related estimated fees) that is to be performed by our independent registered public accounting firm.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of FAT Brands Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of FAT Brands Inc. and its subsidiaries (the Company) as of December 29, 2024 and December 31, 2023, the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended, and the related notes to the consolidated financial statements and Schedule II (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill and Indefinite-Lived Intangible Asset Impairment Assessment
Critical Audit Matter Description
As discussed in Note 2 of the financial statements, goodwill and indefinite-lived intangible assets are tested for impairment at least annually, and more frequently if events or changes in circumstances between annual tests indicate a potential impairment. Goodwill is evaluated for impairment by determining whether the fair values of the Company’s reporting units exceed their carrying values and indefinite-lived intangible assets are evaluated for impairment by determining whether the fair values of such indefinite-lived intangible assets exceed their carrying values. The Company determined that goodwill or the indefinite-lived intangible asset related to certain brands was impaired and the Company recorded a related impairment loss for the year ended December 29, 2024. The determination of the fair value of the reporting units and indefinite-lived intangible assets required significant estimates and assumptions. Minor changes in these assumptions could have a significant impact on either the fair value of the reporting units and indefinite-lived intangible assets, the amount of any goodwill or indefinite-lived intangible asset impairment charge, or both.
We identified the impairment assessment of goodwill and indefinite-lived intangible assets as a critical audit matter. Auditing management’s goodwill and indefinite-lived impairment tests was especially challenging and complex due to the significant
estimation underlying the determination of fair values. In particular, the fair value estimates were sensitive to changes in the significant assumptions used under the income and market approaches utilized to determine the fair value of goodwill and the relief from royalty method utilized to determine the fair value of the indefinite-lived intangible asset. Significant assumptions made by management in estimating fair value under the income and market approaches included future trends in sales, the appropriate discount rate, the selection of guideline companies and the valuation multiples applied. Significant assumptions used to determine fair value under the relief of royalty method included future trends in sales, the royalty rate and the appropriate discount rate.
How the Critical Audit Matter Was Addressed in Our Audit
The primary procedures we performed to address this critical audit matter included:
•Understanding the design of certain internal controls related to the Company’s goodwill and indefinite-lived intangible asset impairment process;
•Reviewing management's goodwill and indefinite-lived intangible asset impairment analysis including the determination of fair value of the reporting units and indefinite-lived intangible assets tested;
•Comparing the actual sales to those forecasted by the Company in previous years in order to assess the historical accuracy of management's forecasting;
•Utilizing a valuation professional with specialized skills and knowledge, who assisted in evaluating the valuation methodologies utilized by the Company for goodwill and indefinite-lived intangible assets by comparing the methodologies to those utilized by other companies holding similar assets, and comparing management's assumption inputs to information from external sources and available economic forecasts and data;
•Testing the completeness and accuracy of underlying data used in the models
•Comparing the estimated fair value of the reporting units to the Company's market capitalization and evaluating whether any variances from the projections or changes in market capitalization were indicative of potential impairment;
•Evaluating whether the significant assumptions used in the goodwill and indefinite-lived intangible assets impairment analysis were reasonable by considering the past performance of reporting units and third‑party industry data, and whether such assumptions were consistent with evidence obtained in other areas of the audit; and
•Performing sensitivity analysis over certain significant inputs and assumptions of the Company to assess the impact any changes to those assumptions could have had on the Company’s fair value estimate.
/s/ Macias Gini & O'Connell LLP
We have served as the Company's auditor since 2023.
Preferred stock: $0.0001 par value; 15,000,000 shares authorized; 3,591,706 shares issued and outstanding at December 29, 2024 and 3,591,804 shares issued and outstanding at December 31, 2023; liquidation preference $25 per share
40,837
44,103
Class A and Class B common stock and additional paid-in capital as of December 29, 2024: $0.0001 par value per share; 51,600,000 shares authorized (Class A 50,000,000, Class B 1,600,000); 17,254,683 shares issued and outstanding (Class A 15,983,878, Class B 1,270,805). Common stock and additional paid-in capital as of December 31, 2023: $0.0001 par value; 51,600,000 shares authorized (Class A 50,000,000, Class B 1,600,000); 16,900,099 shares issued and outstanding (Class A 15,629,294, Class B 1,270,805)
(37,925)
(31,189)
Accumulated deficit
(458,624)
(268,777)
Total stockholders’ deficit
(455,712)
(255,863)
Total liabilities and stockholders’ deficit
$
1,289,178
$
1,388,238
The accompanying notes are an integral part of these audited consolidated financial statements.
FAT Brands Inc. (the “Company”) is a leading multi-brand restaurant franchising company that develops, markets and acquires primarily quick-service, fast casual, casual and polished casual dining restaurant concepts around the world. Organized in March 2017 as a wholly-owned subsidiary of Fog Cutter Capital Group, Inc. (“FCCG”), the Company completed its initial public offering on October 20, 2017 and issued additional shares of common stock representing 20 percent of its ownership upon completion of the offering. During the fourth quarter of 2020, the Company completed a transaction in which FCCG merged into a wholly-owned subsidiary of the Company, and the Company became the parent of FCCG.
As of December 29, 2024, the Company owned eighteen restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli's, Twin Peaks, Smokey Bones, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses. As of December 29, 2024, the Company had approximately 2,300 locations open and under construction, of which approximately 92% were franchised.
Each franchising subsidiary licenses the right to use its brand name and provides franchisees with operating procedures and methods of merchandising. Upon signing a franchise agreement, the franchisor is committed to provide training, some supervision and assistance, and access to operations manuals. As needed, the franchisor will also provide advice and written materials concerning techniques of managing and operating the restaurants.
The Company’s operations have historically been comprised primarily of franchising a growing portfolio of restaurant brands. This growth strategy is centered on expanding the footprint of existing brands and acquiring new brands through a centralized management organization which provides substantially all executive leadership, marketing, training and accounting services. As part of these ongoing franchising efforts, the Company will, from time to time, make opportunistic acquisitions of operating restaurants and may convert them to franchise locations. During the refranchising period, the Company may operate the restaurants and classifies the operational activities as refranchising gains or losses and the assets and associated liabilities as held-for sale. Through recent acquisitions, the Company also operates "company owned" restaurant locations of certain brands. Our revenues are derived primarily from two sales channels, franchised restaurants and company owned restaurants, which we operate as one segment.
Liquidity
The Company recognized loss from operations of $52.2 million during fiscal year 2024 and income from operations of $22.3 million during fiscal year 2023. The Company has a history of net losses and an accumulated deficit of $458.6 million as of December 29, 2024. Additionally, as of December 29, 2024, the Company had negative working capital of $210.3 million. Of this amount, $91.8 million represents the current portion of redeemable preferred stock as discussed in Note 12. Since the Company did not deliver the applicable cash proceeds at the related due dates, the amount accrues interest until the payments are completed. The Company had $23.4 million of unrestricted cash as of December 29, 2024 and plans on the combination of cash flows from operations, cash on hand, $100.6 million of issued but not sold aggregate principal amount of fixed rate secured notes and $64.2 million aggregate principal amount of repurchased but not re-sold fixed rate secured notes (see Note 10) to be sufficient to cover any working capital requirements for the next twelve months from the date of this report. If the Company does not achieve its operating plan, additional forms of financing may be required through the issuance of debt or equity. Although management believes it will have access to financing, no assurances can be given that such financing will be available on acceptable terms, in a timely manner or at all.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation – The accompanying audited consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Our revenues are derived primarily from two sales channels, franchised restaurants and company-owned locations, which we operate as one reportable segment. (See Note 18)
The accompanying audited consolidated financial statements have been prepared pursuant to accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. In the opinion of the Company, all adjustments considered necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included and are of a normal, recurring nature.
Nature of operations – The Company operates on a 52-week calendar and its fiscal year ends on the last Sunday of the calendar year. Consistent with the industry practice, the Company measures its stores’ performance based upon 7-day work weeks. Using the 52-week cycle ensures consistent weekly reporting for operations and ensures that each week has the same days, since certain days are more profitable than others. The use of this fiscal year means a 53rd week is added to the fiscal year every 5 or 6 years, as was the case in fiscal year 2023. In a 52-week year, all four quarters are comprised of 13 weeks. In a 53-week year, one extra week is added to the fourth quarter. Fiscal year 2024 was a 52-week year and 2023 was a 53-week year.
Principles of consolidation – The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. Newly-acquired subsidiaries are included from the date of acquisition. Intercompany accounts have been eliminated in consolidation.
Use of estimates in the preparation of the consolidated financial statements – The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the determination of fair values of goodwill and other intangible assets, the allocation of basis between assets acquired, sold or retained, allowances for uncollectible notes receivable and accounts receivable, and the valuation allowance related to deferred tax assets. Estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Credit and depository risks – Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. Management evaluates each of its franchisee’s financial condition prior to entry into a franchise or other agreement, as well as periodically through the term of the agreement, and believes that it has adequately provided for any exposure to potential credit losses. As of December 29, 2024 and December 31, 2023, accounts receivable, net of allowance for doubtful accounts, totaled $19.4 million and $21.1 million, respectively, with no franchisee representing more than 10% of that amount.
Restricted cash – The Company has restricted cash consisting of funds required to be held in trust in connection with its securitized debt. The current portion of restricted cash was $25.2 million and $39.3 million as of December 29, 2024 and December 31, 2023, respectively. Noncurrent restricted cash of $18.8 million and $15.6 million as of December 29, 2024 and December 31, 2023, respectively, represents interest reserves required to be set aside for the duration of the securitized debt.
Accounts receivable – Accounts receivable are recorded at the invoiced amount and are stated net of an allowance for doubtful accounts on the Consolidated Balance sheets. Accounts receivable net of allowance for doubtful accounts as of December 25, 2022 was $23.9 million. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in existing accounts receivable. The allowance is based on historical collection data and current franchisee information. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of December 29, 2024 and December 31, 2023 accounts receivable was stated net of an allowance for doubtful accounts of $3.9 million and $3.7 million, respectively.
Employee Retention Tax Credits - On March 27, 2020, the U.S. government enacted the Coronavirus Aid Relief and Security Act (the "CARES Act") to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit ("ERC"). As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20"). During 2024, the Company received and recognized $3.6 million of ERCs recorded in "General and administrative expense" in the Consolidated Statements of operations.
Inventories – Inventories are carried at the lower of cost or net realizable value and consist primarily of raw materials used in the Company's dough manufacturing facility in Atlanta, Georgia, and finished goods which consist primarily of food, beverages and supplies for Company restaurants. Inventory costs are included in "Cost of restaurant and factory revenues" in the Consolidated Statements of Operations.
Assets classified as held-for-sale – Assets are classified as held-for-sale when the Company commits to a plan to sell the asset, the asset is available for immediate sale in its present condition, and an active program to locate a buyer at a reasonable price has been initiated. The sale of these assets is generally expected to be completed within one year. The combined assets are valued at the lower of their carrying amount or fair value, net of costs to sell, and included as current assets on the Company’s consolidated balance sheet. Assets classified as held-for-sale are not depreciated. However, interest attributable to the liabilities
associated with assets classified as held-for-sale and other related expenses are recorded as expenses in the Company’s consolidated statement of operations.
Goodwill and other intangible assets – Intangible assets are stated at the estimated fair value at the date of acquisition and include goodwill, trademarks, and franchise agreements. Goodwill and other intangible assets with indefinite lives, such as trademarks, are not amortized but are reviewed for impairment annually or more frequently if indicators arise. All other intangible assets are amortized over their estimated weighted average useful lives, which range from 2.2 years to 15.4 years. Management assesses potential impairments to intangible assets at least annually, or when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of the acquired businesses, market conditions and other factors.
Property and Equipment, net - Property and Equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The useful lives of our property and equipment typically range from 3 to 7 years. Upon retirement or other disposal of property and equipment, the cost and related amounts of accumulated depreciation are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds, is recorded in earnings. On an annual basis the Company assesses its property and equipment for impairment.
Fair value measurements - The Company determines the fair market values of its financial assets and liabilities, as well as non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis, based on the fair value hierarchy established in U.S. GAAP. As necessary, the Company measures its financial assets and liabilities using inputs from the following three levels of the fair value hierarchy:
•Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities.
•Level 2 - Inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active
markets for similar assets or liabilities.
•Level 3 - Inputs are unobservable and reflect the Company’s own assumptions.
The Company does not have a material amount of financial assets or liabilities that are required to be measured at fair value on a recurring basis under U.S. GAAP. None of the Company’s non-financial assets or non-financial liabilities are required to be measured at fair value on a recurring basis.
Income taxes – The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. A valuation allowance is recognized when the realization of our deferred tax assets is expected to be less than our carrying amounts.
A two-step approach is utilized to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon the ultimate settlement.
Franchise fees - The franchise arrangement is documented in the form of a franchise agreement. The franchise arrangement requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which includes the transfer of the franchise license. The services provided by the Company are highly inter-related with the franchise license and are considered a single performance obligation. Franchise fee revenue from the sale of individual franchises is recognized over the term of the individual franchise agreement on a straight-line basis. Unamortized non-refundable deposits collected in relation to the sale of franchises are recorded as deferred income.
The franchise fee may be adjusted from time to time at management’s discretion. Deposits are non-refundable upon acceptance of the franchise application. In the event a franchisee does not comply with their development timeline for opening franchise stores, the franchise rights may be terminated, at which point the franchise fee revenue is recognized for non-refundable deposits.
Royalties – In addition to franchise fee revenue, the Company collects a royalty calculated as a percentage of net sales from our franchisees. Royalties typically range from 0.75% to 7.0% and are recognized as revenue when the related sales are made by the franchisees. Royalties collected in advance of sales are classified as deferred income until earned.
Company-owned restaurant revenue - Company-owned restaurant revenue is recognized at the point in time when food and beverage products are sold. Company restaurant sales are presented net of sales-related taxes collected from customers and remitted to governmental taxing authorities.
Advertising – The Company requires advertising fee payments from franchisees based on a percent of net sales. The Company also receives, from time to time, payments from vendors that are to be used for advertising. Advertising funds collected are required to be spent for specific advertising purposes. Advertising revenue and the associated expense are recorded gross on the Company’s consolidated statement of operations. Assets and liabilities associated with the related advertising fees are reflected in the Company’s consolidated balance sheet.
Share-based compensation – The Company has a stock option plan which provides for options to purchase shares of the Company’s common stock. Options issued under the plan may have a variety of terms as determined by the Board of Directors including the option term, the exercise price and the vesting period. Options granted to employees and directors are valued at the date of grant and recognized as an expense over the vesting period in which the options are earned. Cancellations or forfeitures are accounted for as they occur. Stock options issued to non-employees as compensation for services are accounted for based upon the estimated fair value of the stock option. The Company recognizes this expense over the period in which the services are provided. Management utilizes the Black-Scholes option-pricing model to determine the fair value of the stock options issued by the Company. See Note 14 for more details on the Company’s share-based compensation.
Earnings per share – The Company reports basic earnings or loss per share in accordance with FASB ASC 260, “Earnings Per Share”. Basic earnings per share is computed using the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is computed using the weighted average number of common shares outstanding plus the effect of dilutive securities during the reporting period. Any potentially dilutive securities that have an anti-dilutive impact on the per share calculation are excluded. During periods in which the Company reports a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of the inclusion of all potentially dilutive securities would be anti-dilutive. As of December 29, 2024, and December 31, 2023, there were no potentially dilutive securities considered in the calculation of diluted loss per common share due to net losses for each period.
Recently Adopted Accounting Standards
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss. The amendments improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities. The Company adopted ASU No. 2023-07 for our fiscal year 2024 annual financial statements and interim financial statements thereafter and have applied this standard retrospectively for all periods presented in the consolidated financial statements. See Note 18 for more details on the Company’s segment information.
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement —Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In January 2025, the FASB issued update 2025-01—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The amendments require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting within annual reporting periods beginning after December 15, 2027. The Update should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require that public business entities on an annual basis disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The amendments also require that all entities disclose on an annual basis the income taxes paid disaggregated by jurisdiction. The amendments
eliminate the requirement for all entities to disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or make a statement that an estimate of the range cannot be made. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company plans to adopt the standard when it becomes effective for us beginning in our fiscal year 2025 annual financial statements, and we expect the adoption of this standard will impact certain of our income tax disclosures.
NOTE 3. MERGERS AND ACQUISITIONS
Acquisition of Barbeque Integrated, Inc.
On September 25, 2023, the Company completed the acquisition of Barbeque Integrated, Inc. from Barbeque Holding LLC. Barbeque Integrated, Inc. is the operator of a chain of barbeque restaurants located in the Eastern and Midwest United States branded as Smokey Bones. The net purchase price was $31.3 million after final working capital adjustments.
The assessment of the fair value of the net assets and liabilities acquired by the Company through the transaction was estimated at $31.3 million. The allocation of the consideration to the net tangible and intangible assets acquired is presented in the table below (in millions):
Cash
$
0.3
Accounts receivable, net of allowances
2.8
Inventory
2.6
Prepaids and other current assets
1.5
Other intangible assets, net
8.8
Goodwill
11.7
Operating lease right-of-use assets
108.9
Other assets
1.8
Property and equipment, net
18.1
Below market leases
0.2
Accounts payable
(3.6)
Accrued expenses and other liabilities
(9.9)
Operating lease liability, current portion
(3.9)
Operating lease liability, net of current portion
(105.6)
Other liabilities
(2.4)
Total net identifiable assets
$
31.3
The identifiable intangible assets acquired in connection with the transaction are based on valuations performed by management and third-party experts. Identifiable intangible assets totaled $8.8 million in trademarks.
Pro Forma Information
The table below presents the combined pro forma revenue and net loss of the Company and Barbeque Integrated, Inc. for the year ended December 31, 2023, assuming the acquisition had occurred on December 27, 2021 (the beginning of the Company’s 2022 fiscal year) (in millions). Actual consolidated results are presented in the pro forma information for any period in which Barbeque Integrated, Inc. was actually a consolidated subsidiary of the Company. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the acquisition of Barbeque Integrated, Inc. occurred on this date nor does it purport to predict the results of operations for future periods.
As part of its ongoing franchising efforts, the Company may, from time to time, make opportunistic acquisitions of operating restaurants in order to convert them to franchise locations or acquire existing franchise locations to resell to another franchisee across all of its brands.
The following assets used in the operation of certain restaurants meet all of the criteria requiring that they be classified as held- for-sale, and have been classified accordingly on the accompanying consolidated balance sheets as of December 29, 2024 and December 31, 2023 (in millions):
December 29, 2024
December 31, 2023
Property, plant and equipment
$
—
$
0.7
Operating lease right-of-use assets
0.4
3.1
Total
$
0.4
$
3.8
Operating lease liabilities related to the assets classified as held-for-sale in the amount of $0.4 million and $3.4 million, have been classified as current liabilities on the accompanying consolidated balance sheets as of December 29, 2024 and December 31, 2023, respectively.
The following table highlights the operating results of the Company’s refranchising program during 2024 and 2023 (in millions):
Twelve Months Ended
December 29, 2024
December 31, 2023
Restaurant costs and expenses, net of revenue
$
0.9
3.0
Loss (gains) on store sales or closures
1.0
(0.1)
Refranchising loss
$
1.9
$
2.9
NOTE 5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists primarily of real estate (including land, buildings and tenant improvements) and equipment.
As of December 29, 2024 and December 31, 2023, the Company's gross carrying value of property and equipment and accumulated depreciation balances were (in millions):
Total
2024
2023
Real estate
$
89.6
$
83.5
Equipment
57.3
44.9
Total property and equipment, gross
146.9
128.4
Less: accumulated depreciation
(49.5)
(27.9)
Total property and equipment, net
$
97.4
$
100.5
Depreciation expense for the fiscal years ended December 29, 2024 and December 31, 2023 was $23.6 million and $15.8 million, respectively.
On an annual basis the Company assesses its property and equipment for impairment. The Company recognized $1.9 million impairment expense for the fiscal year ended December 29, 2024. For the fiscal year ended December 31, 2023, the company recognized impairment expense of $0.5 million. The impairment expenses is included in General and administrative expense on the Consolidated Statements of Operations.
Upon retirement or other disposal of property and equipment, the cost and related amounts of accumulated depreciation are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset
value and the proceeds, is recorded in earnings. Loss on disposals during the fiscal year ended December 29, 2024 and December 31, 2023 was $0.4 million and $0, respectively.
NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
The following table reflects the changes in carrying amounts of goodwill for the fiscal years ended December 29, 2024 and December 31, 2023 (in millions):
December 29, 2024
December 31, 2023
Gross goodwill:
Balance, beginning of year
$
306.8
$
295.0
Acquired
—
11.8
Balance, end of year
306.8
306.8
Accumulated impairment:
Balance, beginning of year
(1.7)
(1.7)
Impairment
(19.8)
—
Balance, end of year
(21.5)
(1.7)
Net carrying value
$
285.3
$
305.1
When considering the available facts, assessments and judgments, the Company recorded $19.8 million and $0 of goodwill impairment charges for the fiscal years ended December 29, 2024 and December 31, 2023, respectively.
Other intangible assets consist primarily of trademarks, franchise agreements and customer relationships that were classified as identifiable intangible assets at the time of the brands’ acquisition by the Company, or at the time they were acquired by FCCG prior to FCCG’s contribution of the brands to the Company in connection with the initial public offering. Franchise agreements and customer relationships are amortized over the useful life of the asset. Trademarks are typically considered to have an indefinite useful life and are not amortized.
Changes in Carrying Value of Other Intangible Assets
The changes in carrying value of other intangible assets for the fiscal years ended December 29, 2024 and December 31, 2023 are as follows (in millions):
Amortizing
Non-Amortizing
Total
2024
2023
2024
2023
2024
2023
Balance, beginning of year
$
157.9
$
162.1
$
462.7
$
463.2
$
620.6
$
625.3
Impairment
—
—
(9.0)
(0.5)
(9.0)
(0.5)
Amortization expense
(15.9)
(15.3)
—
—
(15.9)
(15.3)
Acquisitions
—
9.1
—
—
—
9.1
Adjustment to preliminary purchase price allocation
Gross Carrying Value and Accumulated Amortization of Other Intangible Assets
The carrying value of amortizing other intangible assets is as follows as of December 29, 2024 and December 31, 2023 (in millions):
December 29, 2024
December 31, 2023
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Amortizing intangible assets
Franchise agreements
$
118.3
$
(34.2)
$
84.1
$
109.5
$
(24.2)
$
85.3
Customer relationships
73.9
(19.6)
54.3
73.9
(13.7)
60.2
Other
4.1
(0.5)
3.6
12.9
(0.5)
12.4
Balance, end of year
$
196.3
$
(54.3)
$
142.0
$
196.3
$
(38.4)
$
157.9
When considering the available facts, assessments and judgments, including increased interest rates, the Company recorded impairment of trademarks in the amount of $9.0 million and $0.5 million for the fiscal years ended December 29, 2024 and December 31, 2023, respectively.
Amortization expense for the fiscal years ended December 29, 2024 and December 31, 2023 was $15.9 million and $15.3 million, respectively.
The expected future amortization of the Company’s amortizable intangible assets is as follows (in millions):
Components of the income tax benefit, net are as follows (in millions):
Fiscal Year Ended December 29, 2024
Fiscal Year Ended December 31, 2023
Current
Federal
$
—
$
—
State
0.7
0.8
Foreign
1.6
1.3
2.3
2.1
Deferred
Federal
(5.2)
(6.3)
State
0.1
(2.1)
(5.1)
(8.4)
Total income tax benefit
$
(2.8)
$
(6.3)
Income tax benefit related to continuing operations differ from the amounts computed by applying the statutory income tax rate to pretax income as follows (in millions):
Fiscal Year Ended December 29, 2024
Fiscal Year Ended December 31, 2023
Tax benefit at statutory rate
$
(40.5)
$
(20.3)
State and local income taxes
0.6
(1.5)
State and federal valuation allowances
35.9
17.1
162(m) limitation
1.5
1.1
Foreign taxes
1.6
1.3
Tax credits
(8.6)
(9.0)
Nondeductible interest expense
5.1
1.7
Other
1.6
3.3
Total income tax benefit
$
(2.8)
$
(6.3)
As of December 29, 2024, the Company’s subsidiaries’ annual tax filings for the prior three years are open for audit by Federal and for the prior four years for state tax agencies. The Company is the beneficiary of indemnification agreements from the prior owners of the subsidiaries for tax liabilities related to periods prior to its ownership of the subsidiaries. Management evaluated the Company’s overall tax positions and has determined that no provision for uncertain income tax positions is necessary as of December 29, 2024.
Deferred taxes reflect the net effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for calculating taxes payable. Significant components of the Company’s deferred tax assets and liabilities are as follows (in millions):
Net federal and state operating loss carryforwards
$
42.0
$
38.0
Deferred revenue
6.0
5.3
Intangibles
(90.6)
(90.0)
Reserves and accruals
14.3
10.0
Interest expense carryforward
93.0
68.1
Tax credits
37.6
28.3
Share-based compensation
1.3
1.3
Fixed assets
(3.0)
(6.9)
Operating lease right-of-use assets
(55.4)
(55.6)
Operating lease liabilities
57.7
57.9
Valuation allowance
(118.5)
(77.4)
Other
1.8
2.2
Total
$
(13.8)
$
(18.8)
Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than fifty percent) that some portion or all of the deferred tax assets will not be realized. As of December 29, 2024 and December 31, 2023, the Company recorded a valuation allowance against its deferred tax assets in the amount of $118.5 million and $77.4 million, respectively, as it is determined that these amounts would not likely be realized. Realization of our deferred tax assets is dependent upon future earnings, the timing and amount of which, if any, are uncertain. The valuation allowance increased by $41.0 million and $36.8 million during the fiscal years ended December 29, 2024 and December 31, 2023, respectively.
The Company had federal net operating loss carryforwards (“NOLs”) of approximately $155.6 million and $139.5 million as of December 29, 2024 and December 31, 2023, respectively. The Company’s State NOLs were approximately $157.3 million and $126.3 million as of December 29, 2024 and December 31, 2023, respectively. The NOLs begin to expire in 2037. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. The Company also had certain federal tax credits totaling approximately $37.6 million and $28.3 million as of December 29, 2024 and December 31, 2023 respectively. The credits will began to expire in 2024.
Under Section 382 and 383 of the Internal Revenue Code, if an ownership change occurs with respect to a “loss corporation”, as defined, there are annual limitations on the amount of the NOLs and certain other deductions and credits which are available to the Company. The portion of the NOLs and other tax benefits accumulated by Johnny Rockets, GFG, Fazoli's and Barbecue Integrated, Inc. prior to the Acquisition are subject to this annual limitation.
NOTE 9. LEASES
As of December 29, 2024, the Company has recorded 194 operating leases for corporate offices and for certain owned restaurant properties, some of which are in the process of being refranchised. The leases have remaining terms ranging from less than 1 year to 25.8 years. The Company recognized lease expense of $31.5 million and $22.2 million for the fiscal years ended December 29, 2024 and December 31, 2023, respectively. The weighted average remaining lease term of the operating leases as of December 29, 2024 was 15.5 years.
Operating lease right-of-use assets and operating lease liabilities are as follows (in millions):
December 29, 2024
December 31, 2023
Operating lease right-of-use assets
$
198.1
$
220.0
Right of use assets classified as held-for-sale
0.4
3.1
Total right-of-use assets
$
198.5
$
223.1
Operating lease liabilities
$
216.4
$
229.0
Lease liabilities related to assets held-for-sale
0.4
3.4
Total operating lease liabilities
$
216.8
$
232.4
The operating lease right-of-use assets and operating lease liabilities include obligations relating to the optional term extensions available on certain restaurant leases based on management’s intention to exercise the options. The weighted average discount rate used to calculate the carrying value of the right-of-use assets and lease liabilities was 9.0% which is based on the Company’s incremental borrowing rate at the time the lease is acquired.
The contractual future maturities of the Company’s operating lease liabilities as of December 29, 2024, including anticipated lease extensions, are as follows (in millions):
Fiscal year:
2025
$
30.9
2026
28.8
2027
28.3
2028
26.3
2029
25.5
Thereafter
295.7
Total lease payments
435.5
Less imputed interest
219.1
Total
$
216.4
Supplemental cash flow information for the fiscal years ended December 29, 2024 and December 31, 2023 related to leases is as follows (in millions):
2024
2023
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases
$
29.8
$
19.8
Operating lease right-of-use assets obtained in exchange for new lease obligations:
Long-term debt consisted of the following (in millions):
December 29, 2024
December 31, 2023
Final Maturity
Anticipated Call Date
Rate
Face Value
Book Value
Book Value
Senior Debt
FB Royalty Securitization
4/25/2051
7/25/2026
4.75%
$
136.3
$
134.4
$
135.9
GFG Royalty Securitization
7/25/2051
7/25/2026
6.00%
269.8
265.2
267.7
Twin Peaks Securitization
10/25/2054
10/25/2027
7.00%
281.4
277.5
193.7
Fazoli's/Native Securitization
7/25/2051
1/25/2025
6.00%
125.5
125.4
126.0
FB Resid Securitization
7/25/2027
10.00%
53.9
53.8
52.7
Senior Subordinated Debt
FB Royalty Securitization
4/25/2051
7/25/2026
8.00%
45.4
42.7
42.1
GFG Royalty Securitization
7/25/2051
7/25/2026
7.00%
101.7
98.9
95.9
Twin Peaks Securitization
10/25/2054
10/25/2027
9.00%
57.6
53.7
48.6
Fazoli's/Native Securitization
7/25/2051
1/25/2025
7.00%
24.4
24.2
17.4
FB Resid Securitization
7/25/2027
10.00%
56.0
55.9
52.7
Subordinated Debt
FB Royalty Securitization
4/25/2051
7/25/2026
9.00%
15.7
15.5
18.6
GFG Royalty Securitization
7/25/2051
7/25/2026
9.50%
55.6
49.2
43.4
Twin Peaks Securitization
10/25/2054
10/25/2027
10.00%
46.9
45.6
29.4
Fazoli's/Native Securitization
7/25/2051
1/25/2025
9.00%
—
—
20.7
Total Securitized Debt
1,270.2
1,242.0
1,144.8
Elevation Note
7/19/2026
N/A
6.00%
2.0
2.0
3.0
Twin Peaks Equipment Notes
5/5/2027 to 7/31/2028
N/A
7.99% to 11.50%
4.7
4.7
1.9
Twin Peaks Construction Loan III
12/28/2024
N/A
Prime + 1%
—
—
2.2
Twin Peaks Construction Loan IV
10/1/2025
N/A
12.50
%
3.2
3.2
—
Twin Peaks Promissory Note
10/4/2024
N/A
5.30
%
—
—
1.0
FAT Brands GFG Royalty I, LLC Promissory Note
7/25/2026
N/A
16.90% to 18.65%
6.4
6.3
—
Total debt
$
1,286.5
1,258.2
1,152.9
Current portion of long-term debt
(49.2)
(42.6)
Long-term debt
$
1,209.0
$
1,110.3
Terms of Outstanding Debt
FB Royalty Securitization
On April 26, 2021, FAT Brands Royalty I, LLC (“FB Royalty”), a special purpose, wholly-owned subsidiary of FAT Brands, completed the Offering of three tranches of fixed rate senior secured notes. Net proceeds totaled $140.8 million, which consisted of the combined face amount of $144.5 million, net of debt offering costs of $3.0 million and original issue discount of $0.7 million. A portion of the proceeds was used to repay and retire notes issued in 2022 under the Base Indenture (the "2020 Securitization Notes"). The payoff amount totaled $83.7 million, which included principal of $80.0 million, accrued interest of $2.2 million and prepayment premiums of $1.5 million. The Company recognized a loss on extinguishment of debt of $7.8
million in connection with the refinance as well as interest expense on the 2020 Securitization Notes in the amount of $2.6 million for the year ended December 26, 2021.
On July 6, 2022, FB Royalty issued an additional $76.5 million aggregate principal amount of three tranches of fixed rate senior secured notes (in millions):
Closing Date
Class
Seniority
Principal Balance
Coupon
Final Legal Maturity Date
7/6/2022
A-2
Senior
$42.7
4.75%
7/25/2051
7/6/2022
B-2
Senior Subordinated
$14.2
8.00%
7/25/2051
7/6/2022
M-2
Subordinated
$19.6
9.00%
7/25/2051
Of the $76.5 million aggregate principal amount, $30.0 million was sold privately during the third quarter of 2022, resulting in net proceeds of $27.1 million (net of debt offering costs of $0.6 million and original issue discount of $2.3 million). The remaining $46.5 million in aggregate principal was sold privately on October 21, 2022, when the Company entered into an Exchange Agreement with the Twin Peaks sellers and redeemed 1,821,831 shares of the Company’s 8.25% Series B Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and unpaid dividends to the date of redemption, in exchange for $46.5 million aggregate principal amount of secured debt ($43.2 million net of debt offering costs and original issue discount).
Prior to the redemption, the Twin Peaks sellers held 2,847,393 shares of Series B Cumulative Preferred Stock, which shares were issued to it on October 1, 2021 as partial consideration for the Company’s acquisition of Twin Peaks.
Pursuant to the Exchange Agreement, (i) at any time prior to July 25, 2023, the Company may call from the Twin Peaks sellers all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.86, plus any accrued plus unpaid interest thereon; (ii) at any time on or after the date of the Exchange Agreement, the Company may call from the Twin Peaks sellers, and at any time on or after July 25, 2023, the Twin Peaks sellers may put to the Company, all or a portion of the Class A-2 Notes and/or Class B-2 Notes at the outstanding principal balance multiplied by 0.94, plus any accrued plus unpaid interest thereon; and (iii) at any time on or after July 25, 2023, the Company may call from the Twin Peaks sellers, and the Twin Peaks sellers may put to the Company, all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.91, plus any accrued plus unpaid interest thereon. If the Company does not remit the applicable call price or put price upon a duly exercised call or put, as applicable, the amount owed by the Company will accrue interest at 10% per annum, which interest is due and payable in cash monthly by the Company. On July 13, 2023, pursuant to the Exchange Agreement, the Twin Peaks sellers exercised their put option. During the first quarter of 2024, the Company paid $1.0 million to settle the 10% per annum interest in perpetuity and to settle the put option. As a result, as of December 29, 2024, the outstanding principal balance owned by the Twin Peaks sellers is no longer subject to the put option.
As of December 29, 2024, the carrying value of the FB Royalty Securitization Notes was $211.8 million (net of debt offering costs of $2.5 million and original issue discount of $5.8 million). The Company recognized interest expense on the FB Royalty Securitization Notes of $15.4 million for the year ended December 29, 2024, respectively, which includes $1.7 million for amortization of debt offering costs, and $0.7 million for amortization of the original issue discount. The average annualized effective interest rate of the FB Royalty Securitization Notes, including the amortization of debt offering costs and original issue discount, was 8.4% for the time the debt was outstanding during the year ended December 29, 2024.
The FB Royalty Securitization Notes are generally secured by a security interest in substantially all the assets of FB Royalty and its subsidiaries.
GFG Royalty Securitization
In connection with the acquisition of GFG, on July 22, 2021, FAT Brands GFG Royalty I, LLC (“GFG Royalty”), a special purpose, wholly-owned subsidiary of the Company, completed the issuance and sale in a private offering (the “GFG Offering”) of three tranches of fixed rate senior secured notes. Net proceeds totaled $338.9 million, which consisted of the combined face amount of $350.0 million, net of debt offering costs of $6.0 million and original issue discount of $5.1 million. Substantially all
of the proceeds were used to acquire GFG. Immediately following the closing of the acquisition of GFG, the Company contributed the franchising subsidiaries of GFG to GFG Royalty, pursuant to a Contribution Agreement.
On December 15, 2022, GFG Royalty issued an additional $113.5 million aggregate principal amount of three tranches of fixed rate senior secured notes as follows (in millions):
Closing Date
Class
Seniority
Principal Balance
Coupon
Final Legal Maturity Date
12/13/2022
A-2
Senior
$67.8
6.00%
7/25/2051
12/13/2022
B-2
Senior Subordinated
$20.2
7.00%
7/25/2051
12/13/2022
M-2
Subordinated
$25.5
9.50%
7/25/2051
Of the $113.5 million aggregate principal amount, $25.0 million was sold privately during the fourth quarter of 2022, resulting in net proceeds of $22.3 million (net of debt offering costs of $0.4 million and original issue discount of $2.3 million). The remaining $88.5 million in aggregate principal was issued to FAT Brands Inc. and has been eliminated in consolidation. In January 2023, an additional $40.0 million aggregate principal amount was sold privately, resulting in net proceeds of $34.8 million. On September 20, 2023, an additional $2.8 million aggregate principal amount was sold privately resulting in net proceeds of $2.5 million. In October 2023, $20.2 million aggregate principal amount previously issued to FAT Brands Inc. was sold privately resulting in net proceeds of $18.1 million. The remaining $25.3 million in aggregate principal amount remains issued to FAT Brands, Inc., pending sale to third party investors.
As of December 29, 2024, the carrying value of the GFG Securitization Notes was $443.6 million (net of debt offering costs of $4.7 million and original issue discount of $5.9 million). The Company recognized interest expense on the GFG Securitization Notes of $35.8 million for fiscal year ended December 29, 2024, which includes $1.3 million for amortization of debt offering costs and $4.1 million for amortization of the original issue discount. The average annualized effective interest rate of the GFG Securitization Notes, including the amortization of debt offering costs and original issue discount, was 9.6% during the fiscal year ended December 29, 2024.
The GFG Securitization Notes are generally secured by a security interest in substantially all the assets of GFG Royalty and its subsidiaries.
Twin Peaks Securitization
In connection with the acquisition of Twin Peaks, on October 1, 2021, the Company completed the issuance and sale in a private offering through its special purpose, wholly-owned subsidiary, Twin Hospitality I, LLC (formerly Fat Brands Twin Peaks I, LLC), three tranches of fixed rate notes for an aggregate principal amount of $250.0 million, collectively the "Prior Securitization notes". The net proceeds from the sale of the Notes were used by the Company to finance the cash portion of the purchase price for the acquisition of Twin Peaks Buyer, LLC and its direct and indirect subsidiaries. Net proceeds totaled $236.9 million, which consisted of the combined face amount of $250.0 million, net of debt offering costs of $5.6 million and original issue discount of $7.5 million. Substantially all of the proceeds were used to acquire Twin Peaks. Immediately following the closing of the acquisition of Twin Peaks, the Company contributed the franchising subsidiaries of Twin Peaks to Twin Hospitality I, LLC, pursuant to a Contribution Agreement.
On September 8, 2023, Twin Hospitality I, LLC issued an additional $98.0 million aggregate principal amount of two tranches of fixed rate secured notes to FAT Brands Inc., pending sale to third party investors. Of the $98.0 million aggregate principal amount, $48.0 million was sold privately during the third quarter of 2023 resulting in net proceeds of $45.2 million. A portion of the proceeds was used to purchase $14.9 million aggregate principal amount of outstanding Securitization Notes, which will be held pending re-sale to third party investors. In connection with the bonds repurchased, the Company recognized a $2.7 million net loss on extinguishment of debt. The remaining $50.0 million in aggregate principal of notes issued by Twin Hospitality I, LLC was issued to a wholly-owned subsidiary of FAT Brands, Inc., pending sale to third party investors.
On March 20, 2024, Twin Hospitality I, LLC issued an additional $50.0 million aggregate principal amount of one tranche of fixed rate secured notes to FAT Brands Inc., pending sale to third party investors. Of the $50.0 million aggregate principal amount, $38.8 million was sold privately during the first quarter of 2024 resulting in net proceeds of $36.4 million. A portion of the proceeds was used to purchase $7.4 million aggregate principal amount of outstanding Securitization Notes, which will be held pending re-sale to third party investors. In connection with the bonds repurchased, the Company recognized a $0.4 million
net gain on extinguishment of debt. During the second quarter of 2024, the remaining $11.2 million in aggregate principal of notes was sold privately to a third party investor resulting in net proceeds of $10.7 million.
On November 21, 2024, Twin Hospitality I, LLC completed the issuance and sale in a private offering the following four tranches of fixed rate secured notes: (i) $12.0 million aggregate principal amount of 9.00% Fixed Rate Super Senior Notes, Class A-2-I, (ii) $269.3 million aggregate principal amount of 9.00% Fixed Rate Senior Notes, Class A-2-II, (iii) $57.6 million aggregate principal amount of 10.00% Fixed Rate Senior Subordinated Secured Notes, Class B-2 and (iv) $77.7 million aggregate principal amount of 11.00% Fixed Rate Subordinated Secured Notes, Class M-2, collectively the "Twin Securitization Notes."
Net Proceeds from the issuance and sale of the Twin Securitization notes were $407.5 million, which consisted of the aggregate principal amount of $416.7 million, net of aggregate original issue discounts $3.2 million and debt offering costs of $6.0 million. The net proceeds from the sale of the Twin Securitization Notes was used to redeem all of the Prior Securitization Notes, which included principal of $388.8 million and accrued interest of $2.3 million, with the remainder to be used for working capital and general corporate purposes. The Company recognized a loss on extinguishment of debt of $2.4 million.
As of December 29, 2024, the carrying value of the Twin Peaks Securitization Notes was $407.5 million (net of debt offering costs of $6.0 million and original issue discount of $3.2 million). The Company recognized interest expense on the Twin Peaks Securitization Notes of $33.7 million for year ended December 29, 2024, which includes $9.5 million for amortization of debt offering costs and $2.3 million for amortization of the original issue discount. The effective interest rate of the Twin Peaks Securitization Notes, including the amortization of debt offering costs and original issue discount, was 12.2% during the year ended December 29, 2024.
The Prior Twin Peaks Securitization Notes and the Twin Peaks Securitization Notes are generally secured by a security interest in substantially all the assets of Twin Hospitality I, LLC and its subsidiaries.
Terms and Debt Covenant Compliance
The Twin Securitization Notes require that the principal (if any) and interest obligations be segregated to ensure appropriate funds are reserved to pay the quarterly principal and interest amounts due. The amount of monthly cash flow that exceeds the required monthly interest reserve is generally remitted to the Company. Interest payments are required to be made on a quarterly basis. The legal final maturity date of the Twin Securitization Notes is October 26, 2054; however, it is currently anticipated that, unless earlier prepaid to the extent permitted under the Base Indenture, the Twin Securitization Notes will be repaid on October 25, 2027 (which we refer to as the "Anticipated Repayment Date"). If the Twin Securitization Notes are not repaid or refinanced by the Anticipated Repayment Date, additional interest will accrue on the then outstanding balance of each class of the Twin Securitization Notes at a rate of 5.0% per annum. Each class of the Twin Securitization Notes may be prepaid in whole or in part on any business day; provided that optional prepayment made after the Anticipated Repayment Date must be applied first to Class A-2-I, second to Class A-2-II, third to Class B-2 and fourth to Class M-2 of the Twin Securitization Notes.
Additionally, pursuant to the Base Indenture, upon each "Qualified Equity Offering" (as defined in the Base Indenture), which is a public or private offering by Twin Hospitality Group Inc. of our common equity securities for cash, subject to certain limited exceptions, Twin Hospitality Group Inc. is required to deposit 75% of the net proceeds from such offering into a segregated, non-interest bearing trust account to be used towards the repayment of the Twin Securitization Notes, until an aggregate of $75.0 million has been repaid in that manner. If the amount of net proceeds from our Qualified Equity Offerings used for repayment of the Twin Securitization Notes is not at least $25.0 million on or prior to each of April 25, 2025, July 25, 2025 and October 27, 2025, or is not at least $75.0 million on or prior to January 26, 2026, then under any such circumstance, a Cash Flow Sweeping Event (as defined in the Base Indenture) would occur, whereupon certain excess cash flows from our operations will be used to make additional principal payments, on a pro rata basis, on the three most senior classes of the Twin Securitization Notes.
The material terms of the Twin Securitization Notes contain covenants which are standard and customary for these types of agreements, including the following financial covenants: (i) debt service coverage ratio, (ii) interest-only debt service coverage ratio and (iii) senior leverage ratio. As of December 29, 2024, the Company was in compliance with these covenants.
In connection with the issuance and sale of the Twin Securitization Notes, we entered into a letter agreement, pursuant to which our subsidiary Twin Hospitality Group Inc. agreed to issue to the investors in the Twin Securitization Notes warrants (which we refer to as the "Noteholders' Warrants") exercisable for the aggregate number of shares of the subsidiary's Class A Common Stock equal to 5.0% of the number of issued and outstanding shares of the subsidiary's Class A Common Stock at the time of the Spin-Off, which occurred on January 29, 2025 (See Note 19, Subsequent Events). The Noteholders' Warrants will be exercisable during the period commencing on October 25, 2025 and ending on the five-year anniversary of the date of issuance,
at an exercise price of $0.01 per share. Under the letter agreement, we also agreed not to pay a dividend on our common stock until at least $25,000,000 in proceeds from Qualified Equity Offerings (as defined in the Base Indenture) have been used to prepay the Twin Securitization Notes.
Fazoli's / Native Securitization
In connection with the acquisition of Fazoli's and Native Grill & Wings, on December 15, 2021, the Company completed the issuance and sale in a private offering through its special purpose, wholly-owned subsidiary, FAT Brands Fazoli's Native I, LLC, of an aggregate principal amount of $193.8 million. Net proceeds totaled $180.6 million, which consisted of the combined face amount of $193.8 million, net of debt offering costs of $3.8 million and original issue discount of $9.4 million. The proceeds were used to close the acquisitions of Fazoli's and Native, and to provide working capital for the Company. Immediately following the closing of the acquisition of Fazoli's and Native, the Company contributed the franchising subsidiaries of these entities to FAT Brands Fazoli's Native I, LLC, pursuant to a Contribution Agreement.
As of December 29, 2024, the carrying value of the Fazoli's-Native Securitization Notes was $188.6 million (net of debt offering costs of $2.5 million and original issue discount of $6.0 million). The Company recognized interest expense on the Fazoli's-Native Securitization Notes of $14.8 million for the fiscal year ended December 29, 2024, which includes $1.2 million for amortization of debt offering costs and $3.0 million for amortization of the original issue discount. The effective interest rate of the Fazoli's-Native Securitization Notes, including the amortization of debt offering costs and original issue discount, was 10.1% during the year ended December 29, 2024.
The Fazoli's-Native Securitization Notes are generally secured by a security interest in substantially all the assets of FAT Brands Fazoli's Native I, LLC and its subsidiaries.
FB Resid Holdings I, LLC
On July 8, 2023, FB Resid Holdings I, LLC (“FB Resid”), a special purpose, wholly-owned subsidiary of FAT Brands, completed the issuance of two tranches of fixed rate secured notes with a total aggregate principal amount of $150.0 million. Of the $150.0 million aggregate principal amount, $105.8 million was sold privately, resulting in net proceeds of $105.3 million. A portion of the proceeds was used to purchase $64.6 million of outstanding Securitization Notes, which will be held pending re-sale to third party investors. The remaining $44.2 million in aggregate principal of notes issued by FB Resid was issued to a wholly-owned subsidiary of FAT Brands, Inc., pending sale to third party investors.
On November 21, 2024, the Company modified the terms of the outstanding notes issued by FB Resid pursuant to an Omnibus Amendment executed with the noteholders as well as with the Company’s other whole business securitization subsidiaries, FAT Brands Royalty I, LLC, FAT Brands GFG Royalty I, LLC, Twin Hospitality I, LLC (f/k/a FAT Brands Twin Peaks I, LLC) and FAT Brands Fazoli’s Native I, LLC (the “Existing Issuers”). The Omnibus Amendment amended the treatment of “Excess Amounts” under the Company’s current securitization transactions, other than Twin Hospitality I, LLC, upon (i) the occurrence of an Event of Default under the FB Resid Indenture or (ii) if the Controlling Class Representative (currently 3|5|2 Capital ABS Master Fund LP) has notified the FB Resid Trustee that certain Excess Amounts are required to satisfy clauses (i) through (xiii) of the Priority of Payments on the next applicable Monthly Allocation Date under the FB Resid Indenture. In such event, all such Excess Amounts must be deposited into a segregated account to be included in Retained Collections and deposited in the Collection Account under the FB Resid Indenture for application in accordance with the waterfall of payments under Section 5.10 of the FB Resid Indenture. The Omnibus Amendment also amended the FB Resid Indenture to provide that with respect to (i) any Mandatory Prepayment Amount and/or (ii) from and after the occurrence of any Event of Default (as such terms are defined in the FB Resid Indenture), payments of interest and principal with respect to the Class A-1 Notes and the Class A-2 Notes shall be made in accordance with the Applicable Class A Payment Priority (defined in the Omnibus Amendment), and no amounts may be paid on the Class A-1B Notes or Class A-2B Notes until amounts then due and owing to the Class A-1A Notes and the Class A-2A Notes shall have been paid in full in cash.
In addition, under the Omnibus Amendment, the Company and FB Resid agreed not to permit (i) any equity interests of any Existing Issuer to be sold, transferred or disposed, other than the transactions contemplated by the Twin Peaks Listing Event, or (ii) any Specified Additional Issuance (as defined in the FB Resid Indenture). In addition, the Omnibus Amendment added a new Event of Default under the FB Resid Indenture if the Issuer should fail, by July 31, 2026, to have prepaid or purchased at least $20,000,000 of Class A-1A Notes and Class A-2A Notes held by the Controlling Class Representative or its managed funds. Also under the Omnibus Amendment, the Company agreed not to sell or otherwise dispose of any of its equity interests of Twin Hospitality until Twin Hospitality has used at least $75,000,000 of aggregate Qualified Equity Offering Proceeds or other proceeds to prepay the new Notes issued under the TWNP Indenture. The Company also agreed not to declare or pay any dividend or distribution in the form of equity interests in Twin Hospitality (i) until the third anniversary of the Closing Date (ii)
or if any Potential Rapid Amortization Event, Rapid Amortization Event, Default or Event of Default has occurred or would result therefrom under the indentures of any Existing Issuer.
On November 21, 2024, the Company also entered into a Pledge and Security Agreement (the “Pledge Agreement”) and Securities Account Control Agreement (the “Control Agreement”) with UMB Bank, N.A., as trustee under the FB Resid Indenture and as securities intermediary (in such capacities, the “Pledge Trustee”). Under the Pledge Agreement, the Company pledged all of its shares of Class A Common Stock of Twin Hospitality (other than shares distributed to its shareholders at the time of the Twin Peaks Listing Event) (the “Pledged Shares”) along with all proceeds of the Pledged Shares for the payment and performance of all obligations of FB Resid under the FB Resid Indenture. The Company agreed that the “Applicable Percentage” (a formula that is defined in the Pledge Agreement) of any (i) proceeds of the sale or other disposal of Pledged Shares, (ii) dividend, distribution, rights, warrants or other consideration with respect to the Pledged Shares, and (iii) proceeds of any loan secured by the Pledged Shares (collectively, the “Proceeds”), will be applied to purchase first the Class A-2A Notes, and then the Class A-1A Notes, issued under the FB Resid Indenture at par plus any accrued and unpaid interest thereon and interest paid in kind. The Company also agreed that, if Twin Hospitality has not raised at least $25,000,000 in Qualified Equity Proceeds and is sold, then so long as either (i) the Issuer has repaid its debt in full under the TWNP Indenture or (ii) the Issuer’s noteholders have otherwise waived such payment and approved the sale in writing, then 50% of the Proceeds from the sale of Twin Hospitality will be applied to purchase first the Class A-2A Notes, and then the Class A-1A Notes, issued under the FB Resid Indenture at par plus any accrued and unpaid interest thereon and interest paid in kind. Also under the Pledge Agreement, upon the occurrence and during the continuance of an Event of Default and following the Grace Period, if applicable, under the FB Resid Indenture, all rights of the Company to vote or give consent with respect to the Pledged Shares shall be vested in the Pledge Trustee. Under the Control Agreement, the Company agreed to deposit all of the Pledged Shares at the time of the Twin Peaks Listing Event into a controlled account maintained by the Pledge Trustee, and the Pledge Trustee will distribute Proceeds of the Pledged Shares held in such account according to the Pledge Agreement. The Company will be entitled to enter any market order to sell Pledged Shares in a brokers’ transaction on an approved trading market, and may enter orders to sell Pledged Shares other than on a permitted trading market (i) with the prior written consent of the Pledge Trustee or (ii) in a trade to be executed within 5% of the 5-trading day volume weighted average price and with a value of at least $15,000,000. Upon an Event of Default under the FB Resid Indenture, the Controlling Class Representative will be entitled to exercise sole control of the Pledged Shares and direct sales or other dispositions of the Pledged Shares held in the controlled account.
Retained Notes
During 2024, the Company repurchased certain of its securitized notes to be held for resale to third party investors and sold certain of its securitized notes previously repurchased or issued and not sold (collectively, the "Retained Notes"). During 2024, cash proceeds from the sale of Retained Notes and cash used to repurchase Retained Notes was $108.2 million and $36.4 million including accrued interest, respectively. The $108.2 million includes the sale of $30.9 million aggregate principal Twin Peaks Securitization notes issued in 2024 in addition to securitization notes previously held in wholly-owned subsidiaries of Fat Brands Inc. As of December 29, 2024, the Company held $164.8 million of Retained Notes, which have been eliminated in consolidation.
Terms and Debt Covenant Compliance
The FAT Royalty securitization notes, the GFG Royalty securitization notes, the Twin Peaks securitization notes, the Fazoli's/Native securitization notes and the FB Resid notes (collectively, the "Securitization Notes") require that the principal (if any) and interest obligations be segregated to ensure appropriate funds are reserved to pay the quarterly principal and interest amounts due. The amount of monthly cash flow that exceeds the required monthly interest reserve is generally remitted to the Company. Interest payments are required to be made on a quarterly basis. Beginning July 26, 2023, additional interest equal to 1.0% per annum and principal payments equal to 2.0% per annum of the initial principal amount on the FAT Royalty securitization notes, the GFG Royalty securitization notes, the Twin Peaks securitization notes and the Fazoli's/Native securitization notes will be made on the scheduled quarterly payment dates.
The material terms of the Securitization Notes contain covenants which are standard and customary for these types of agreements, including the following financial covenants: (i) debt service coverage ratio, (ii) leverage ratio, and (iii) senior leverage ratio. As of December 29, 2024, the Company was in compliance with these covenants.
Elevation Note
On June 19, 2019, the Company completed the acquisition of Elevation Burger. A portion of the purchase price included the issuance to the Seller of a convertible subordinated promissory note (the “Elevation Note”) with a principal amount of $7.5
million, bearing interest at 6.0% per year and maturing in July 31, 2026. The Elevation Note is convertible under certain circumstances into shares of the Company’s common stock at $12.00 per share. In connection with the valuation of the acquisition of Elevation Burger, the Elevation Note was recorded on the financial statements of the Company at $6.1 million, net of a loan discount of $1.3 million and debt offering costs of $0.1 million.
As of December 29, 2024, the carrying value of the Elevation Note was $2.0 million which is net of the loan discount of $0.4 million and debt offering costs of $35,329. In June 2022, pursuant to the claw-back provision of the purchase agreement, the balance of the Elevation Note was reduced by $1.0 million to $6.5 million. The Company recognized interest expense relating to the Elevation Note during the fiscal year ended December 29, 2024 in the amount of $0.2 million, which included amortization of the loan discount of $10,191 and amortization of $132,949 in debt offering costs. The Company recognized interest expense relating to the Elevation Note during the year ended December 31, 2023 in the amount of $0.2 million, which included amortization of the loan discount of $0.2 million and amortization of $10,191 in debt offering costs. The effective interest rate for the Elevation Note during the year ended December 29, 2024 was 12.4%.
The Elevation Note is a general unsecured obligation of Company and is subordinated in right of payment to all indebtedness of the Company arising under any agreement or instrument to which Company or any of its Affiliates is a party that evidences indebtedness for borrowed money that is senior in right of payment.
Equipment Financing (Twin Peaks)
During 2022, one of our wholly-owned subsidiaries entered into certain equipment financing arrangements to borrow up to $1.4 million, the proceeds of which were used to purchase certain equipment for a company-owned restaurant that opened in 2022 and to retrofit certain existing company-owned restaurants with equipment (which we refer to as the "2022 Equipment Financings"). The 2022 Equipment Financings have maturity dates between May 5, 2027 and March 7, 2028 and bear interest at fixed rates between 7.99% and 8.49% per annum.
During 2023, one of our wholly-owned subsidiaries entered into certain equipment financing arrangements to borrow up to $1.4 million, the proceeds of which will be used to purchase certain equipment for a new company-owned restaurant (which we refer to as the "2023 Equipment Financing"). The 2023 Equipment Financing has maturity dates that are 48 months from the date of each draw, and bears interest at 11.5% per annum.
During 2024, one of our wholly-owned subsidiaries entered into certain equipment financing arrangements to borrow up to $4.2 million, the proceeds of which will be used to purchase certain equipment for three new company-owned Twin Peaks restaurants (which we refer to as the "2024 Equipment Financing"). The 2024 Equipment Financing has maturity dates that are 48 months from the date of each draw, and bears interest at 11.5% per annum.
The 2022 Equipment Financings, the 2023 Equipment Financing, and the 2024 Equipment Financing are secured by certain equipment of such respective company-owned restaurants. As of December 29, 2024, the total outstanding principal amount under them on a collective basis was $4.7 million, and as of December 31, 2023, the total outstanding principal amount was $1.9 million.
Construction Loan Agreement (Twin Peaks)
On December 28, 2023, an indirect subsidiary of the Company entered into a construction loan agreement to borrow up to $4.75 million, the proceeds of which will be used for a new corporate Twin Peaks in McKinney, TX (the "Construction Loan III"). The Construction Loan III has an initial maturity of December 28, 2024, with an optional 12-month extension, bearing interest at Wall Street Journal Prime plus 100 basis per year and is secured by land and building. The Construction Loan III was paid in full on its maturity date on December 28, 2024.
On September 20, 2024, an indirect subsidiary of the Company entered into a loan agreement to borrow $3.2 million with an initial maturity of October 1, 2025, bearing interest at 12.5% per annum and is secured by land and building of a new corporate restaurant. As of December 29, 2024, the total amount outstanding on this loan was $3.2 million.
Promissory Note (Twin Peaks)
On December 4, 2023, an indirect subsidiary of the Company purchased all member interest units of a joint venture entity for $1.3 million in the form of a $0.3 million cash payment and 10 equal monthly payments of $0.1 million beginning in January
2024. The $1.0 million promissory note bears interest of 5.3% and has a maturity of October 4, 2024. As of December 29, 2024, the total outstanding amount on the promissory note was $0. This promissory note was paid in full on its maturity date.
FAT Brands GFG Royalty I, LLC Promissory Note
During 2024, one of our wholly-owned subsidiaries entered into a financing arrangement to borrow money, where the proceeds would be used for general corporate purposes. The total outstanding amount on the promissory note was $6.3 million. The FAT GFG LLC Promissory Note has a maturity date of July 25, 2026 and bears interest at fixed rates between 16.90% and 18.65% per annum.
Scheduled Principal Maturities
Scheduled principal maturities of long-term debt and redemptions of redeemable preferred stock (Note 12) for the next five fiscal years are as follows (in millions):
Fiscal Year
Long-Term Debt
Redeemable Preferred Stock (Note 12)
2025
$
49.2
$
91.8
2026
$
34.0
$
—
2027
$
136.8
$
—
2028
$
26.0
$
—
2029
$
25.4
$
—
NOTE 11. PREFERRED STOCK
Series B Cumulative Preferred Stock
On July 13, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) to issue and sell, in a public offering (the “Offering”), 360,000 shares of 8.25% Series B Cumulative Preferred Stock (“Series B Preferred Stock”) and 1,800,000 warrants, plus 99,000 additional warrants pursuant to the underwriter’s overallotment option (the “2020 Series B Offering Warrants”), to purchase common stock at $5.00 per share (Note 15).
In connection with the Offering, on July 15, 2020 the Company filed an Amended and Restated Certificate of Designation of Rights and Preferences of Series B Cumulative Preferred Stock with the Secretary of State of Delaware, designating the terms of the Series B Preferred Stock (the “Certificate of Designation”).
The Certificate of Designation amends and restates the terms of the Series B Cumulative Preferred Stock issued in October 2019 (the “Original Series B Preferred”). At the time of the Offering, there were 57,140 shares of the Original Series B Preferred outstanding, together with warrants to purchase 34,284 shares of the Company’s common stock at an exercise price of $8.50 per share (the “Series B Warrants”).
Holders of Series B Cumulative Preferred Stock do not have voting rights and are entitled to receive, when declared by the Board, cumulative preferential cash dividends at a rate per annum equal to the 8.25% multiplied by $25.00 per share stated liquidation preference of the Series B Preferred Stock. The dividends shall accrue without interest and accumulate, whether or not earned or declared, on each issued and outstanding share of the Series B Preferred Stock from (and including) the original date of issuance of such share and shall be payable monthly in arrears on a date selected by the Company each calendar month that is no later than twenty days following the end of each calendar month.
If the Company fails to pay dividends on the Series B Preferred Stock in full for any twelve accumulated, accrued and unpaid dividend periods, the dividend rate shall increase to 10.0% until the Company has paid all accumulated accrued and unpaid dividends on the Series B Preferred Stock in full and has paid accrued dividends during the two most recently completed dividend periods in full, at which time the 8.25% dividend rate shall be reinstated.
The Company may redeem the Series B Preferred Stock, in whole or in part, at the option of the Company, for cash, at the following redemption price per share, plus any unpaid dividends:
i.After July 16, 2023 and on or prior to July 16, 2024: $26.00 per share.
ii.After July 16, 2024 and on or prior to July 16, 2025: $25.50 per share.
iii.After July 16, 2025: $25.00 per share.
As a result of the amended and restated terms of the Series B Cumulative Preferred Stock, the Company classified the Series B Preferred Stock as equity as of July 15, 2020.
In addition to the shares issued in the Offering, The Company concurrently engaged in the following transactions:
•The holders of the outstanding 57,140 shares of Original Series B Preferred became subject to the new terms of the Certificate of Designation. At the time of the amendment and restatement of the Certificate of Designation, the adjusted basis of the Original Series B Preferred on the Company’s books was $1.1 million, net of unamortized debt discounts and debt offering costs. As a result of the amendment and restatement of the Certificate of Designation, the recorded value of the new Series B Stock was $1.1 million with $0.3 million allocated to the 2020 Series B Offering Warrants, resulting in an aggregate loss on the exchange of $0.3 million. The original holders were also issued 3,537 shares of new Series B Preferred Shares in payment of $0.1 million accrued and outstanding dividends relating to the Original Series B Preferred at a price of $25.00 per share.
•The Company entered into an agreement to exchange 15,000 shares of Series A Fixed Rate Cumulative Preferred Stock owned by FCCG for 60,000 shares of Series B Preferred Stock valued at $1.5 million, pursuant to a Settlement, Redemption and Release Agreement. At the time of the exchange, the adjusted basis of the Series A Preferred on the Company’s books was $1.5 million, net of unamortized debt discounts and debt offering costs, and the Company recognized a loss on the exchange in the amount of $11,000. The Company also agreed to issue 14,449 shares of Series B Preferred Stock valued at $0.4 million as consideration for accrued dividends due to FCCG.
•The Company entered into an agreement to exchange all of the outstanding shares of Series A-1 Fixed Rate Cumulative Preferred Stock for 168,001 shares of Series B Preferred Stock valued at $4.2 million, pursuant to a Settlement, Redemption and Release Agreement with the holders of such shares. At the time of the exchange, the adjusted basis of the Series A-1 Preferred Stock on the Company’s books was $4.4 million, net of unamortized debt discounts and debt offering costs, and the Company recognized a gain on the exchange in the amount of $0.2 million.
On June 22, 2021, the Company closed a second underwritten public offering of 460,000 shares of 8.25% Series B Cumulative Preferred Stock at a price of $20.00 per share. The net proceeds to the Company totaled $8.3 million (net of $0.9 million in underwriting discounts and other offering expenses).
On August 25, 2021, the Company redeemed the final 80,000 shares of outstanding Series A Preferred Stock held by Trojan Investments, LLC, with a redemption value of $8.0 million, plus accrued dividends thereon in the amount of $1.6 million, in exchange for 478,199 shares of Series B Preferred Stock valued at $10.8 million. The Company recognized a loss on extinguishment of debt in the amount of $1.2 million resulting from the redemption of the Series A Preferred Stock. The loss on extinguishment of debt was recognized during the fourth quarter of 2021 and was deemed by the Company to be immaterial to the third quarter 2021 financial statements. Following this transaction, the Company no longer has outstanding shares of its Series A Preferred Stock and has cancelled all shares. The Company had accounted for the Series A Preferred Stock as debt and recognized interest expense on the Series A Preferred Stock of $0.7 million for the fiscal year ended December 26, 2021.
On November 1, 2021, the Company closed an additional underwritten public offering of 1,000,000 shares of 8.25% Series B Cumulative Preferred Stock at a price of $18.00 per share. The net proceeds to the Company totaled $16.8 million (net of $1.2 million in underwriting discounts and other offering expenses).
On November 14, 2022, we entered into an ATM Sales Agreement (the "ThinkEquity Sales Agreement") with ThinkEquity LLC (the "Agent"), pursuant to which we may offer and sell from time to time through the Agent up to 21,435,000 maximum aggregate offering price of shares of our Class A Common Stock and/or 8.25% Series B Preferred Stock. The ThinkEquity Sales Agreement with the Agent was terminated in May 2024.
On July 19, 2024, we entered into an Equity Distribution Agreement (the “Noble Sales Agreement”) with Noble Capital Markets, Inc. (the “Sales Agent”), pursuant to which we may offer and sell from time to time through the Sales Agent shares (the “Placement Shares”) of our Class A Common Stock and/or 8.25% Series B Cumulative Preferred Stock. During fiscal year
2024, pursuant to the Noble Sales Agreement, we sold and issued 238,823 shares of 8.25% Series B Cumulative Preferred Stock, at a weighted average share price of $10.04, paid the Sales Agent commissions of $71,968 for such sales and received net proceeds of $2,326,278 (net of fees and commissions) for such sales.
As of December 29, 2024, the Series B Preferred Stock consisted of 3,591,706 shares outstanding with a balance of $40.8 million. The Company declared preferred dividends to the holders of the Series B Preferred Stock totaling $7.8 million during the fiscal year ended December 29, 2024. As of December 31, 2023, the Series B Preferred Stock consisted of 3,591,804 shares outstanding with a balance of $44.1 million. The Company declared preferred dividends to the holders of the Series B Preferred Stock totaling $7.0 million during the fiscal year ended December 31, 2023. These amounts do not include 5,936,638 shares of Series B Preferred Stock classified as redeemable preferred stock due to associated put options granted to the holders by the Company (see Note 12).
NOTE 12. REDEEMABLE PREFERRED STOCK
GFG Preferred Stock Consideration
On July 22, 2021, the Company completed the acquisition of GFG. A portion of the consideration paid included 3,089,245 newly issued shares of the Company’s Series B Cumulative Preferred Stock valued at $67.3 million (the "GFG Preferred Stock Consideration"). Additionally, on July 22, 2021, the Company entered into a put/call agreement with the GFG sellers, pursuant to which the Company may purchase, or the GFG Sellers may require the Company to purchase, the GFG Preferred Stock Consideration for $67.5 million plus any accrued but unpaid dividends on or before August 20, 2022 (extended from the original date of April 22, 2022), subject to the other provisions of the Put/Call Agreement. Since the Company did not deliver the applicable cash proceeds to the GFG Sellers by that date, the amount accrues interest at the rate of 5% per annum until repayment is completed. On March 22, 2022, the Company received a put notice on the GFG Preferred Stock Consideration and reclassified the GFG Preferred Stock Consideration from redeemable preferred stock to current liabilities on its consolidated balance sheet. As of December 29, 2024, the carrying value of the redeemable preferred stock was $67.5 million.
On September 16, 2022, the Company entered into an agreement with one of the GFG sellers who held 1,544,623 put preferred shares. Pursuant to the agreement, effective August 23, 2022, the interest rate applicable to such holder's 1,544,623 put shares was increased from 5% to 10% per annum, payable monthly in arrears. During the fiscal year ended December 29, 2024, the Company paid $3.1 million in accrued interest.
On March 9, 2023, the Company entered into an agreement with the second GFG seller who held 1,544,623 put preferred shares. Pursuant to the agreement, effective August 23, 2022, the interest rate applicable to such holder's 1,544,623 put shares was increased from 5% to 10% per annum, payable on the date of redemption.
Twin Peaks Preferred Stock Consideration
On October 1, 2021, the Company completed the acquisition of Twin Peaks. A portion of the consideration paid included 2,847,393 shares of the Company’s Series B Cumulative Preferred Stock (the "Twin Peaks Preferred Stock Consideration") valued at $67.5 million.
On October 1, 2021, the Company and the Twin Peaks Seller entered into a Put/Call Agreement (the “Put/Call Agreement”) pursuant to which the Company was granted the right to call from the Twin Peaks Seller, and the Twin Peaks Seller was granted the right to put to the Company, the Initial Put/Call Shares at any time until March 31, 2022 for a cash payment of $42.5 million, and the Secondary Put/Call Shares at any time until September 30, 2022 for a cash payment of $25.0 million (the Initial Put/call Shares together with the Secondary Put/Call Shares total $67.5 million), plus any accrued but unpaid dividends on such shares. Unpaid balances, when due, accrue interest at a rate of 10.0% per annum until repayment is completed. On October 7, 2021, the Company received a put notice on the Initial Put/Call Shares and the Secondary Put/Call Shares and, therefore, classified them in current liabilities in its consolidated balance sheet.
On October 21, 2022, the Company entered into an Exchange Agreement with the Twin Peaks Seller and redeemed 1,821,831 shares of the Company’s 8.25% Series B Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and unpaid dividends to the date of redemption in exchange for $46.5 million aggregate principal amount of secured debt ($43.2 million net of debt offering costs and original issue discount) as discussed in Note 10.
As of December 29, 2024, the carrying value of the Twin Peaks Preferred Stock Consideration totaled $24.3 million. The Company recognized interest expense relating to the Twin Peaks Preferred Stock Consideration in the amount of $2.4 million during the year ended December 29, 2024.
NOTE 13. STOCKHOLDERS’ EQUITY AND DIVIDENDS ON COMMON STOCK
On August 16, 2021, the Company filed its Second Amended and Restated Certificate of Incorporation (the “Amended Certificate”) with the Secretary of State of the State of Delaware, which among other things, (i) authorized 50,000,000 shares of Class A Common Stock and 1,600,000 shares of Class B Common Stock, and (ii) reclassified the Company’s outstanding shares of Common Stock as Class A Common Stock as of such date (the "Recapitalization"). Prior to the Recapitalization, the Company’s authorized common shares totaled 51,600,000 in a single class.
The terms of the Amended Certificate require equal or better treatment for the Class A Common Stock to the Class B Common Stock in transactions such as distributions, mergers, dissolution or recapitalization. Generally, each holder of shares of Class A Common Stock shall be entitled to 1 vote for each share of Class A Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Corporation, while each holder of shares of Class B Common Stock shall be entitled to 2,000 votes for each share of Class B Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Corporation. The foregoing is qualified in its entirety by reference to the full text of the Amended Certificate, which is filed as Exhibit 3.1 on the Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 19, 2021 and incorporated by reference herein.
On October 15, 2021, the Board of Directors of the Company approved an amendment and restatement (the “Amendment”) of the Company’s Bylaws, effective as of the same date. The Amendment revised the stockholder voting provisions of the Bylaws to reflect the dual class common stock structure adopted by the Company in August 2021. In addition, the Amendment revised the provisions in the Bylaws for stockholder voting by written consent and the procedure for fixing the size of the Board of Directors and made certain other conforming changes.
As of December 29, 2024 and December 31, 2023, the total number of authorized shares of Class A and Class B common stock was 51,600,000. There were 15,983,878 shares of Class A common stock and 1,270,805 shares of Class B common stock outstanding at December 29, 2024, and 15,629,294 shares of Class A common stock and 1,270,805 shares of Class B common stock issued and outstanding at December 31, 2023.
Below are the changes to the Company’s common stock during the fiscal year ended December 29, 2024:
●
Warrants to purchase 302,474 shares of Class A common stock were exercised during the year ended December 29, 2024. The proceeds to the Company from the exercise of the warrants totaled $0.7 million.
●
On January 9, 2024, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, payable on March 1, 2024 to stockholders of record as of February 15, 2024, for a total of $2.4 million.
●
On April 17, 2024, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, payable on May 31, 2024 to stockholders of record as of May 15, 2024, for a total of $2.4 million.
●
On July 9, 2024, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, payable on August 30, 2024 to stockholders of record as of August 15, 2024, for a total of $2.4 million.
●
On October 29, 2024, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, payable on November 29, 2024 to stockholders of record as of November 15, 2024, for a total of $2.4 million.
Below are the changes to the Company’s common stock during the fiscal year ended December 31, 2023:
Warrants to purchase 342,290 shares of Class A common stock were exercised during the year ended December 31, 2023. The proceeds to the Company from the exercise of the warrants totaled $0.7 million.
●
The Company granted 25,000 restricted shares of Class A common stock to an employee. One-third of the shares vested immediately and the remaining shares will vest over the next 2 years in equal installments at the anniversary date of grant. The value of the restricted stock grant was $0.1 million and will be amortized as compensation expense over the vesting period.
●
A total of 126,134 shares of Class A common stock were issued.
●
On January 3, 2023, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, payable on March 1, 2023 to stockholders of record as of February 15, 2023, for a total of $2.3 million.
●
On April 4, 2023, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, payable on June 1, 2023 to stockholders of record as of May 15, 2023, for a total of $2.3 million.
●
On July 11, 2023, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, payable on September 1, 2023 to stockholders of record as of August 15, 2023, for a total of $2.3 million.
●
On October 3, 2023, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, payable on December 1, 2023 to stockholders of record as of November 15, 2023, for a total of $2.4 million.
NOTE 14. SHARE-BASED COMPENSATION
Effective September 30, 2017, the Company adopted the 2017 Omnibus Equity Incentive Plan (the “Plan”). The Plan was amended on December 20, 2022 to increase the number of shares available for issuance under the Plan. The Plan is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, FAT Brands Inc. and its subsidiaries. The Plan provides a maximum of 5,000,000 shares available for grant.
The Company has periodically issued stock options under the Plan. All of the stock options issued by the Company to date have included a vesting period of three years, with one-third of each grant vesting annually. The Company’s stock option activity for fiscal year ended December 29, 2024 can be summarized as follows:
Number of Shares
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life (Years)
Stock options outstanding at December 31, 2023
2,890,172
$
9.39
7.8
Grants
326,360
$
7.08
9.2
Forfeited
(76,772)
$
9.68
7.6
Stock options outstanding at December 29, 2024
3,139,760
$
9.15
7.1
Stock options exercisable at December 29, 2024
2,303,336
$
10.18
6.5
The range of assumptions used in the Black-Scholes valuation model to value to options granted in fiscal years 2024 and 2023 are as follows:
2024
2023
Expected dividend yield
7.9% - 11.0%
7.9% - 10.4%
Expected volatility
77.0
%
81
%
Risk-free interest rate
4.2% - 4.7%
3.4% - 4.9%
Expected term (in years)
6.0
6.0
The Company recognized share-based compensation expense in the amount of $2.3 million and $3.6 million during the fiscal years ended December 29, 2024 and December 31, 2023, respectively. As of December 29, 2024, there remains $0.9 million of share-based compensation expense relating to non-vested grants, which will be recognized over the remaining vesting period of 2.5 years, subject to future forfeitures.
As of December 29, 2024, the Company had issued outstanding warrants to purchase shares of its Class A common stock as follows:
Issue Date
Number of Warrants Outstanding
Commencement Date
Termination Date
Exercise Price
Value at Grant Date (In Thousands)
06/19/2019
46,875
12/24/2020
06/19/2024
$
7.27
N/A (1)
07/16/2020
680,381
12/24/2020
07/16/2025
$
3.76
$
1,163
07/16/2020
18,648
12/24/2020
07/16/2025
$
3.76
$
64
745,904
(1) Values were not calculated at the issue date because the warrants were only exercisable in the event of a merger involving the Company and FCCG.
In addition to the warrants to purchase common stock described above, the Company has also granted warrants issued on July 16, 2020, to purchase 3,600 shares of the Company’s Series B Preferred Stock at an exercise price of $24.95 per share, exercisable beginning on the earlier of one year from the date of issuance, or the consummation of a merger or other similar business combination transaction involving the Company and FCCG, and will expire on July 16, 2025.
The Company’s activity in warrants to purchase Class A common stock for the fiscal year ended December 29, 2024 was as follows:
Number of Shares
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life (Years)
Warrants outstanding at December 31, 2023
1,048,438
$
2.95
1.6
Exercised
(302,474)
$
2.43
0.8
Expired
(60)
$
7.73
—
Warrants outstanding at December 29, 2024
745,904
$
2.53
0.6
Warrants exercisable at December 29, 2024
745,904
$
2.53
0.6
(1)
Exercise price adjusted due to cash dividends and Class B stock dividend.
During the fiscal year ended December 29, 2024, a total of 302,474 warrants were exercised in exchange for 302,474 shares of common stock with net proceeds to the Company of $0.7 million.
The range of assumptions used to establish the initial value of the warrants using the Black-Scholes valuation model were as follows:
Warrants
Expected dividend yield
4.00% - 6.63%
Expected volatility
30.23% - 31.73%
Risk-free interest rate
0.99% - 1.91%
Expected term (in years)
3.8 - 5.0
NOTE 16. COMMITMENTS AND CONTINGENCIES
Litigation and Investigations
Government Investigations and Litigation
In December 2021, the U.S. Attorney’s Office for the Central District of California (the “U.S. Attorney”) and the U.S. Securities and Exchange Commission (the “SEC”) informed the Company that they had opened investigations relating to the Company and our former CEO, Andrew Wiederhorn, and were formally seeking documents and materials concerning, among other things, the Company’s December 2020 merger with Fog Cutter Capital Group Inc. (“FCCG”), transactions between those entities and Mr. Wiederhorn, as well as compensation, extensions of credit and other benefits or payments received by Mr. Wiederhorn or his family from those entities prior to the merger.
On May 10, 2024, the U.S. Department of Justice (“DOJ”) indicted the Company on two violations of Section 402 of the Sarbanes-Oxley Act for directly and indirectly extending and/or arranging for the extension of credit in 2019 and 2020 to former CEO Andrew Wiederhorn in the amount of $2.65 million. These charges allege that the Company, through its subsidiary Fatburger N.A., transferred approximately $600,000 to Mr. Wiederhorn in the form of a personal loan on January 30, 2019, and lent approximately $2 million in 2020 to its former parent company FCCG which indirectly funded a personal loan from FCCG to Mr. Wiederhorn. The indictment also includes charges against Mr. Wiederhorn, the Company’s former CFO, Rebecca Hershinger, and the Company’s former tax advisor, William Amon, on violations of various federal tax and other laws related to loans from FCCG to Mr. Wiederhorn.
Concurrently with the DOJ’s charges, the SEC filed a complaint against the Company, claiming violations of Section 17(a)(2) of the Securities Act of 1933; Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(k), and 14(a) of the Securities Exchange Act of 1934; and Rules 10b-5(b), 12b-20, 13a-1, 13a-13, 14a-3, and 14a-9 thereunder. The SEC’s claims pertain principally to allegations that, for fiscal periods covering 2017 through 2020, the Company failed to disclose certain related party transactions, failed to disclose the salaries of Mr. Wiederhorn’s adult children working at the Company, failed to maintain proper books and records and internal accounting controls, made false or misleading statements regarding the Company’s liquidity and use of proceeds from certain transactions, and directly or indirectly extended credit to Mr. Wiederhorn in the form of a personal loan. The SEC’s complaint also names Mr. Wiederhorn, Ms. Hershinger, and the Company’s SVP of Finance, Ron Roe, as defendants. The SEC is seeking injunctive relief, disgorgement, and civil monetary penalties.
The Company is evaluating these charges and intends to vigorously defend itself against them.
Derivative Litigation
James Harris and Adam Vignola, derivatively on behalf of FAT Brands, Inc. v. Squire Junger, James Neuhauser, Edward Rensi, Andrew Wiederhorn, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc., and FAT Brands Inc., nominal defendant (Delaware Chancery Court, Case No. 2021-0511-NAC).On June 10, 2021, plaintiffs James Harris and Adam Vignola, putative stockholders of the Company, filed a stockholder derivative action (“Harris I”) in the Delaware Court of Chancery nominally on behalf of the Company against the Company’s current and former directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn) and the Company’s current and former majority stockholders, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc. Plaintiffs assert claims of breach of fiduciary duty, unjust enrichment and waste of corporate assets arising out of the Company’s December 2020 merger with Fog Cutter Capital Group, Inc. Since it was originally filed, the parties engaged in motion practice and substantial discovery, and the Company’s Board appointed a Special Litigation Committee. On June 3, 2024, the Court granted the United States’ request to extend the stay of all proceedings in this matter pending resolution of the charges in United States v. Wiederhorn, et al., 2:24-CR-295-RGK (C.D. Cal.). In January 2025, the principal parties to this matter participated in a mediation in Wilmington, DE and agreed in principle to settle this matter and the Harris II litigation. The settlement is subject to final documentation and approval of the Delaware court, as well as non-objection by the United States. We are obligated to indemnify our current and former directors in connection with defense costs for the lawsuit and any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect on our financial condition. The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management.
James Harris and Adam Vignola, derivatively on behalf of FAT Brands, Inc. v. Squire Junger, James Neuhauser, Edward Rensi, Andrew Wiederhorn, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc., and FAT Brands Inc., nominal defendant (Delaware Chancery Court, Case No. 2021-0511-NAC).On June 10, 2021, plaintiffs James Harris and Adam Vignola, putative stockholders of the Company, filed a stockholder derivative action (“Harris I”) in the Delaware Court of Chancery nominally on behalf of the Company against the Company’s current and former directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn) and the Company’s current and former majority stockholders, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc. Plaintiffs assert claims of breach of fiduciary duty, unjust enrichment and waste of corporate assets arising out of the Company’s December 2020 merger with Fog Cutter Capital Group, Inc. Since it was originally filed, the parties engaged in motion practice and substantial discovery, and the Company’s Board appointed a Special Litigation Committee. On June 3, 2024, the Court granted the United States’ request to extend the stay of all proceedings in this matter pending resolution of the charges in United States v. Wiederhorn, et al., 2:24-CR-295-RGK (C.D. Cal.). In January 2025, the principal parties to this matter participated in a mediation in Wilmington, DE and agreed in principle to settle this matter and the Harris II litigation. The settlement is subject to final documentation and approval of the Delaware court, as well as non-objection by the United States. We are obligated to indemnify our current and former directors in connection with defense costs for the lawsuit and any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect on our financial condition. The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management.
Richard Collura v. Andrew A. Wiederhorn, et al. (Delaware Chancery Court, Case No. 2024-1305-NAC). In December 2024, plaintiff Richard Collura, a putative stockholder of the Company, filed a stockholder derivative action in the Delaware Court of Chancery nominally on behalf of the Company against certain of the Company’s current and former officers and directors
(Andrew Wiederhorn, Kenneth Kuick, Robert Rosen, Ron Roe, John Allen, Kenneth Anderson, Donald Berchtold, Tyler Child, Lynne Collier, Mark Elenowitz, James Ellis, Peter Feinstein, Amy Forrestal, Matthew Green, Squire Junger, John Metz, James Neuhauser, Edward Rensi, Carmen Vidal, Mason Wiederhorn, Taylor Wiederhorn and Thayer Wiederhorn), and the Company’s majority stockholder, Fog Cutter Holdings, LLC. Plaintiff alleges that Mr. Wiederhorn and certain of the other defendants engaged in an unlawful scheme to distribute money to Mr. Wiederhorn and his family for their own personal benefit through 2020, which they allege attracted the attention of the U.S. Attorney’s office and the SEC, and that the Company indicated in public statements and filings that it was cooperating with the government investigations but allegedly was not actually cooperating and investigating the scheme, which caused the Company’s stock price to fall. Defendants dispute the premises and allegations of the lawsuit and intend to vigorously defend against the claims. We cannot predict the outcome of this lawsuit. This lawsuit does not assert any claims against the Company. However, subject to certain limitations, we are obligated to indemnify our current and former directors in connection with defense costs for the lawsuit and any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect on our financial condition. The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management.
Other Litigation
Mitchell Kates v. FAT Brands, Inc., Andrew Wiederhorn, Kenneth J. Kuick and Robert G. Rosen (United States District Court for the Central District of California, Case No. 2:24-cv-04775-MWF-MAA).On June 7, 2024, plaintiff Mitchell Kates, a putative investor in the Company, filed a putative class action lawsuit against the Company, Andrew Wiederhorn, Kenneth J. Kuick and Robert G. Rosen, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Rule 10b-5 promulgated thereunder, alleging that the defendants made false and misleading statements and omitted material facts necessary to make statements not misleading in the Company’s reports filed with the SEC under the 1934 Act related to the subject matter of the government investigations and litigation discussed above, the Company’s handling of these matters and its cooperation with the government. Plaintiff alleges that the Company’s public statements wrongfully inflated the trading price of the Company’s common stock, preferred stock and warrants. Plaintiff is seeking to certify the complaint as a class action and is seeking compensatory damages in an amount to be determined at trial. Plaintiff’s motion for appointment as lead plaintiff, filed on August 6, 2024, remains sub judice. As this matter is still in the early stages, we cannot predict the outcome of this lawsuit.
Stratford Holding LLC v. Foot Locker Retail Inc. (U.S. District Court for the Western District of Oklahoma, Case No. 5:12-cv-772-HE). In 2012 and 2013, two property owners in Oklahoma City, Oklahoma sued numerous parties, including Foot Locker Retail Inc. and our subsidiary Fog Cutter Capital Group Inc. (now known as Fog Cutter Acquisition, LLC), for alleged environmental contamination on their properties, stemming from dry cleaning operations on one of the properties. The property owners seek damages in the range of $12.0 million to $22.0 million. From 2002 to 2008, a former Fog Cutter subsidiary managed a lease portfolio, which included the subject property. Fog Cutter denies any liability, although it did not timely respond to one of the property owners’ complaints and several of the defendants’ cross-complaints and thus is in default. The parties are currently conducting discovery. The court has vacated the current trial date and has not yet reset the trial date. The Company is unable to predict the ultimate outcome of this matter, however, reserves have been recorded on the balance sheet of FAT Brands relating to this litigation. There can be no assurance that the defendants will be successful in defending against these actions.
SBN FCCG LLC v FCCGI (Los Angeles Superior Court, Case No. BS172606). SBN FCCG LLC (“SBN”) filed a complaint against Fog Cutter Capital Group, Inc. (“FCCG”) in New York state court for an indemnification claim (the “NY case”) stemming from an earlier lawsuit in Georgia regarding a certain lease portfolio formerly managed by a former FCCG subsidiary. In February 2018, SBN obtained a final judgment in the NY case for a total of $0.7 million, which included $0.2 million in interest dating back to March 2012. SBN then obtained a sister state judgment in Los Angeles Superior Court, Case No. BS172606 (the “California case”), which included the $0.7 million judgment from the NY case, plus additional statutory interest and fees, for a total judgment of $0.7 million. In May 2018, SBN filed a cost memo, requesting an additional $12,411 in interest to be added to the judgment in the California case, for a total of $0.7 million. In May 2019, the parties agreed to settle the matter for $0.6 million, which required the immediate payment of $0.1 million, and the balance to be paid in August 2019. FCCG wired $0.1 million to SBN in May 2019, but has not yet paid the remaining balance of $0.5 million. The parties have not entered into a formal settlement agreement, and they have not yet discussed the terms for the payment of the remaining balance.
SBN FCCG LLC v FCCGI (Supreme Court of the State of New York, County of New York, Index No. 650197/2023). On January 13, 2023, SBN filed another complaint against FCCG in New York state court for an indemnification claim stemming from a lawsuit in Oklahoma City regarding the same lease portfolio formerly managed by Fog Cap (the “OKC Litigation”), and a bankruptcy proceeding involving Fog Cap (the “Bankruptcy Proceeding”). SBN alleges that under a February 2008 stock purchase agreement, Fog Cutter is required to indemnify SBN and its affiliates. According to the complaint, SBN has, at the time of filing the complaint, incurred costs subject to indemnification of approximately $12 million. On March 11, 2024, the court issued an order granting FCCG’s motion to dismiss SBN’s complaint without prejudice to refile the complaint, if at all,
once the underlying proceedings (the OKC Litigation and the Bankruptcy Proceeding) were complete. On April 10, 2024, SBN filed a notice of appeal of the trial court's order dismissing SBN's complaint. We are unable at this time to express any opinion as to the eventual outcome of this matter or the possible range of loss, if any.
The Company is involved in other claims and legal proceedings from time-to-time that arise in the ordinary course of business, including those involving the Company’s franchisees. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on its business, financial condition, results of operations, liquidity or capital resources. As of December 29, 2024, the Company had accrued an aggregate of $5.1 million for the specific matters mentioned above and claims and legal proceedings involving franchisees as of that date.
Operating Leases (See Also Note 9)
Our corporate headquarters, including our principal administrative, sales and marketing, customer support, and research and development operations, are located in Beverly Hills, California, comprising approximately 15,000 square feet of space, pursuant to a lease that expires on January 31, 2031.
Our subsidiary, GFG Management, LLC, leases an approximately 16,000 square foot warehouse location in Atlanta, GA under a lease expiring on May 31, 2029.
Our subsidiary, GAC Supply, LLC, owns and operates an approximately 40,000 square foot manufacturing and production facility in Atlanta, Georgia and the underlying real property, which supplies our franchisees with cookie dough, pretzel dry mix and other ancillary products.
Our subsidiary, Twin Restaurant Holding, LLC, leases offices in Dallas, TX comprising approximately 8,300 square feet under a lease expiring on April 30, 2025.
Our subsidiary, Fazoli's Holdings, LLC, leases offices located in Lexington, KY comprising approximately 19,200 square feet under a lease expiring on April 30, 2027.
Our subsidiary, Smokey Bones, LLC, leases offices located in Plantation, Florida comprising approximately 6,000 square feet under a lease expiring in February 2033.
In addition to the above locations, certain of our subsidiaries directly own and operate restaurant locations, substantially all of which are located in leased premises. As of December 29, 2024, we owned and operated 181 restaurant locations. The leases have remaining terms ranging from less than 1 year to 25.8 years.
We believe that our existing facilities are in good operating condition and adequate to meet our current and foreseeable needs. Additional information related to our operating leases are disclosed in Note 9.
NOTE 17. GEOGRAPHIC INFORMATION AND MAJOR FRANCHISEES
Revenues by geographic area are as follows (in millions):
Fiscal Year Ended December 29, 2024
Fiscal Year Ended December 31, 2023
United States
$
579.8
$
469.6
Other countries
12.9
10.9
Total revenues
$
592.7
$
480.5
Revenues are shown based on the geographic location of our licensee restaurants. All of our owned restaurant assets are located in the United States.
During the fiscal years ended December 29, 2024 and December 31, 2023, no individual franchisee accounted for more than 10% of the Company's revenues.
We manage our business activities on a consolidated basis and operate as a single reporting segment as our businesses contain similar products and services managed by the Company, and are economically similar, and share similar types of customers, production and distribution: We primarily derive our revenue in the United States through the sale of food and beverages at our company restaurants and the collection of royalties, franchise fees and advertising revenue from sales of food and beverages at our franchised restaurants. The accounting policies of the single reporting segment are the same as those described in Note 2. Summary of Significant Accounting Policies.
Our Chief Operating Decision Maker (“CODM”) is made up of both our Co-Chief Executive Officers. Our CODMs regularly review and use the consolidated net loss, as reported on our Consolidated Statements of Operations in evaluating the overall performance of our single reporting segment and determining how to allocate resources of the Company as a whole, including investing in our existing company owned restaurants, acquisition strategy and stockholder return programs. The CODMs do not review assets in evaluating the results of our single reporting segment, and therefore, such information is not presented.
Geographically, we have no assets in a foreign country requiring separate disclosure. We have no single major customer representing greater than 10% of our total revenues. For more information regarding our domestic revenues and revenues generated in the foreign countries refer to Note 17, Geographic information and Major Franchisees. Foreign revenues are based on the country in which the legal subsidiary is domiciled.
NOTE 19. SUBSEQUENT EVENTS
On January 16, 2025, the Company's Board of Directors declared a special stock dividend to the Company’s common stockholders of shares of Class A Common Stock (“Twin Common Stock”) of Twin Hospitality Group Inc., a Delaware corporation (“Twin Hospitality”), the operating unit for the Company’s Twin Peaks and Smokey Bones restaurant brands. The distribution (“Spin-Off”) of shares of Twin Common Stock was made on a pro rata basis to all holders of the Company’s Class A Common stock and Class B Common Stock of the Company as of the close of trading on January 27, 2025 (the “record date”). The distribution took the form of a special dividend of 0.1520207 share of Twin Common Stock distributed with respect to each one share of the Company’s Class A Common Stock and Class B Common Stock outstanding as of the record date.
On January 29, 2025, the Company completed the previously announced distribution of approximately 5.0% of the fully-diluted shares of Class A Common Stock, par value $0.0001 per share Twin Common Stock, as a pro rata dividend to holders of Class A common stock and Class B common stock of the Company of record as of January 27, 2025. Following the completion of the Spin-Off, Twin Hospitality became an independent, publicly traded company, and the Twin Common Stock began trading on the Nasdaq Global Market under the ticker symbol “TWNP”.
In connection with the Spin-Off, on January 24, 2025, the Company entered into a Master Separation Agreement (the “Master Separation Agreement”) and Tax Matters Agreement (the “Tax Matters Agreement”) with Twin Hospitality, which provide a framework for Twin Hospitality’s on-going relationship with FAT Brands following the Spin-Off.
Master Separation Agreement
Pursuant to the Master Separation Agreement, on January 24, 2025, the Company exchanged its initial founder’s shares in Twin Hospitality (representing 100% of the issued and outstanding capital stock of Twin Hospitality) for 47,298,271 shares of Twin Hospitality’s Class A Common Stock and 2,870,000 shares of Twin Hospitality’s Class B Common Stock. In connection with the Spin-Off, on January 29, 2025, FAT Brands distributed 2,659,412 of its shares of Twin Hospitality Class A Common Stock to the FAT Brands Common Stockholders in the Distribution.
Tax Matters Agreement
The Tax Matters Agreement governs the rights, responsibilities and obligations of the Company and Twin Hospitality with respect to tax liabilities, tax attributes, tax returns, tax audits, and certain other tax matters following the completion of the Spin-Off. For so long as the Company maintains at least 80% aggregate ownership of Twin Hospitality’s Common Stock, Twin Hospitality will continue to be included in the income tax returns filed by the Company’ consolidated group for U.S. federal income tax purposes (“FAT Brands Consolidated Group”), as well as in certain other consolidated, combined or unitary groups that include the Company and/or certain of its subsidiaries (each such group, a “FAT Brands Tax Group”). Each member of a consolidated group during any part of a consolidated return year is jointly and severally liable for the tax on the consolidated return of such year and for any subsequently determined deficiency thereon. Similarly, in some jurisdictions, each member of a consolidated, combined or unitary group for state, local or foreign income tax purposes is jointly and severally liable for the
state, local or foreign income tax liability of each other member of such consolidated, combined or unitary group. The Tax Matters Agreement allocates tax liabilities between Twin Hospitality and the Company for any period in which Twin Hospitality or any of its subsidiaries (the “Twin Group”) was included in the FAT Brands Consolidated Group.
Under the Tax Matters Agreement, Twin Hospitality will generally make payments to the Company such that, with respect to tax returns for any taxable period in which any of the Twin Group are included in the FAT Brands Consolidated Group or any FAT Brands Tax Group, the amount of taxes to be paid by Twin Hospitality will be determined by computing the excess (if any) of any taxes due on any such tax return over the amount that would otherwise be due if such return were recomputed by excluding the Twin Group. The Tax Matters Agreement also provides that the Company will generally have the right to control audits or other tax proceedings with respect to any tax returns of the FAT Brands Consolidated Group or a FAT Brands Tax Group. Twin Hospitality will generally have the right to control any audits or other tax proceedings with respect to tax returns that include only the Twin Group, provided that, as long as the Company is required to consolidate the results of operations and financial position of the Twin Group in its financial statements, the Company will have certain oversight and participation rights with respect to such audits or other tax proceedings.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The undersigned directors and officers of FAT Brands Inc. do hereby constitute and appoint Kenneth J. Kuick and Robert G. Rosen, and each of them, with full power of substitution and resubstitution, as their true and lawful attorneys and agents, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney and agent, may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto, and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
DATE
NAME AND TITLE
February 28, 2025
/s/ Kenneth J. Kuick
Kenneth J. Kuick
Co-Chief Executive Officer and Chief Financial Officer (Principal Executive Officer, Principal Financial and Accounting Officer)
