FAT BRANDS INC. REPORTS FIRST QUARTER 2025 FINANCIAL RESULTS

Rhea-AI Summary

FAT Brands (NASDAQ: FAT) reported its Q1 2025 financial results, showing mixed performance. The company opened 23 new locations, a 37% increase from last year, and maintains a development pipeline of ~1,000 signed agreements. However, financial metrics showed decline with total revenue down 6.5% to $142.0 million and system-wide same-store sales declining 3.4%. The company reported a net loss of $46.0 million ($2.73 per share). Notable strategic moves include the spin-off of Twin Hospitality Group delivering a $50 million dividend to shareholders, plans to refranchise 57 Fazoli's restaurants, and expansion into France with 40 new locations. The company is also diversifying through co-branding initiatives and manufacturing capabilities expansion, including a new third-party contract with a national restaurant entertainment chain.

Positive

• Opened 23 new locations (37% increase YoY)
• Strong development pipeline with ~1,000 signed agreements
• International expansion with 40 new locations planned in France
• $50 million dividend to shareholders through Twin Hospitality spin-off
• New third-party manufacturing contract secured
• Successful amendment of Fazoli's securitization providing enhanced financial flexibility

Negative

• Total revenue declined 6.5% to $142.0 million
• System-wide same-store sales declined 3.4%
• Net loss increased to $46.0 million from $38.3 million YoY
• Adjusted EBITDA decreased to $11.1 million from $18.2 million YoY
• General and administrative expenses increased 10.1% due to litigation costs

Insights

Restaurant Industry Financial Analyst

FAT Brands reports concerning Q1 with declining revenue, same-store sales, and widening losses despite expansion efforts and strategic initiatives.

FAT Brands' Q1 2025 results reveal significant operational challenges despite management's focus on expansion. The 6.5% revenue decline to $142.0 million alongside a 3.4% same-store sales drop indicates fundamental weaknesses in existing locations. More concerning is the widening net loss of $46.0 million ($2.73 per share), deteriorating from $38.3 million last year, while Adjusted EBITDA fell 39% to $11.1 million.

The company's strategy presents a curious contrast: accelerating unit growth (23 new openings, up 37%) while same-store performance deteriorates. This expansion-despite-weakness approach raises questions about the long-term viability of their growth model. Their development pipeline of 1,000 signed agreements looks impressive on paper but depends on franchisee confidence and concept viability.

The Twin Hospitality spin-off delivering a $50 million dividend provides immediate shareholder value but doesn't address operational challenges. Their shift toward a "nearly 100% franchised model" through refranchising 57 Fazoli's locations likely aims to reduce operational expenses and capital requirements, but also suggests potential difficulties managing company-owned units profitably.

Their diversification through manufacturing capabilities expansion and international growth (40 new locations in France) may eventually create new revenue streams, but these initiatives require time to materialize while current performance deteriorates. The increase in G&A expenses related to "pending litigation" adds another layer of concern and uncertainty.

The co-branding strategy pairing concepts like Round Table Pizza with Marble Slab Creamery shows innovation but remains unproven at scale. In the restaurant industry, declining same-store sales typically indicate either traffic problems, check average issues, or both – fundamental challenges that expansion alone cannot solve.

Conference call and webcast today at 5:30 p.m. ET

LOS ANGELES, May 08, 2025 (GLOBE NEWSWIRE) -- FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT Brands” or the “Company”) today reported financial results for the fiscal first quarter ended March 30, 2025.

Andy Wiederhorn, Chairman of FAT Brands, said, “We started 2025 with strong momentum, opening 23 new locations in the first quarter, a 37% increase over last year’s quarter. We remain on track to achieve our target of over 100 new restaurant openings this year, supported by our robust development pipeline of approximately 1,000 signed agreements. Our co-branding initiatives continue to gain traction, with successful launches including our first Round Table Pizza and Marble Slab Creamery pairing, demonstrating our commitment to innovative growth strategies. Additionally, we are expanding internationally, having secured new agreements to open 40 locations across France, consisting of both our Fatburger and Buffalo’s Cafe concepts.”

Ken Kuick, Co-Chief Executive Officer and Chief Financial Officer of FAT Brands, said, “The successful spin-off of Twin Hospitality Group Inc. marks a significant strategic milestone for FAT Brands. This transaction delivered a $50 million dividend to our shareholders through the distribution of Twin Hospitality Group’s Class A Common Stock, while maintaining our ownership of the remaining shares. As we progress through 2025, we remain focused on strengthening our balance sheet while driving operational efficiencies across our portfolio.”

Taylor Wiederhorn, Co-Chief Executive Officer of FAT Brands, said “Our strategy to return to a nearly 100% franchised model is advancing with the planned refranchising of our 57 company-operated Fazoli’s restaurants. This follows our successful amendment of the Fazoli’s securitization, which provides enhanced financial flexibility. Combined with our manufacturing capabilities expansion, including our first third-party contract with a national restaurant entertainment chain, which we expect to execute on in the second quarter, we are well-positioned to drive sustainable growth and shareholder value.”

Fiscal First Quarter 2025 Highlights

• Total revenue declined 6.5% to $142.0 million compared to $152.0 million in the fiscal first quarter of 2024
  • System-wide sales declined 1.8%
  • System-wide same-store sales declined 3.4%
  • 23 new store openings during the fiscal first quarter of 2025
• Net loss of $46.0 million, or $2.73 per diluted share, compared to $38.3 million, or $2.37 per diluted share, in the fiscal first quarter of 2024
• EBITDA⁽¹⁾ of $2.1 million compared to $9.4 million in the fiscal first quarter of 2024
• Adjusted EBITDA⁽¹⁾ of $11.1 million compared to $18.2 million in the fiscal first quarter of 2024
• Adjusted net loss⁽¹⁾ of $38.7 million, or $2.32 per diluted share, compared to adjusted net loss⁽¹⁾ of $32.9 million, or $2.05 per diluted share, in the fiscal first quarter of 2024

⁽¹⁾ EBITDA, adjusted EBITDA and adjusted net loss are non-GAAP measures defined below, under “Non-GAAP Measures”. Reconciliation of GAAP net loss to EBITDA, adjusted EBITDA and adjusted net loss are included in the accompanying financial tables.

Summary of Fiscal First Quarter 2025 Financial Results

Total revenue decreased $9.9 million, or 6.5%, in the first quarter of 2025 to $142.0 million compared to $152.0 million in the year-ago quarter, driven by lower same-store sales and lower revenues due to the closure of one Smokey Bones location during its conversion to a Twin Peaks lodge, partially offset by revenues generated by our new Twin Peaks lodges.

Cost of restaurant and factory revenues was related to the operations of the company-owned restaurant locations and dough factory and decreased $3.0 million, or 3.0%, in the first quarter of 2025 to $96.1 million compared to $99.1 million in the year-ago quarter, primarily due to lower same-store sales, partially offset by labor inflation and increases in the prices of food ingredients.

General and administrative expense increased $3.0 million, or 10.1%, in the first quarter of 2025 to $33.0 million compared to $30.0 million in the same period in the prior year, primarily due to the increased professional fees related to pending litigation.

Advertising expenses decreased $1.5 million in the first quarter of 2025 to $11.1 million compared to $12.6 million in the same period in the prior year. These expenses vary in relation to advertising revenues.

Total other expense, net, for the first quarter of 2025 and 2024 was $36.0 million and $33.4 million, respectively, which is inclusive of interest expense of $35.9 million and $34.0 million, respectively.

Adjusted net loss⁽¹⁾ was $38.7 million, or $2.32 per diluted share, compared to adjusted net loss⁽¹⁾ of $32.9 million, or $2.05 per diluted share, in the fiscal first quarter of 2024.

Key Financial Definitions

New store openings - The number of new store openings reflects the number of stores opened during a particular reporting period. The total number of new stores per reporting period and the timing of stores openings has, and will continue to have, an impact on our results.

Same-store sales growth - Same-store sales growth reflects the change in year-over-year sales for the comparable store base, which we define as the number of stores open and in the FAT Brands system for at least one full fiscal year. For stores that were temporarily closed, sales in the current and prior period are adjusted accordingly. Given our focused marketing efforts and public excitement surrounding each opening, new stores often experience an initial start-up period with considerably higher than average sales volumes, which subsequently decrease to stabilized levels after three to six months. Additionally, when we acquire a brand, it may take several months to integrate fully each location of said brand into the FAT Brands platform. Thus, we do not include stores in the comparable base until they have been open and in the FAT Brands system for at least one full fiscal year.

System-wide sales growth - System-wide sales growth reflects the percentage change in sales in any given fiscal period compared to the prior fiscal period for all stores in that brand only when the brand is owned by FAT Brands. Because of acquisitions, new store openings and store closures, the stores open throughout both fiscal periods being compared may be different from period to period.

Conference Call and Webcast

FAT Brands will host a conference call and webcast to discuss its fiscal first quarter 2025 financial results today at 5:00 PM ET. Hosting the conference call and webcast will be Andy Wiederhorn, Chairman of the Board, and Ken Kuick, Co-Chief Executive Officer and Chief Financial Officer.

The conference call can be accessed live over the phone by dialing 1-877-704-4453 from the U.S. or 1-201-389-0920 internationally. A replay will be available after the call until Thursday, May 29, 2025, and can be accessed by dialing 1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The passcode is 13752592. The webcast will be available at www.fatbrands.com under the “Investors” section and will be archived on the site shortly after the call has concluded.

About FAT (Fresh. Authentic. Tasty.) Brands

FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets, and develops fast casual, quick-service, casual dining, and polished casual dining concepts around the world. The Company currently owns 18 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 and franchises and owns approximately 2,300 units worldwide. For more information, please visit www.fatbrands.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the future financial and operating results of the Company, the timing and performance of new store openings, our ability to conduct future accretive acquisitions and our pipeline of new store locations. Forward-looking statements generally use words such as “expect,” “foresee,” “anticipate,” “believe,” “project,” “should,” “estimate,” “will,” “plans,” “forecast,” and similar expressions, and reflect our expectations concerning the future. Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are difficult to predict and beyond our control, which could cause our actual results to differ materially from the results expressed or implied in such forward-looking statements. We refer you to the documents that we file from time to time with the Securities and Exchange Commission, such as our reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause our actual results to differ materially from our current expectations and from the forward-looking statements contained in this press release. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this press release.

Non-GAAP Measures (Unaudited)

This press release includes the non-GAAP financial measures of EBITDA, adjusted EBITDA and adjusted net loss.

EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. We use the term EBITDA, as opposed to income from operations, as it is widely used by analysts, investors, and other interested parties to evaluate companies in our industry. We believe that EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance. EBITDA is not a measure of our financial performance or liquidity that is determined in accordance with generally accepted accounting principles (“GAAP”), and should not be considered as an alternative to net loss as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP.

Adjusted EBITDA is defined as EBITDA (as defined above), excluding expenses related to acquisitions, refranchising loss, impairment charges, and certain non-recurring or non-cash items that the Company does not believe directly reflect its core operations and may not be indicative of the Company’s recurring business operations.

Adjusted net loss is a supplemental measure of financial performance that is not required by or presented in accordance with GAAP. Adjusted net loss is defined as net loss plus the impact of adjustments and the tax effects of such adjustments. Adjusted net loss is presented because we believe it helps convey supplemental information to investors regarding our performance, excluding the impact of special items that affect the comparability of results in past quarters to expected results in future quarters. Adjusted net loss as presented may not be comparable to other similarly titled measures of other companies, and our presentation of adjusted net loss should not be construed as an inference that our future results will be unaffected by excluded or unusual items. Our management uses this non-GAAP financial measure to analyze changes in our underlying business from quarter to quarter based on comparable financial results.

Reconciliations of net loss presented in accordance with GAAP to EBITDA, adjusted EBITDA and adjusted net loss are set forth in the tables below.

Investor Relations:

ICR
Michelle Michalski
ir-fatbrands@icrinc.com

Media Relations:

Erin Mandzik
emandzik@fatbrands.com
860-212-6509

FAT Brands Inc. Consolidated Statements of Operations

		Thirteen Weeks Ended
(In thousands, except share and per share data)		March 30, 2025				March 31, 2024
Revenue
Royalties		$	21,773			$	21,947
Restaurant sales			99,415				105,938
Advertising fees			9,764				9,796
Factory revenues			8,811				9,474
Franchise fees			1,190				1,481
Other revenue			1,066				3,331
Total revenue			142,019				151,967
Costs and expenses
General and administrative expense			33,043				30,005
Cost of restaurant and factory revenues			96,097				99,050
Depreciation and amortization			10,391				10,194
Refranchising (gain) loss			(22	)			1,508
Advertising fees			11,076				12,592
Total costs and expenses			150,585				153,349
Loss from operations			(8,566	)			(1,382	)
Other (expense) income, net
Interest expense			(31,444	)			(29,623	)
Interest expense related to preferred shares			(4,418	)			(4,418	)
Net (loss) gain on extinguishment of debt			(151	)			427
Other income, net			37				204
Total other expense, net			(35,976	)			(33,410	)
Loss before income tax provision			(44,542	)			(34,792	)
Income tax provision			(1,769	)			(3,524	)
Net loss			(46,311	)			(38,316	)
Less: Net loss attributable to non-controlling interest			(342	)			—
Net loss attributable to FAT Brands Inc.		$	(45,969	)		$	(38,316	)
Net loss attributable to FAT Brands Inc.		$	(45,969	)		$	(38,316	)
Dividends on preferred shares			(2,231	)			(1,881	)
		$	(48,200	)		$	(40,197	)
Basic and diluted loss per common share		$	(2.73	)		$	(2.37	)
Basic and diluted weighted average shares outstanding			17,632,860				16,947,400
Cash dividends declared per common share		$	—			$	0.14

FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation

		Thirteen Weeks Ended
(In thousands)		March 30, 2025				March 31, 2024
Net loss attributable to FAT Brands Inc.		$	(45,969	)		$	(38,316	)
Interest expense, net			35,862				34,041
Income tax provision			1,769				3,524
Depreciation and amortization			10,391				10,194
EBITDA			2,053				9,443
Bad debt expense			230				168
Share-based compensation expenses			367				745
Non-cash lease expenses			341				630
Refranchising (gain) loss			(22	)			1,508
Litigation costs			6,864				3,807
Severance			—				22
Net loss related to advertising fund deficit			569				2,282
Net loss (gain) on extinguishment of debt			151				(427	)
Pre-opening expenses			517				28
Adjusted EBITDA		$	11,069			$	18,207

FAT Brands Inc. Adjusted Net Loss Reconciliation

		Thirteen Weeks Ended
(In thousands, except share and per share data)		March 30, 2025				March 31, 2024
Net loss attributable to FAT Brands Inc.		$	(45,969	)		$	(38,316	)
Refranchising (gain) loss			(22	)			1,508
Net loss (gain) on extinguishment of debt			151				(427	)
Litigation costs			6,864				3,807
Severance			—				22
Tax adjustments, net (1)			278				497
Adjusted net loss		$	(38,698	)		$	(32,909	)
Net loss		$	(45,969	)		$	(38,316	)
Dividends on preferred shares			(2,231	)			(1,881	)
		$	(48,200	)		$	(40,197	)
Adjusted net loss		$	(38,698	)		$	(32,908	)
Dividends on preferred shares			(2,231	)			(1,881	)
		$	(40,929	)		$	(34,789	)
Loss per basic and diluted share		$	(2.73	)		$	(2.37	)
Adjusted net loss per basic and diluted share		$	(2.32	)		$	(2.05	)
Weighted average basic and diluted shares outstanding			17,632,860				16,947,400

(1) Reflects the tax impact of the adjustments using the effective tax rate for the respective periods.

FAQ

What were FAT Brands' (FAT) key financial results for Q1 2025?

FAT Brands reported Q1 2025 revenue of $142.0 million (down 6.5% YoY), net loss of $46.0 million ($2.73 per share), and adjusted EBITDA of $11.1 million. System-wide same-store sales declined 3.4%.

How many new restaurants did FAT Brands open in Q1 2025?

FAT Brands opened 23 new locations in Q1 2025, representing a 37% increase compared to the same quarter last year.

What is FAT Brands' expansion plan for France?

FAT Brands secured agreements to open 40 new locations across France, which will include both Fatburger and Buffalo's Cafe concepts.

What strategic changes is FAT Brands making to its Fazoli's business?

FAT Brands plans to refranchise its 57 company-operated Fazoli's restaurants as part of its strategy to return to a nearly 100% franchised model.

How did the Twin Hospitality Group spin-off benefit FAT Brands shareholders?

The Twin Hospitality Group spin-off delivered a $50 million dividend to FAT Brands shareholders through the distribution of Twin Hospitality Group's Class A Common Stock.