FAT Brands announced Monday that founder and CEO Andy Wiederhorn will step down in May to eliminate the distraction of an ongoing federal investigation tied to him.
In February 2022, the Los Angeles Times reported that Wiederhorn and his family were being investigated as part of an inquiry into allegations of securities and wire fraud, money laundering, and attempted tax evasion. The California home of Wiederhorn's son, Thayer, and daughter-in-law, Brook Wiederhorn, was raided in December 2022 by federal agents, who took tax documents, phones, digital storage devices, and other records from the residence. In an affidavit, an FBI special agent accuses Wiederhorn of devising a scheme to avoid paying taxes and alleges that he received “millions of dollars in sham loans.”
Wiederhorn categorically denied any wrongdoing, and emphasized that FAT Brands was not a target of the investigation. The executive said his personal history—when he pleaded guilty to filing a false tax return in 2004 and went to prison—was a contributing factor in government officials looking into his financials. Wiederhorn also accused the L.A. Times of multiple fact errors and said the affidavit shouldn't have been made public.
The industry veteran said removing himself as CEO will allow senior management to "focus on continuing to drive shareholder value." Wiederhorn will move into an outside consultant and strategic adviser role, but he will remain on the board. His family office, Fog Cutter Holdings, will keep a controlling interest in FAT Brands. An interim CEO will be announced prior to Wiederhorn's transition on May 5.
“While I will be stepping aside as CEO, I will continue to support the growth and evolution of FAT Brands, including championing our talented executive team, which has over the past five years taken the company from two brands to 17 iconic restaurant brands with over 2,300 units and systemwide sales of $2.2 billion annually,” Wiederhorn said in a statement. “In 2022 we were named Public Company of the Year by the Los Angeles Business Journal, due in large part to the hard work and dedication of our corporate teams and franchise partners.”
The news comes after a record year in which FAT Brands opened 142 stores, including 44 in the fourth quarter. It also signed 110 new franchise development agreements representing a total of 362 new stores. The company has a 1,000-unit pipeline that it plans to complete within five years. When that pipeline materializes, it is expected to lift adjusted EBITDA to approximately $150 million.
FAT Brands is currently weighing multiple options to reduce debt after buying several brands between 2020 and 2021. Some potential options include increasing capacity at its manufacturing facility and selling it or building Twin Peaks footprint, in hopes of a sale or IPO.
Wiederhorn took the reins at Fatburger in 2003. Over the years, he acquired several brands before forming FAT Brands in 2017 and going public. The company now owns 17 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, 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. It operates more than 2,300 units worldwide.