Hot Dog on a Stick has “a lot of legs” to co-brand with Fatburger and Johnny Rockets, Wiederhorn says. The chain dropped from 61 domestic outlets to 50 by the end of 2020. Meanwhile Pretzelmaker completed 2020 with 161 U.S. outlets, a net decrease of 19.
“There’s franchise sales opportunities all over the place for sure,” Wiederhorn says. “They have an active pipeline on the Great American Cookie side and Marble Slab Creamery. We think Round Table needs a shot in the arm for new franchise sales, but they have a very strong franchisee base, so I think there's an opportunity there also. The company just refranchised a bunch of company stores right ahead of this transaction. So I think that's interesting also.”
As of March 28, FAT Brands had 651 stores systemwide, plus 36 locations under construction and scheduled to open in 2021. Five new franchised stores debuted in the first quarter. Systemwide sales lifted 35.3 percent in Q1 year-over-year and increased 20.6 percent compared to 2019. Same-store sales rose 7.8 percent versus 2020. The brand also posted adjusted EBITDA of $1.1 million in the quarter, compared to $283,000 in the year-ago period.
Wiederhorn’s M&A quest began in 2011 with the purchase of Buffalo’s Café and the subsequent creation of Buffalo’s Express in 2012. In October 2017, the group finalized the purchase of Ponderosa Steakhouse and Bonanza Steakhouse for $10.5 million. That same year, FAT Brands completed its IPO, raising $24 million.
Then in July 2018, FAT Brands completed the acquisition of Hurricane Grill & Wings for $12.5 million. In August 2018, Yalla Mediterranean joined the growing company. In June 2019, the parent completed the acquisition of Elevation Burger for $10 million. FAT Brands’ most recent purchase came in September 2020 when it finalized the acquisition of Johnny Rockets from Sun Capital Partners for $25 million.
Wiederhorn explains that when a company buys franchise entities, it must look at the health of the franchisees, explore the system, and investigate “what the brand equity really is all about.” Once the company understands each of those facets, it now must turn to growth and project where the opportunities may lie. Because at the end of the day, Wiederhorn says, the most important part is franchise’s making money. FAT Brands runs with a philosophy that the franchisee is the customer.
“It's not really about the guy eating the hamburger, the chicken wings, the cookies, the hot dogs and pizza—it's about the franchisee making money,” the CEO says. “And so their profitability is our first concern. If they make money then they're going to build more restaurants and pass more royalties. So that's our focus. If they don't make money, we know what's going to happen.”