FAT Brands announced Tuesday that it will acquire fast casual Fazoli's for $130 million, marking its third transaction in roughly four months.
With nearly 220 units in 28 states and a development pipeline of 100 stores, Fazoli's is the largest premium quick-service Italian chain in the U.S. FAT Brands' purchase will increase its footprint to 2,300 franchised and corporate-owned locations globally, and increase projected 2022 systemwide sales to more than $2.1 billion. Post-COVID normalized EBITDA is also expected to rise by $14.5 million to $15 million in 2022.
FAT Brands will acquire Fazoli's from Sentinel Capital Partners, which bought the chain in 2015 from Sun Capital Partners.
“Fazoli’s has a great growth story, in particular, over the last year. They continue to surpass sales expectations across the board,” FAT Brands CEO Andy Wiederhorn said in a statement. “We have been eyeing this category for some time; however, we were waiting for the right brand – one that is high-growth, with almost all restaurants having drive-thru access, in addition to, the synergies that we will achieve adding Fazoli’s to our portfolio of brands. We look forward to building off of the success of Sentinel Capital Partners.”
When the purchase is complete, Fazoli's will become the 16th restaurant to join FAT Brands' portfolio, which already features Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Twin Peaks, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe, Buffalo's Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses.
Including the Fazoli's purchase, FAT Brands will have spent roughly $873 million on acquisition agreements in 2021. This summer, the company revealed that it was buying Global Franchise Group for $442.5 million, the largest transaction in the restaurant industry this year so far. That group included Round Table Pizza, Marble Slab Creamery, Great American Cookies, Hot Dog on a Stick, and Pretzelmaker. Then in September, FAT Brands moved to the casual-dining segment and announced that it will buy sports bar Twin Peaks for $300 million.
FAT Brands has finalized more than a half-dozen acquisitions in the past decade, including Buffalo's Café (2011), Ponderosa Steakhouse and Bonanza Steakhouse (2017), Hurricane Grill & Wings (2018), Yalla Mediterranean (2018), Elevation Burger (2019), Johnny Rockets (2020), Global Franchise Group (2021), and Twin Peaks (2021). During that run, FAT Brands completed its IPO in 2017, raising $24 million.
Fazoli's will join the growing company as one of the hottest concepts in the quick-service industry. In the second quarter the brand broke 138 weekly sales records, with sales and traffic increasing double digits compared to last year. In June, the company posted its 13th straight double-digit sales gain with a 27.7 percent two-year comparison.
“We have had an outstanding year and we couldn’t be more pleased to join forces with FAT Brands, a company that has the same growth-oriented mentality as us at Fazoli’s,” Carl Howard, CEO of Fazoli’s, said in a statement. “From co-branding to virtual kitchens to menu development opportunities, we see great value in being a part of FAT Brands.”
The purchase will be funded with cash from the issuance of new notes from FAT Brands' securitization facilities. The transaction is expected to close by mid-December.
For FAT Brands, Duff & Phelps Securities, LLC served as financial advisor and Foley & Lardner LLP acted as legal counsel. For Sentinel Capital Partners, North Point Mergers and Acquisitions Inc. served as financial advisor and Winthrop & Weinstine, P.A. acted as legal counsel.