FAT Brands announced Monday that it will spend $442.5 million to acquire Hot Dog on a Stick parent Global Franchise Group.
In addition to Hot Dog on a Stick, Global Franchise Group franchises quick-service concepts Round Table Pizza, Great American Cookies, Marble Slab Creamery, and Pretzelmaker. Those brands will soon join FAT Brands’ growing portfolio, which includes Johnny Rockets, Fatburger, Hurricane Grill & Wings, Buffalo’s Café, Buffalo’s Express, Elevation Burger, Ponderosa Steakhouse, Bonanza Steakhouse, and Yalla Mediterranean.
“This acquisition is a key strategic milestone for FAT Brands. We have been very acquisitive in recent years, seeking to add strong and growing restaurant brands to our portfolio. Now that the economy is emerging from COVID-19 and restaurants are rapidly recovering, we are pleased to have reached this agreement to incorporate a powerhouse restaurant franchising group with the support of Serruya Private Equity and Lion Capital,” said Andy Wiederhorn, president and CEO of FAT Brands, in a statement.
“The five new restaurant concepts have been very resilient coming out of the pandemic and will complement our existing brands,” he continued. “Furthermore, we will acquire GFG’s [Global Franchise Group] manufacturing operations, which will provide greater efficiencies and incremental revenue opportunities to our company.”
The purchase of Global Franchise Group will give FAT Brands more than 2,000 franchised and company-owned restaurants around the world that earn a combined $1.4 billion in annual systemwide sales. Eighty-seven percent of Global Franchise Group's stores are in the U.S. Based on current projections and assumptions, including realization of expected synergies and return to pre-COVID restaurant sales, the acquisition is expected to eventually increase annual EBITDA by approximately $40 million to approximately $55–$60 million.
FAT Brands is purchasing the concepts with cash and stock from Serruya Private Equity and Lion Capital LLP.
“This is truly a transformative deal for both FAT Brands and GFG,” said Michael Serruya, managing director of Serruya Private Equity and chairman of Global Franchise Group, in a statement. “Andy has an exciting vision for FAT Brands and through his recent acquisitions, he has been able to create brand synergies within the portfolio while maintaining an asset-light business model. I look forward to our continued involvement with GFG through our company’s support of FAT Brands from an equity and strategic perspective.”
FAT Brands has spent the past decade building a company full of quick-service and casual-dining brands, starting with the purchase of Buffalo’s Café in 2011 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.
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. Then 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 hinted last year that Johnny Rockets wouldn’t be FAT Brands’ final move. He told QSR in September that the company is “absolutely inquisitive these days” and that he sees additional acquisitions in upcoming quarters.”
FAT Brands’ systemwide sales lifted 20.6 percent in Q1 compared to 2019, including growth of 10.9 percent in the U.S. and 49.5 percent internationally. The company swung a net loss of 2.4 million year-over-year and garnered an EBITDA of $585,000.
Duff & Phelps Securities, LLC served as financial advisor to Global Franchising Group and Serruya Private Equity. Sheppard, Mullin, Richter & Hampton LLP and Greenberg Traurig, LLP acted as legal counsel to FAT Brands. Bryan Cave Leighton Paisner LLP acted as legal counsel to Serruya Private Equity and Lion Capital.