FAT Brands made headlines during the summer when it announced the purchase of Global Franchise Group for a price tag of $442.5 million.
At the time, it was the second-largest restaurant deal of 2021, second only to NPC International's $801 million bankruptcy sale to Wendy's franchisees and Flynn Restaurant Group (the biggest in 2021 overall was RBI's $1 billion purchase of Firehouse Subs). Soon, FAT Brands portfolio grew to 14 brands with the addition of Round Table Pizza, Marble Slab Creamery, Great American Cookies, Pretzelmaker, and Hot Dog on a Stick.
While significant, it was simply the first domino to fall. Two months later, FAT Brands announced an agreement to purchase sports bar Twin Peaks for $300 million, and in another two months, it struck a deal to buy Fazoli's for $130 million. The company finished up its aggressive 2021 with a $20 million acquisition of 23-unit Native Wings and Grill.
In total, FAT Brands spent nearly $900 million in five months. The reward is a multi-brand platform with 17 concepts, 2,300 franchised and company-run locations globally, and systemwide sales of roughly $2.3 billion. The company operates in 40 countries and 48 states and partners with 800 franchisees, half of which are multi-unit operators. In addition to those 2,300 stores, FAT Brands has a pipeline of roughly 800 restaurants set to open in the next four or five years.
The company's big year almost included the 600-unit Del Taco, as well, but the fast casual was instead sold to Jack in the Box for $575 million.
"We looked hard at the Del Taco deal," says FAT Brands CEO Andy Wiederhorn on the QSR Uncut podcast. "We put in a preliminary bid, we did diligence, and we just decided that it was just too many company-owned stores, and that was just going to be a lot of work. I think that's a great deal for Jack in the Box. They're in that business, they're in that [quick-service restaurant]. I think it makes a lot of sense."
Wiederhorn says FAT Brands' momentous 2021 kickstarted in September 2020 with the $25 million purchase of Johnny Rockets, a brand that doubled the company's portfolio. The CEO describes the transaction as a "gutsy move," considering capacity restrictions were still widely in place and COVID vaccines hadn't been rolled out yet.
But the deal set the stage for the following year. Wiederhorn says the brand had its "financing and house in order" and states began relenting on mandates. FAT Brands soon found a number of transactional opportunities with private equity firms and founder-led restaurants that were ready to sell.
"A PE firm would normally hold something for five to seven years, but OK, now it's already five years," Wiederhorn says. "Maybe they only got three years to work hard on a brand, and two years of trying to keep it alive. And they felt like, hey, we lost some time, let's recycle our investment. We took advantage of that a little bit. Some of it was just natural timing of people already owning things for five or six years and time to roll out of it."
The reasons behind each acquisition differed, the FAT Brand leader says. For instance, Global Franchising Group brought forth cost-saving synergies, with the elimination of headquarters and back office, merging of departments like accounting and legal, and the addition of a factory with excess capacity. The purchase of Native Wings was a synergies play, as well.
But for Twin Peaks and Fazoli's, it was about the "growth story." The sports bar concept has roughly 85 units, with 18 more to open by next summer and more than 115 in its pipeline. Wiederhorn says the idea was to leave the management team alone and not try to "ring out that last few dollars of synergies." The same mindset was true when exploring Fazoli's. With roughly 220 restaurants and a pipeline of more than 100 units, it's the largest premium quick-service Italian chain in the U.S.
"We can always talk about synergies later, but right now it doesn't make sense," Wiederhorn says. "Let those guys run. ... Even though we made some significant acquisitions this year, there was some method to the madness of what are we integrating and what are we going to leave standalone. So it wasn't that painful to swallow."