Michael Halen, Senior Restaurant Analyst at Bloomberg Intelligence, interviewed Andrew Wiederhorn, Chairman of Fat Brands – (FAT), parent of Twin Hospitality Group – (TWNP) on his podcast last week. The summary of that discussion provided below will serve as an introduction to some and an update for others. We have written extensively on both FAT and TWNP, which can be accessed by way of the SEARCH function on our Home Page.
BACKGROUND
FAT Brands, Inc. owns 18 franchised chain restaurant brands, Twin Hospitality Group (operator and franchisor of the now 115-unit Twin Peaks sports bar chain) being the largest. TWNP was purchased several years ago, at the time with 84 units, and 5% of the equity was issued as a dividend earlier this year to FAT Brands shareholders. FAT continues to own over 90%, after allowing for operating management incentives, though that will likely be reduced by TWNP sale of equity later this year.
NEW CEO
A new CEO, Kim Boerema, was installed at Twin Peaks just a month ago, having thirty years of experience including the Presidency of Parry’s Pizzeria & Taphouse as it grew from 10 to 30 units in the last two and a half years. Prior to that he was Chief Operating Officer at California Pizza Kitchen and Regional V.P. at Texas Roadhouse overseeing 125 units in 22 states. At Twin Peaks, with a 100-unit franchisee growth pipeline already in place, Boerema will be particularly focused on store level profitability for both company and franchised stores, as well as corporate efficiency.
UPDATE – TWIN PEAKS/SMOKEY BONES
Updating developments with the Smokey Bones brand (61 company operated units bought in May ’24), the first two conversions to Twin Peaks have been particularly successful. Both Company stores, the first, in Lakeland FL, opened at close to an $8M annual rate, up from $3.6M as a Smokey Bones, and looks to be settling in somewhere north of $7M. The second conversion, in Sandler, FL opened in February ’25, and looks to be approximately doubling its previous volume. Expectations continue to be that about 30 Smokey Bones location will convert, about 10 for Company use, about 10 for existing franchisees, and about 10 still to be determined. 8 or 9 locations will close over time as leases expire and 20-22 may continue to be operated. Substantial economies, compared to a new buildout, take place by way of these conversions, with modifications costing $3-4M on top of a relatively inexpensive existing leasehold, versus $5M for a new building from scratch on top of $2M for land. Carrying cost of the facility prior to opening is also reduced by as much as two years. From a corporate margin standpoint, the headwind from carrying Smokey Bones locations not yet converted should abate this year, with a $3-4M positive swing by ’26. There should be two or three additional conversions done by the Company in the next nine months or so, and franchisee expansion plans should also be firmed up during that timeframe.
The broad “scratch prepared” menu at Twin Peaks, with the 48% alcohol mix, is designed to also appeal to females (25% of customers), including salads and snacks. The famous 29-degree $5 beer will remain a signature item, while work will be done to improve alcohol margins overall.
OTHER DEVELOPEMENTS
Out of the 1000 store expansion backlog, seven brands are noteworthy in terms of growth potential: Twin Peaks, Fatburger, Johnny Rockets, Round Table Pizza, Fazoli’s, Marble Slab Creamery, & Great American Cookie. While a steady 100-120 new locations have been the pattern recently, higher interest rates and economic uncertainty have admittedly taken a bit of a toll, but there is a sense that the rate of franchise development is trending higher. A transaction to re-franchise 57 Fazoli’s is in the works, which will raise from $15-25M and produce a 100% franchised brand. The proceeds will be used to pay down Fazoli’s debt, will save at least $3M of corporate G&A, and the royalties from the 57 stores will approximate the previous company operated cash flow. There continues to be expansion of dual branded locations. Fatburger has been co-branded with Buffalo Express for about four years, now in about 100 locations. Johnny Rockets has been paired with Hurricane Grill & Wings. There have also been tri-branded locations, with various combinations including Hot Dog on a Stick, Marble Slab Creamery and Great American Cookies.
TARIFF EFFECT?
There has been minimal effect from new tariffs on operations, so the effect could be more expensive new equipment as stores open or renovate, but a bigger influence than tariffs has been more expensive equipment financing. So far it does not seem to have been important.
DOUGH MANUFACTURING
Regarding the planned higher utilization of the dough manufacturing facility in Atlanta: there is a currently a test in place with the 7-11 chain, selling cookies with an option to bake fresh in the store. There is also a rollout now within Chucky Cheese of the Great American Cookie product.
LITIGATION
Management indicated that it finally seems to be running its course and the current expectation is that it will be wound up by the end of ’25, “one way or another”.
THE ECONOMY
Relative to the general economic condition of the US dining public: FAT Brands is a happy not to be in fine dining, with most of their brands benefiting from trade-down from higher ticket concepts. In general, however, consumers are more demanding than ever, and whatever the price point, the “experience”, such as it is, must be seamless.
IN CONCLUSION
FAT Brands is focused individually and collectively on their portfolio of 18 brands, in terms of improving on their support platform, and spearheading improvements within individual franchise systems. It was noted that the Twin Peaks brand, though over 90% owned by FAT Brands, due to its size and rapid growth expectations is functioning largely on its own, both operationally and financially.
Roger Lipton