FAT BRANDS, Inc. (FAT) TO ACQUIRE 200 UNIT FAZOLI’S, ADDING ANOTHER STRONG GROWTH BRAND

FAT Brands (FAT) continues its aggressive buildout of a multi-branded fast casual franchising platform. Fazoli’s will be the sixteenth brand under FAT’s umbrella, bringing portfolio systemwide sales to more than $2.1 billion within 2,300 franchised and corporate locations. The purchase price of Fazoli’s is $130M, to be funded by notes from FAT’s securitization facilities and the transaction should close by mid-December. According to FAT’s announcement, almost all restaurants have drive-thru facilities, “continues to surpass sales expectations across the board”, there is a current pipeline of an additional 100 units to open over the next several years, and ownership of Fazoli’s will increase FAT Brands’ post-COVID normalized EBITDA by an incremental $14.5-15.0M in 2022.

According to previous industry articles written about Lexington KY based Fazoli’s, the Company, previously owned by Sentinel Partners, has been run by Carl Howard, CEO, for the last thirteen years. Fazoli’s was originally created in 1988 by Jerrico, then the owner of Long John Silver’s, and peaked at over 300 locations by the late 1990s. After struggling under a variety of ownership, it was sold in 2006 to Sun Capital Partners. Carl Howard entered in 2008 and has steadily improved results ever since. While the unit count remained just over 200 during the past decade, the operational stage was apparently set to capitalize on the now obvious convenience (and pandemic) driven new trends in food prepared and/or consumed away from home. While Fazoli sales steadily improved starting in 2013, the preponderance of drive-thru locations and the general focus on off-premise dining has improved AUVs by twenty percent or more over just the last two years, which are now annualizing at close to $1.6M. This steady, and lately dramatic, change of circumstance has predictably encouraged new franchise development.  The locations range from 2,000-3,500 square feet and can be opened for as little as $350k. In the twelve months ending 3/31/21, according to a Fazoli corporate release, 20 new franchise agreements had been signed, covering 50 locations, and 15 stores were projected to open in the twelve months ending 3/31/22.

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Roger Lipton