Tag Archives: Round Table Pizza



FAT Brands has been aggressively adding to its multi-branded franchising portfolio throughout the two-year course of the Covid pandemic. We have previously chronicled (accessible by way of the SEARCH function on our Home Page) the details of that process and we present below a number of slides in the Investor Presentation released yesterday that provide an update. Most importantly, the Company has strategically pivoted, concentrating over the next year or so on consolidating and building upon the recent acquisitions from an operational standpoint, reaping the substantial organic growth and synergistic rewards, which will simultaneously allow for re-rating of the existing debt and allow for $20-30M per year less debt service. Management has stated that “tuck in” opportunistic acquisitions may still be made, such as the recent purchase of Native Grill Wings but the primary focus will be as stated above.

The slides below (1) summarize the acquisition timeline of the last two years (2) provide a summary of FAT’s portfolio as it stands today (3) updates operating results through Q3’21 (4) and provides a summary of the most important cash flow “levers” that management expects to demonstrate over the near term.

The slide just below shows the sequence of acquisitions, starting with Johnny Rockets in the fall of ’20. It is important to note that the most recently reported quarter, Q3’21, did not yet reflect a full quarter of Global Franchise (with Round Table Pizza, acquired 7/22/21), nor any contribution from Twin Peaks (acquired 10/1/21), Fazoli’s (12/16/21) or Native Wings (12/17/21). The third quarter therefore did not reflect about 35% of the $2.23B of (2019 based) systemwide sales among the current 17 brands.






FAT Brands updated the financial community on its operating results for the third quarter, ending 9/30/21. It should be noted that major acquisitions have been taking place over the last twelve to fifteen months which, combined with the worldwide COVID effects, distort current and comparable results. Corporate management, analysts and investors must therefore look through the GAAP results and gauge the corporate progress and prospects by evaluating the basic health of the major brands.

Recall that Johnny Rockets was purchased in September, 2020. Global Franchise Group (GFG), with 415 unit Round Table Pizzas, closed on July 23, 2021. Twin Peaks, with 83 systemwide units, was acquired on October 1st, 2021 and Fazoli’s (214 units) is expected to close in mid-December. Johnny Rockets, when acquired, was projected by management to bring the “post-COVID, normalized” EBITDA run rate to $15-20M. GFG has been expected to add $30M (bringing the run rate to $45-50M). Management projects that Twin Peaks could add $25-30M (bringing the run rate to $70-80M) and Fazoli’s is projected to add $14.5-15M (for a new “post-COVID normalized” objective of $85-95M). The total portfolio, including Fazoli’s, will consist of about 2,300 units generating over $2 billion of sales.

The third quarter of ’21 was predictably much better than in ’20. Operating Income was $2.376M vs. a loss of $1.296M. The positive operating income was after an increase of $10M due to G&A and professional fees relating to the initial inclusion of GFG. Advertising expense also increased, from $0.8M to $5.5M, “reflecting advertising expenses from GFG and Johnny Rockets and the increase in customer activity as the recovery from COVID continues”. There was also a $2.053M “acquisition cost” item reducing Q3’21 Operating Income. After $7.1M of interest expense vs. only $123k in ’20, there was a pretax loss of $4.8M vs. a loss of $587k in ’20. CFO, Ken Kuick pointed out that the Revenue Run Rate entering ’22, assuming that COVID continues to fade, should be on the order of $340M annually ($85M/qtr.), versus the $29.8M just reported in Q3. Wiederhorn suggested on the conference call that the current quarter should show closer to $15M of Adjusted EBITDA, with the inclusion and synergies at GFG and the effect of Twin Peaks.

Relative to the basic health of the various brands, the earnings release noted that domestic same store sales were up 7% in Q3 vs. ’19 and worldwide same store sales were up 3.5% vs. Q3’19. While the int’l units, primarily Johnny Rockets, have been slower to reopen and rebuild sales, the third quarter improved 7.15% from Q2’21 to Q3’21. Portfolio wide, most notably at overseas Johnny Rockets, the number of closed stores was 52 at 9/30, down from 63 at 6/30 and 107 at 3/31. The franchise sales team “had a record quarter, closing nine deals that account for 166 locations. We expect unit growth to continue increasing in the coming months with plans to open 26 additional stores by the end of 2021 for a total of 85.” Management further described the pipeline of new units, which totals about 700 units within the current portfolio, over 800, including Fazoli’s. CEO, Wiederhorn, refrained from specifying over what period those locations would open but pointed out that new additional deals are being done all the time, and it is not hard to picture somewhere between 100 and 200 new units adding annually to the current 2,100 units (including Fazoli’s.) Wiederhorn again emphasized his expectation that the current $744M of securitized debt can be refinanced with a new rating, saving something like $25M of interest per year. Wiederhorn accurately pointed out that the predictable growth in the various franchised systems is “free” growth. The supporting systems are in place and additional capital is not necessary for the organic progress.


The third quarter results included Johnny Rockets (bought a year ago), GFG from July 23rd, and Twin Peaks only for one week. Adding back to the $2.4M of operating income: the $2.1M of acquisition expense, some portion of the heavy $5.5M of advertising expense as well as the initial larger than necessary G&A at GFG, we would have suggested that the third quarter “normalized” (not yet “post-COVID”) EBITDA might have been in the area of $8-9M. FAT actually reported “Adjusted EBITDA” at $7.2M. Considering that the COVID is still a factor and synergies at GFG are just now being implemented, FAT was not far from the (GFG included) “post-COVID normalized” objective of about $12M quarterly ($45-50M annually). With the impressive new unit pipeline and the encouraging same store sales trends across most of the portfolio, it seems to us that the developing fundamentals are adequately supporting the long term “story”.  Our previous reports describing FAT Brands can be accessed by way of the SEARCH function on our Home Page.

Roger Lipton



Readers interested in FAT Brands should review our previous reports by using the SEARCH function on our Home Page.


FAT Brands (FAT) is moving quickly to become a leader in the multi-branded restaurant space.

While investors in both the common stock and the 8% Preferred have done admirably over the last eighteen months, analysts have to look below the surface to accurately view the risk vs. the reward. This is because the pace of acquisition and the accompanying balance sheet expansion, accomplished during a worldwide health crisis, has predictably distorted the most obvious reported results. The $494M of debt looks daunting relative to historical GAAP treatment, not so much relative to the $55-60M (and more over time) of potential annual EBITDA from the fourteen brands now in the portfolio. Comparable “Asset Light” and “Free Cash Flow” restaurant franchising companies are trading at Enterprise Values materially higher than is the case here. We conclude that, with the demonstrated indications of brand health and unit growth potential, there is reason to believe that the apparently aggressive management guidance, starting in Q4’21 to Q1’22, and using 2019 historical EBITDA as a base, will prove to be valid. Accordingly, we continue to feel that FAT stock price will appreciate from current levels as reported results more obviously reflect the fundamental progress that is being made.


The second quarter (Q2’21) was marked by announcement of a major acquisition (closed on 7/22) accompanied by balance sheet expansion at a reduced interest rate and ongoing liquidity to fund further deal activity. The acquisition of Global Franchise Group (GFG), with five brands (Round Table Pizza @ 40% of portfolio systemwide  sales), expanded the current multi-branded franchising portfolio (including Fatburger, Johnny Rockets, Hurricane Grill and Buffalo Cafe) from about 650 current locations to more than 2,000 worldwide. $442.5 million was raised in the process, the total number of brands was increased from nine to fourteen, and the post-Covid EBITDA guidance was increased from $15-20M to $55-60M. The balance sheet at 6/30 showed cash and restricted cash of $54M and total debt of $494M at a blended interest rate of 6.5%. Management reiterated on the Conference Call the intention to conclude another acquisition, as well as an interest rate reduction, in the near future, within six months in our estimation.


Qualitatively: diversifies FAT portfolio to include pizza, snacks and dessert, expands FAT’s purchase power with suppliers and distributors, provides a manufacturing facility that can serve franchise partners within 14 brands, allowed for shared administrative services, provides a large and diverse franchisee base, adds five established brands.

Quantitatively: 2019 systemwide sales were $1.36B vs. $710M for FAT previously, 2019 store count was 2,061 vs. 628, there were 766 franchise partners vs 303, there were 183 multi-unit operators vs. 74.


Costs and expenses decreased to $6.2 million in the second quarter of 2021 compared to $8.9 million in the second quarter of 2020. General and administrative expenses increased $1.4 million primarily due to increased professional fees and expansion of the management team.

On July 22, 2021, the Company completed the acquisition of Global Franchise Group (GFG) for $442.5 million, adding five brands to the portfolio – Round Table Pizza®, Great American Cookies®, Hot Dog on a Stick®, Marble Slab Creamery® and Pretzelmaker®. The transaction was funded with cash and stock, including $350 million in cash from newly issued notes and cash on hand, $67.5 million in Series B preferred stock and $25 million in common stock.

GLOBAL FRANCHISE GROUP OVERVIEW (from the investor presentation)

GFG is a global restaurant franchising company with a portfolio of one pizza and four quick service restaurant concepts and a manufacturing facility in Georgia. GFG’s portfolio has 1,433 restaurants (97.7% franchised, 86.7% in the US. Locations are in 12 countries and 45 states. Round Table Pizza accounts for 60% of systemwide sales. There are 463 franchisees, 109 of which are multi-unit. No franchisee accounts for over 4.5% of the portfolio. GFG owns a 37,400 sq. ft. production facility in Georgia that exclusively supports GFG franchisees. It is vertically integrated and manufactures 13M lbs of cookie batter and 3.5M lbs of dry pretzel mix each year , distributed to over 375 locations nationwide. GFG began e-commerce business in 2019, achieving Amazon’s Choice for “fresh baked cookies’ in December, 2020.


Management reiterated confidence in the stated goal of generating, in a post-Covid environment annual EBITDA of $55-60M from the current crop of brands ($15-20M) plus the GFG acquisition ($40M). This run rate of EBITDA is expected to kick in by Q4’21 to Q1’22, absent any major Covid resurgence, which is not yet showing up. CEO, Andy Wiederhorn, predicted that there would continue to be a certain amount of “noise” in Q3, and that Q4 would begin to demonstrate the fundamental potential of the newly expanded portfolio of brands.

Important progress was made at the most important (pre-GFG) brands, namely Fatburger, Buffalo and Hurricane. In Q2’21 vs. Q2’19: Fatburger SSS were up 6.1%, Buffalo Café was up 18% and Hurricane Grill and Wings was up 24%. The developmental pipeline is promising as well. Franchisees opened 10 new locations in Q2, up from 5 in Q1, with another 32 locations anticipated to open through the end of 2021. In terms of signings, 12 new deals, for 99 locations including a 50 unit agreement in Mexico and 40 units in France, were completed in Q2, and the total ’21 signings through 6/30 amounted  to 128 intended locations.

Based on AUVs, same store sales trends, and the developmental pipelines, there is quantitative reason that 2019 can appropriately be viewed as the base year (with $55-60M of Adjusted EBITDA) on which to build. Additionally, as discussed on the conference call, there is a “kicker’ in the story, acquired within GFG, namely a cookie manufacturing facility operating far below capacity. The summary above provides a concise summary of the contribution that GFG makes to the FAT portfolio, as well as an indication of the potential from the manufacturing arm. The possibility here, as suggested by management, is for an additional $15M of annual EBITDA, since there are fourteen brands within the FAT portfolio that could potentially sell dough based products produced at this facility.

CONCLUSION: Provided Above

Roger Lipton