One month after news broke that federal authorities were investigating Fat Brands CEO Andy Wiederhorn on allegations of securities and wire fraud, money laundering and attempted tax evasion — not Wiederhorn’s first brush with the law after serving a prison sentence in 2005 for tax fraud — the CEO addressed the allegations in a Monday Q4 earnings call for the period ended Dec. 26, 2021.
In his prepared comments to investors on Monday, Wiederhorn called the legal allegations “a derivative suit” based on the 2020 merger of Fat Brands with Fog Cutter Capital, and said the government is now “formally seeking documents concerning these matters from the company and me.”
Wiederhorn also said that the documents should have remained classified and denied many of the characterizations presented in the Los Angeles Times article, which originally broke the news of the federal investigation in February. He said that the reporting “has many factual errors and conflates the different entities and my family as if they were one.”
“Our business is selling burgers, shakes and fries, pizza and meatballs, cookies and ice cream, steaks and chicken wings and 29-degree cold beer to our customers,” Wiederhorn said. “[…] I look forward to being able to put these matters behind us. […] While these legal matters are certainly a distraction personally, our team is focused on running our business and integrating the newly acquired brands into the FAT family of brands.”
In addition to addressing these legal matters, Wiederhorn also detailed the financial growth of his companies, especially with the finalized acquisitions of “polished casual” brand, Twin Peaks and quick-service Italian chain, Fazoli’s, last quarter.
Without the company’s more recent acquisitions, FAT Brands already saw a 5.6% increase in same-store sales over the fourth quarter of 2019, but with all of the newer brands, that number grew to 8.5%. All of the FAT Brands brands saw growth over 2020, and only one brand — Johnny Rockets — did not see same-store sales growth over 2019. Johnny Rockets sales declined 7.4% over 2019 (but grew 52% over 2020). Fazoli’s saw the largest growth jump with same-store sales increases of more than 25% compared to the fourth quarter of 2019.
“We have a long runway for organic growth with more than 850 new locations in our pipeline, providing us with a potential 33% unit growth and 50% EBITDA growth over the next few years,” Wiederhorn said Monday.
FAT Brands has also become known for its rapid-fire acquisition strategy — with 12 brand acquisitions in three years — and while the buying spree has slowed, Wiederhorn said that thoughts of acquisition have not halted completely.
“We are now at a size and scale that we do not need to acquire additional brands,” he said. “We already have so many great ones with so much organic growth already committed and paid for. That doesn't mean that we won't make some acquisitions. In fact, we're considering some presently, but our focus has to be this year on digesting what we already acquired realizing the synergies.”
Total revenue for FAT Brands increased 1,042% to $74.2 million compared to $6.5 million the fourth quarter of 2020, while system-wide sales grew 308% as compared with the same quarter last year, and 353% as compared with the same quarter in 2019. The company saw a net loss of $19.6 million or $1.38 per share as compared with a net loss of $7.7 million or $0.64 per diluted share in the fourth quarter of 2020.
As of Dec. 26, 2021, FAT Brands has 2,369 stores system-wide.
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