FAT Brands reported another quarter of revenue growth while operating at a loss largely driven by the Smokey Bones acquisition last year, which created both extra revenue and extra debt for the company. The company reported a 2.7% decline in same-store sales growth for the third quarter ended Sept. 29, as the company continues to focus on increased development momentum with 1,000 stores in the pipeline.
“We continue to prioritize accelerated growth in our polished casual category, particularly through Twin Peaks, our fastest-growing concept,” Ken Kuick, co-CEO of FAT Brands, said in a statement. “Year to date, we opened nine new lodges, bringing our total to 115 locations. We also completed our first Smokey Bones to Twin Peaks conversion in Lakeland, Florida, during the third quarter, with our second conversion underway and several more planned for next year.”
Conversions of underperforming Smokey Bones restaurants have been part of FAT Brands’ strategy for a few quarters. The company is also still looking into taking Twin Peaks public, but now with Smokey Bones together as a combined entity. FAT Brands said that in May, the company submitted a registration statement with the Securities and Exchange Commission, which is the next step in going public.
However, with the end of fiscal year 2024 growing nearer, FAT Brands executive leadership now have said that Twin Peaks/Smokey Bones could seek an alternative transaction, which could include options like a direct public listing or using a special purpose acquisition company, or SPAC.
Either way, the goal is for FAT Brands to pay off its debts and leverage its balance sheet so that the company can become profitable, including refinancing Twin Peaks’ securitization debt.
“FAT Brands will look to monetize its investment in Twin Peaks over time and use that to pay down other debt and deleverage overall debt at FAT Brands,” Andy Wiederhorn, chair of FAT Brands, said during this week’s earnings call. “I would expect that to happen beginning later in 2025 and that includes the redemption of some of the preferred stock that’s expensive and that we need to redeem. It’s just taking a long time because of market conditions.”
For the third quarter ended Sept. 29, FAT Brands opened 22 new restaurants, with 29 more openings planned for the last quarter of 2024. The company reported total revenue growth up 31.1% to $143.4 million, compared with $109.4 million in the third quarter of 2023. The net loss was $44.8 million, or $2.74 per share, compared to $24.7 million, or $1.59 per diluted share, in the third quarter of 2023.
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