FAT Brands Earnings Call: Expansion Amid Challenges

Fat Brands ((FAT)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for FAT Brands painted a mixed picture of the company’s current standing and future prospects. While there was a palpable sense of optimism surrounding expansion efforts and strategic initiatives like the Twin Peaks spin-off and successful co-branding, these positive sentiments were tempered by concerns over declining revenues, increased litigation expenses, and challenges in raising equity. This dual narrative suggests a cautious outlook for the company as it navigates both opportunities and obstacles.

Strong Momentum in Expansion

FAT Brands demonstrated strong momentum in its expansion efforts, having opened 23 new units in the first quarter of 2025, marking a 37% increase from the same period in 2024. The company has ambitious plans to open over 100 new locations by the end of the year, underscoring its commitment to growth and market presence.

Twin Peaks Development and Spin-Off

The development of Twin Peaks was a focal point, with the opening of two new lodges. Additionally, FAT Brands executed a strategic spin-off of Twin Hospitality Group, distributing 5% of Twin Hospitality’s Class A stock to shareholders, which could potentially unlock value and streamline operations.

Robust Franchise Development Pipeline

FAT Brands’ franchise development pipeline remains robust, with commitments for over 1,000 new locations. This pipeline is expected to contribute significantly to the company’s financial performance, with potential for around $50 million in incremental annual adjusted EBITDA.

Digital Sales and Co-Branding Success

The company reported success in digital sales and co-branding initiatives. Great American Cookies and Marble Slab Creamery experienced an 8% increase in sales through their new app, and the launch of 10 co-branded models highlights the effectiveness of these strategies.

International Expansion

FAT Brands is also making strides internationally, with a new partnership set to open 30 Fatburger locations across France and 10 Buffalo’s Cafe locations, signaling a strong push towards global market expansion.

Revenue and Sales Decline

Despite these positive developments, the company faced a decline in total revenue for Q1 2025, which was $142 million, down 6.5% from $152 million in Q1 2024. System-wide sales also decreased by 1.8%, reflecting broader market challenges.

Challenges in Twin Peaks Equity Raise

The company encountered difficulties in securing the first tranche of a $75-$100 million equity raise due to volatile market conditions, which has delayed its debt reduction plans.

Increased Litigation Expenses

FAT Brands saw an increase in general and administrative expenses, attributed to higher professional fees related to pending litigation, which has impacted the company’s financials.

Net Loss Increase

The net loss attributable to FAT Brands increased to $46 million or $2.73 per diluted share, compared to a net loss of $38.3 million or $2.37 per share in the prior year quarter, indicating financial pressures.

Smoky Bones Closures Impact

The revenue decline was partially due to the closure of Smoky Bones locations, which were being converted into Twin Peaks lodges, affecting short-term financial performance.

Forward-Looking Guidance

Looking ahead, FAT Brands provided guidance for the remainder of the year, aiming to open over 100 new locations in 2025. The company plans to raise between $75 million and $100 million in equity, with a focus on debt reduction. Additionally, FAT Brands is enhancing production capabilities at its Georgia facility and anticipates increased utilization. Co-branding initiatives are set to accelerate, despite market volatility impacting the equity raise timeline. The company remains confident in achieving its annual targets and is committed to reducing SG&A expenses and leveraging growth opportunities.

In summary, FAT Brands’ earnings call revealed a company at a crossroads, balancing promising expansion and strategic initiatives with financial challenges and market uncertainties. While the sentiment was mixed, the company’s commitment to growth and innovation offers a hopeful outlook for the future.