Fat Brands outlines $75M–$100M Twin Peaks equity raise and targets 80 new openings amid debt restructuring and leadership changes

Earnings Call Insights: FAT Brands Inc. (FAT) Q3 2025

MANAGEMENT VIEW

* Andy Wiederhorn, Chairman and Chief Executive Officer, returned to the CEO role and thanked Ken Kuick and Taylor Wiederhorn for their leadership as co-CEOs during recent legal challenges. He announced the U.S. Department of Justice dismissed all charges against himself and the company, and final court approval for the Harris I and II Delaware derivative settlements is anticipated in December. Wiederhorn stated, “We are now fully focused on strategic execution and enhancing shareholder value.”
* Wiederhorn highlighted new leadership appointments at Twin Hospitality Group, including Ken Brendemihl as President of Smokey Bones, Rob Churn as Chief Operating Officer of Smokey Bones, Lexi Burns as Chief People Officer, and Melissa Fry as Chief Marketing Officer. He also noted his own new role as Chairman of Twin Hospitality Group following its spinout.
* The company is advancing plans for a $75 million to $100 million equity raise at Twin Peaks to pay down debt and fund new unit development, while a dividend pause is preserving $35 million to $40 million in annual cash flow.
* Wiederhorn emphasized ongoing SG&A reductions of more than $10 million and active negotiations for debt restructuring with noteholders. He said, “Together, these actions put us on track to achieve positive cash flow in the coming quarters, reduce our debt and build a strong foundation for long-term growth.”
* The company delivered adjusted EBITDA of $13.1 million for the quarter, and narrowed the same-store sales decline to 3.5%, down from 4.2% in Q2. Casual dining segment same-store sales grew 3.9%.
* The company opened 13 new locations in the quarter and 60 year-to-date, targeting 80 openings this year. Over 190 franchise development agreements have been secured year-to-date, bringing approximately 900 committed locations to open over the next 5 to 7 years, with potential incremental earnings of $50 million to $60 million once operational.
* Notable expansion included the first co-branded Roundtable Pizza and Fatburger location in California, new market entries for Great American Cookies and Marble Slab Creamery, Fatburger’s debut in Oklahoma, and Johnny Rockets openings in multiple international markets. Fatburger’s return to Japan was also announced.
* The company’s manufacturing facility in Georgia generated $9.6 million in sales and $3.8 million in adjusted EBITDA at a 39.6% margin, operating at 45% capacity. A new partnership with Virtual Dining Concepts is set to make Great American Cookies available for delivery from more than 450 Chuck E Cheese locations, with an additional 500 targeted by year-end.
* Kenneth Kuick, Chief Financial Officer, stated, “Total revenues were $140 million, a 2.3% decrease from $143.4 million in last year's quarter. This was driven primarily by the closure of 11 underperforming Smokey Bones locations as planned, the temporary closure of 2 Smokey Bones locations for conversion into Twin Peaks lodges and lower same-store sales, partially offset by revenues generated by our new Twin Peaks Lodges.”

OUTLOOK

* The company is advancing a $75 million to $100 million equity raise at Twin Peaks, with most proceeds allocated to debt reduction and new unit development. Dividend pause and legal resolution are expected to provide at least $65 million to $70 million in annual cash flow and cost savings. The target for new openings in 2025 has been revised to 80, down from 100 previously, due to franchisee delays rather than project cancellations. Management expects positive cash flow in upcoming quarters and maintains a development pipeline of 900 committed locations over the next 5 to 7 years. Management described the outlook as focused on “execution, driving growth across our brands, strengthening our balance sheet and unlocking the full potential of our platform.”

FINANCIAL RESULTS

* Total revenues were $140 million for Q3 2025. General and administrative expense increased to $42.7 million, primarily due to a $6.9 million store closure reserve and a $1.4 million noncash impairment. Cost of restaurant and factory revenues was $94.6 million. Advertising expense decreased to $12.2 million. Total other expense, mainly interest, was $41 million. Net loss attributable to FAT Brands was $58.2 million or $3.39 per diluted share. As-adjusted net loss was $45.4 million or $2.67 per diluted share. Adjusted EBITDA was $13.1 million for the quarter. The Georgia production facility generated $9.6 million in sales and $3.8 million in adjusted EBITDA at a 39.6% margin.

Q&A

* Joseph Gomes, NOBLE Capital Markets: Asked about debt restructuring timing. Wiederhorn replied, “I'm hopeful that during this quarter, we'll come to a resolution on restructuring...the majority of the proceeds from the equity raise go to reduce debt with the noteholders. So we'd like to get that started as quickly as everyone would. We're just waiting for the government to open.”
* Gomes: Asked about Smokey Bones closures. Wiederhorn replied all have been closed and reserved for, but some underperforming stores remain within master leases and may close after lease negotiations.
* Gomes: Asked about Fazoli's refranchising. Wiederhorn reported “material progress” and ongoing evaluation of proposals.
* Gomes: Inquired about the reduction in store opening targets. Wiederhorn explained, “There's definitely a slowdown in the pace of which new stores are getting opened. That's a little bit of foot dragging by franchisees...It's always frustrating because every day, every month that a store is delayed, that's $5,000 in royalties you'll never get.”
* Gomes: Asked about SG&A reduction sources. Wiederhorn stated reductions came from staff and executive cuts, office closures, and accounting consolidation. He noted potential for further cost savings depending on restaurant sector performance.
* Roger Lipton, Lipton Financial Services: Asked about same-store sales growth in casual dining and which chains are included. Wiederhorn referenced Hurricane Grill & Wings, Buffalo's Cafe, Native Grill & Wings, and Ponderosa and Bonanza steakhouses.
* Lipton: Asked about Twin Peaks expansion plans. Kuick cited active development with both corporate and franchise conversions and a robust pipeline, but noted timing depends on permitting and franchisee readiness.
* Lipton: Noted Twin Peaks’ improved margins and asked about future margin improvements. Wiederhorn confirmed margin improvement is a top priority and expects further gains, especially with new leadership at Smokey Bones and menu management initiatives.

SENTIMENT ANALYSIS

* Analysts displayed a neutral to slightly positive tone, focusing on strategic initiatives and operational execution, with repeated questions about debt, refranchising, and cost control. There was some frustration noted regarding delays in new store openings but no overt skepticism.
* Management’s tone was confident, emphasizing operational progress, legal resolution, and cost control. Wiederhorn used language like, “We are now fully focused on strategic execution and enhancing shareholder value,” and “Together, these actions put us on track to achieve positive cash flow in the coming quarters.” In Q&A, management remained responsive and constructive, acknowledging challenges but maintaining a forward-looking stance.
* Compared to the previous quarter, both management and analysts showed increased focus on operational execution and less concern over legal distractions, with a more optimistic tone regarding financial recovery and strategic initiatives.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from legal resolution and defensive posture in Q2 to a focus on operational execution, debt reduction, and growth in Q3. The new target for openings was reduced from 100 to 80. Legal matters have moved from being a primary concern to a resolved issue, freeing management to focus on business fundamentals.
* Management’s tone is more confident, citing cost savings and positive cash flow targets. Analyst questions shifted from legal and SG&A event-driven concerns in Q2 to operational execution, growth pipeline, and margin improvement in Q3.
* There is greater emphasis on leadership changes and development at Twin Hospitality, and increased detail around cost control and SG&A reductions.

RISKS AND CONCERNS

* Management highlighted ongoing headwinds in the restaurant industry, including slower franchisee store openings and some underperforming locations tied to master leases. Legal and derivative matters have been largely resolved. The pace of new unit openings remains a concern due to franchisee delays, and there are still underperforming locations that may require closure or conversion.
* Management is negotiating debt restructuring and continuing to pursue SG&A reductions. The company is monitoring macroeconomic trends and franchisee performance to drive further cost optimization.

FINAL TAKEAWAY

FAT Brands management emphasized the resolution of major legal matters and a renewed focus on operational execution, debt reduction, and strategic growth. The company is actively pursuing a $75 million to $100 million equity raise at Twin Peaks to accelerate debt repayment and development, while maintaining cost controls and targeting positive cash flow. Leadership changes at Twin Hospitality and robust development pipelines are positioning the company for long-term growth, with a disciplined approach to new openings and margin improvement across key brands.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/fat/earnings/transcripts]

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