FAT Brands (FAT) Q3 Earnings call transcript Oct 30, 2024

FAT Brands Inc., a leading global multi-brand restaurant company, recently held its third quarter 2024 earnings call, providing insights into its financial performance and strategic initiatives. The call, led by Chairman of the Board Andrew Wiederhorn and Co-Chief Executive Officer and Chief Financial Officer Kenneth Kuick, highlighted the company's robust growth and optimistic outlook for the future.

Financial Performance and Strategic Initiatives

The company reported a significant 31.1% increase in total revenue, reaching $143.4 million, driven primarily by the strategic acquisition of Smokey Bones in September 2023. This acquisition has fueled the company's expansion, particularly in the polished casual dining segment, with Twin Peaks being the most rapidly expanding concept. Twin Peaks locations have achieved average unit volumes of approximately $6 million annually, with select high-performing markets seeing AUVs materially higher in the $9 million to $14 million range.

The company's strategic focus on organic growth, growth by acquisition, and increasing cookie dough and dry mix production at its Georgia-based manufacturing facility has proven successful. The acquisition of Smokey Bones has provided a strong backbone for Twin Peaks' rapid expansion, with plans to convert approximately 30 Smokey Bones locations into Twin Peaks over the next several years. This conversion process offers significant advantages, notably reducing construction time by about 18 months compared to building from the ground up.

Digital Marketing Initiatives and Innovations

FAT Brands has also been emphasizing its focus on digital marketing initiatives to enhance customer experience and establish value perception. The company recently launched a new loyalty program and app experience for Great American Cookies and Marble Slab Creamery, which seamlessly integrates ordering and rewards across both brands for guests. This digital transformation is expected to drive guests towards higher average check sizes and enhance online conversions.

Growth and Expansion

Looking ahead, FAT Brands plans to open approximately 40 units in the full fourth quarter, ending the year with over 100 new units. The company's development pipeline remains healthy, with signed agreements to open approximately 1,000 new units in the coming years. These additional units are projected to incrementally contribute $50 million to $60 million to the company's annual adjusted EBITDA, reducing leverage and enhancing the balance sheet.

Future Outlook and Challenges

Despite the impressive growth, FAT Brands faces challenges, including evolving market conditions and legal issues. The company is working diligently to resolve these issues and remains optimistic about its future, including the potential IPO or alternative transaction to unlock value for shareholders. The company's strategic focus on digital marketing, menu innovation, and acquisitions, coupled with its robust development pipeline, positions FAT Brands for continued growth and success in the restaurant industry.

In conclusion, FAT Brands' third quarter 2024 earnings call underscored the company's strong financial performance, strategic initiatives, and optimistic outlook for the future. With a focus on digital marketing, operational efficiencies, and strategic acquisitions, FAT Brands is well-positioned to capitalize on opportunities and overcome challenges in the dynamic restaurant industry.