Smokey Bones Closures Drive FAT Brands' Strategic Shift to Boost Profitability

FAT Brands Inc. is undertaking a strategic reorganization to address the underperformance of its Smokey Bones barbecue restaurant chain. The company announced plans to shutter 15 Smokey Bones locations, with 10 closures already completed and five more slated to close by the end of the third quarter. The decision follows FAT Brands' acquisition of Smokey Bones in 2023 and the subsequent integration of the chain into its Twin Hospitality division.

Ken Kuick, co-CEO and CFO of FAT Brands, stated that the closures align with a broader strategy to optimize the company's portfolio and improve overall profitability by eliminating inefficiencies. Twin Hospitality CEO Kim Boerema emphasized that the organization is committed to supporting the remaining Smokey Bones locations, which exhibit positive cash flow and contribute approximately $3 million in total EBITDA on a trailing 12-month basis.

The company has identified 19 Smokey Bones restaurants for conversion into Twin Peaks establishments, which are recognized for their lodge-themed sports bars and robust unit volumes. The converted venues are reportedly generating an average of $7.8 million per location, compared to $3.5 million as Smokey Bones. Twin Hospitality has already completed two of these conversions, with a third expected to open later this year.

The reorganization is projected to enhance FAT Brands' EBITDA performance by an estimated $1.5 million, stemming from reduced corporate overhead and improved efficiencies. The focus on franchising a portion of the remaining Smokey Bones locations aims to create a more balanced corporate-to-franchise mix, enabling further growth potential for the brand.

Ken Brendemihl has been appointed as the new president of Smokey Bones. With over 25 years of experience in restaurant leadership, including roles at Alamo Drafthouse and Texas Roadhouse, Brendemihl is set to steer Smokey Bones through this transitional period, leveraging his operational expertise to drive the chain's long-term success.

Despite these challenges, FAT Brands remains committed to sustaining the viability and expansion of Smokey Bones, while simultaneously strengthening its Twin Peaks brand. Although Twin Hospitality has reported operational losses, the closure of underperforming Smokey Bones units is expected to mitigate these financial setbacks, paving the way for improved profitability.

In conclusion, Smokey Bones, once an expanding franchise under various ownerships, faces a redefined future as FAT Brands redeploys resources to enhance its broader business portfolio. The strategic transition highlights the complex dynamics of the restaurant industry, where adaptability and fiscal prudence are pivotal to sustaining growth and competitive advantage.