FAT Brands' Delisting Crisis and Liquidity Challenges: A Looming Bankruptcy Scenario?

The restaurant franchising giant FAT Brands Inc. (NASDAQ:FAT) is teetering on the brink of collapse, with a perfect storm of liquidity constraints, debt acceleration, and delisting threats converging to test its survival. As of December 2025, the company faces a $1.26 billion debt acceleration triggered by UMB Bank, the trustee for its secured notes, demanding immediate repayment of $158.9 million in principal and $9.9 million in accrued interest after FAT Brands missed a quarterly payment. Simultaneously, Nasdaq has issued three delisting notices due to the stock's prolonged sub-$1 price and inadequate market capitalization, giving the company until July 7 to regain compliance. For investors, the question is no longer whether FAT Brands can recover but how it will fail-and who will bear the brunt of the fallout.

Liquidity Crunch: A House of Cards Collapsing

FAT Brands' liquidity crisis is rooted in its inability to service a $1.4 billion debt burden while navigating eight consecutive quarters of declining same-store sales. The company's Q3 2025 financial report underscores the severity: total revenue fell 2.3% year-over-year to $140.0 million, while net losses widened to $58.2 million, or $3.39 per diluted share. System-wide sales dropped 5.5% to $567.5 million, with same-store sales retreating 3.5%. These metrics reflect a franchise model struggling to adapt to shifting consumer preferences and operational inefficiencies.

Compounding the issue is the acceleration of securitized debt tied to royalty streams and assets from brands like Fazoli's, Round Table Pizza, and Fatburger. According to a report by , the company lacks sufficient funds in its collection accounts to meet immediate repayment demands, rendering its liquidity position "critically weak."

Debt Restructuring: A Race Against Time

In response, FAT Brands has initiated negotiations with noteholders to restructure its debt, though no agreements have materialized. The company's co-CEOs, Ken Kuick and Rob Rosen, have emphasized deleveraging and operational improvements as priorities, but concrete steps remain limited. A proposed $75–$100 million equity raise through Twin Peaks aims to reduce debt and fund new unit development, yet this strategy hinges on investor confidence-a commodity in short supply given the company's deteriorating credit ratings and legal history. highlights, the acceleration of $1.26 billion in debt "places the company at immediate risk of bankruptcy," with foreclosures on pledged assets potentially triggering a cascading collapse.

The debt restructuring efforts are further complicated by the company's decision to pause its dividend, preserving $35–$40 million in annual cash flow. While this measure extends short-term runway, it does little to address the structural imbalance between obligations and revenue. As noted by Franchise Times, the acceleration of $1.26 billion in debt "places the company at immediate risk of bankruptcy," with foreclosures on pledged assets potentially triggering a cascading collapse.

Delisting Implications: A Death Knell for Investor Value

Nasdaq's delisting notices add another layer of existential risk. If FAT Brands fails to elevate its stock price and market capitalization by July 7, its shares will trade over the counter (OTC), severely limiting access to institutional capital. For retail investors, OTC trading typically correlates with wider bid-ask spreads, reduced transparency, and diminished liquidity, compounding losses in an already volatile scenario.

The delisting also signals a loss of credibility with regulators and creditors. FAT Brands' recent resolution of a long-standing SEC investigation may have temporarily alleviated regulatory pressure, but the delisting notices and debt acceleration suggest systemic governance failures. highlights, the company's "history of legal and regulatory issues" has eroded investor trust, making a turnaround increasingly improbable.

The Path Forward: A Looming Bankruptcy?

While FAT Brands' management remains optimistic about its ability to navigate the crisis, the financial realities paint a grim picture. The company's Q3 2025 adjusted EBITDA of $13.1 million-a decline from $14.1 million in the prior-year period-indicates insufficient cash flow to service even its current debt load, let alone the accelerated obligations. With eight consecutive quarters of same-store sales declines and a $1.4 billion debt burden, the likelihood of a Chapter 11 filing appears to be rising.

For investors, the key risks are twofold: a potential total loss of equity value in the event of bankruptcy and the erosion of collateral pledged to creditors. UMB Bank's control over Twin Peaks' shares could lead to forced liquidation, further devaluing the company's remaining assets. Meanwhile, the delisting would render any recovery efforts nearly impossible, cementing FAT Brands' status as a cautionary tale of overleveraged growth.

Conclusion

FAT Brands' delisting crisis and liquidity challenges represent a convergence of financial, operational, and regulatory failures. While the company's debt restructuring and equity-raising initiatives offer a glimmer of hope, the scale of its obligations and the fragility of its business model suggest a high probability of insolvency. For investors, the lesson is clear: in a scenario where survival hinges on unrealistic optimism, the safest bet may be to cut losses early.