FAT Brands: A Mixed Bag with Big Growth Hopes – Is This a Buy?

Investors, let’s cut to the chase: FAT Brands Inc. (NASDAQ: FAT) just delivered Q1 2025 results that scream contradiction. Revenue dropped, same-store sales tanked, and the net loss widened—yet the stock is up 4% after hours. Why? Because beneath the red ink lies a story of aggressive expansion, risky bets on franchising, and a CEO who’s rolling the dice on a manufacturing overhaul. Let’s break it down.

The Numbers: A Tough Quarter, But Not a Write-Off

Total revenue fell 6.5% to $142 million, dragged down by shuttered Smokey Bones locations and a 3.4% dive in system-wide same-store sales. The net loss swelled to $46 million, or $2.73 per share, and adjusted EBITDA plunged 39% to $11.1 million. Ouch. But here’s the kicker: 23 new stores opened in Q1 alone, a 37% jump from last year. The company’s pipeline now holds 1,000 signed agreements, with plans to open over 100 locations in 2025.

The Bull Case: Expansion, Expansion, Expansion

FAT Brands isn’t just building restaurants—it’s reinventing them. The first Round Table Pizza and Marble Slab Creamery co-branding effort is off the ground, and agreements for 40 new locations in France under Fatburger and Buffalo’s Cafe brands signal global ambition. But the real wild card? The $8.8 million in Q1 sales from its Georgia manufacturing facility, which management aims to ramp up to 60-70% utilization (from 40-45%). At that rate, they’re targeting $15–$25 million annually in incremental revenue, potentially slashing debt over time.

Then there’s the refranchising push. Selling 57 company-owned Fazoli’s locations could free up cash and align FAT with its goal of becoming a “nearly 100% franchised model.” The spin-off of Twin Hospitality Group Inc., which netted a $50 million dividend to shareholders, also hints at balance sheet cleanup.

The Bear Case: Debt, Litigation, and Execution Risk

Let’s not sugarcoat it: $1.54 billion in total debt looms over this company like a storm cloud. Rising interest expenses ($35.9 million in Q1) and a 10% spike in G&A costs (to $33 million)—largely due to litigation—aren’t helping. Same-store sales are in freefall, and while new stores are popping up, they’ll need to turn profitable fast to offset losses.

The stock’s recent bounce to $3.00 after hours suggests optimism, but remember: this is a company that’s been here before. In 2023, FAT Brands’ pivot to franchising and manufacturing was met with enthusiasm, only for same-store sales to stumble again. Can management finally close the execution gap?

The Bottom Line: A Risky Roll of the Dice – But Worth Watching

FAT Brands is a high-risk, high-reward play. The math is simple: if the company can:
1. Turn around same-store sales (even modestly),
2. Hit its 100-store 2025 target,
3. Boost factory utilization to $25 million/year,
and manage debt, this stock could surge.

But the risks are glaring. Litigation costs could balloon, franchising might not yield quick cash, and the $1.54 billion debt mountain is a ticking clock.

Final Call: Buy the dip? Maybe—but only if you’re ready for volatility. The stock’s post-earnings pop shows investors are betting on the story, not the current numbers. If you’re a long-term growth investor, this could be a steal at $3. But tread carefully: FAT Brands isn’t for the faint of heart.

Investors, what’s your play? Let me know in the comments!

Disclosure: The analysis is based on publicly available data and does not constitute financial advice. Consult your financial advisor before making investment decisions.