Pretzelmaker’s Free Bites: A Big Win for FAT Brands?

Pretzelmaker’s National Pretzel Day promotion—giving away free pretzel bites and dangling $5 discounts—is more than a gimmick. It’s a strategic move to supercharge customer engagement and sales for its parent company, FAT Brands (NASDAQ: FAT). But here’s the question: Can this bite-sized strategy translate into a meaningful win for investors? Let’s dig into the data.

The Promotion’s Punch: Free Bites and Loyal Bites

Pretzelmaker’s April 26 promotion offered free Small Original Pretzel Bites to all visitors, paired with a $5-off coupon for Rewards App sign-ups. The goal? Drive foot traffic, boost app downloads, and create a halo effect for future sales. Think of it as a two-part hook: immediate gratification (free pretzels) and long-term loyalty (discounts for app users).

This isn’t the first time Pretzelmaker has leaned into freebies. In 2019, they used similar tactics to engage Rewards members, but this year’s twist—tethering discounts to app sign-ups—is smarter. By incentivizing digital adoption, Pretzelmaker can gather customer data and refine targeting, turning one-time visitors into repeat buyers. The $5-off coupon valid for 14 days is a masterstroke: it nudges customers back for bigger purchases, potentially boosting average order values.

The Big Picture: FAT Brands’ Financial Crossroads

FAT Brands, which owns Pretzelmaker and 17 other restaurant brands, is in a precarious spot. Despite 23% revenue growth in 2024 to $592.7 million, net losses skyrocketed to $197.6 million, a 103% jump from 2023. The company is drowning in debt ($306 million in interest expenses alone last year) and struggling with same-store sales declines (-2.5% in 2024).

But here’s the silver lining: Pretzelmaker is part of FAT’s “core” brands, alongside Marble Slab Creamery and Hurricane Grill & Wings. These units are critical to turning around profitability. The National Pretzel Day promotion isn’t just about a single day—it’s a test of whether FAT can leverage its 2,300 global locations and franchise network to reverse declining sales trends.

The Spin-Off Play: Twin Peaks and the Debt Dragon

FAT’s recent spin-off of Twin Hospitality (owner of Twin Peaks) is a bold move. By unloading underperforming assets and focusing on its strongest brands, FAT aims to slash debt and improve liquidity. The spin-off could free up capital to invest in high-growth concepts like Pretzelmaker’s breakfast menus and standalone drive-thrus, which promise higher traffic and margins.

Investors should also note the analyst’s “Strong Buy” rating with a $12 price target—a 408% upside from April’s $2.35 price. That’s not just optimism—it’s a bet on FAT’s ability to execute its refranchising plan (reducing company-owned stores to just 33) and leverage its franchise pipeline of 1,000+ locations.

The Risks: Same-Store Sales and Debt Demons

Don’t mistake this for a slam dunk. FAT’s Achilles’ heel—same-store sales—remains unresolved. A 2.5% decline in 2024 signals softening demand or brand fatigue. If Pretzelmaker’s promotion can’t reverse that trend, the stock could stay stuck in the mud.

Then there’s the debt. With interest expenses consuming 20% of revenue, even a small misstep in same-store sales could push losses deeper into the red. The spin-off might help, but FAT needs to prove it can grow revenue and margins—not just top-line numbers.

The Bottom Line: A Bite of Hope, But Chew Slowly

Pretzelmaker’s National Pretzel Day promotion is a smart play to juice traffic and app engagement. If it translates into sustained sales growth and app-driven loyalty, it could be the first bite of a turnaround. Couple that with the Twin Peaks spin-off and a 100% franchised model, and FAT Brands has a fighting chance.

But investors should hold the salt on the free pretzels. Until we see same-store sales stabilize (or grow) and debt shrink, FAT remains a high-risk, high-reward bet. The stock’s $2.35 price is a steal if the turnaround works—but if same-store sales keep falling, this could be a pretzel-shaped disaster.

Final Call: Buy if you believe in FAT’s execution and the analyst’s $12 target—but Hold until we see Q2 results and concrete signs of margin improvement. The next bite could be the one that decides whether this stock is a sweet deal or a sour one.

Data sources: FAT Brands’ 2023/2024 financial reports, Nasdaq, and company press releases.