On October 30, 2024, FAT Brands Inc (FAT, Financial) released its 8-K filing detailing the financial results for the fiscal third quarter ended September 29, 2024. FAT Brands Inc, a multi-brand restaurant franchising company, operates globally with a diverse portfolio including brands like Round Table Pizza, Fatburger, and Johnny Rockets. The company primarily generates revenue through franchise fees and royalties, with a significant portion of its income derived from the United States.
Revenue Growth and Challenges
FAT Brands Inc reported a substantial increase in total revenue, which rose by 31.1% to $143.4 million compared to $109.4 million in the same quarter of the previous year. This growth was primarily driven by the acquisition of Smokey Bones in September 2023 and the opening of new restaurant locations. Despite this revenue growth, the company faced challenges, including a net loss of $44.8 million, or $2.74 per diluted share, compared to a net loss of $24.7 million, or $1.59 per diluted share, in the third quarter of 2023. The widening losses highlight ongoing financial pressures, including increased costs and expenses.
Financial Achievements and Industry Context
The company's revenue growth is a positive indicator in the competitive restaurant industry, where expanding brand portfolios and increasing location footprints are crucial for long-term success. FAT Brands Inc's strategic focus on its Polished Casual category, particularly through its Twin Peaks brand, underscores its commitment to growth. The company opened 22 new units during the quarter, bringing the year-to-date total to 71 new units, with plans to reach 100 by year-end.
Key Financial Metrics
FAT Brands Inc's financial statements reveal several important metrics:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenue | $143.4 million | $109.4 million |
| Net Loss | $(44.8) million | $(24.7) million |
| EBITDA | $1.7 million | $10.8 million |
| Adjusted EBITDA | $14.1 million | $21.9 million |
The increase in costs and expenses, which rose by 48.1% to $152.2 million, was largely attributed to the acquisition of Smokey Bones and increased activity from company-owned restaurants. General and administrative expenses also saw a significant rise, primarily due to increased professional fees related to pending litigation.
Commentary and Strategic Moves
Andy Wiederhorn, Chairman of FAT Brands, stated, "Over the last three years, we have expanded our brand portfolio to include 18 distinct concepts while our footprint has increased tenfold, now encompassing over 2,300 locations across more than 40 countries and 49 U.S. states or territories."
Rob Rosen, Co-Chief Executive Officer, commented, "In May, Twin Peaks and Smokey Bones, as a combined entity, took a significant step towards becoming a standalone public company. We view this potential IPO or alternative transaction as a strategic opportunity to unlock value for FAT shareholders."
Analysis and Outlook
FAT Brands Inc's performance in the third quarter of 2024 reflects both the opportunities and challenges faced by the company. While revenue growth is promising, the widening net loss and increased expenses highlight the need for strategic financial management. The company's focus on expanding its Polished Casual category and potential IPO plans for Twin Peaks and Smokey Bones could provide avenues for future growth and value creation for shareholders. However, the company must address its cost structure and operational efficiencies to improve profitability and sustain its growth trajectory.
Explore the complete 8-K earnings release (here) from FAT Brands Inc for further details.
