FAT Brands(FAT) - 2026 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company has seen a cautious but cautiously optimistic consumer environment, with recent weeks showing improved sales [5] - Same-store sales were down approximately 3% to 3.5% across all 18 brands, which is considered manageable in the current environment [31] - The company reported technical gross revenues exceeding $600 million, with around $150 million from royalties, franchise fees, and profits from company-owned stores [32] Business Line Data and Key Metrics Changes - The company has expanded its portfolio to 18 brands, including high-growth brands like Fatburger, Johnny Rockets, and Round Table Pizza [4][8] - The manufacturing operation, which produces cookie dough and pretzel mix, has increased its capacity utilization from 30% to 45%, generating approximately $15 million in annual EBITDA [13][14] Market Data and Key Metrics Changes - The company has sold a couple of hundred incremental franchise units in recent years, indicating strong franchisee confidence [7] - The development pipeline includes a mix of new franchise units and conversions, with a solid path for growth anticipated in the coming years [24] Company Strategy and Development Direction - The company is focusing on co-branded and multi-branded locations, which are expected to generate 10% to 20% higher revenues compared to standalone units [9] - The strategy includes converting select Smoky Bones locations into Twin Peaks, which has shown a potential to double sales in converted units [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by rising interest rates and a difficult equity market, but remains optimistic about restructuring debt and improving cash flow [27][33] - The company is actively engaging with noteholders to restructure debt and is looking for practical solutions to improve financial stability [30] Other Important Information - The company has faced significant costs related to a government investigation, amounting to $75 million, but has successfully navigated through it [28] - The company has a strong focus on utilizing its manufacturing capabilities to support its restaurant brands and expand its product offerings [12] Q&A Session Summary Question: What is the current state of the consumer? - Management noted a cautious but cautiously optimistic consumer environment, with recent sales improvements [5] Question: How is the development pipeline looking? - The company has sold a couple of hundred incremental franchise units, indicating franchisee confidence [7] Question: What are the strategic advantages of co-branding? - Co-branding is expected to yield 10% to 20% higher revenues and is a cost-effective way for franchisees to enter new concepts [9] Question: How is the company addressing its debt situation? - Management is in discussions with noteholders to restructure debt and is seeking common-sense solutions [30] Question: What is the growth strategy for Twin Peaks? - Growth will come from a combination of conversions and new franchise openings, with a solid pipeline for the future [24]