As FAT Brands Sells Its Assets, What Should Franchisees Keep in Mind?
FAT Brands undergoes major asset sales, raising concerns for franchisees amid ownership changes.
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FAT Brands sold its assets for about $1 billion to several buyers, including lenders and a franchisee. Notable brands involved include Johnny Rockets and Fatburger. Franchisees must be vigilant as they navigate potential upheavals from the sales approved by a bankruptcy court.
Why It Matters
Multi-unit operators in the affected territories may need to prepare for operational challenges and shifts in franchise support amidst this significant ownership transition.
FAT Brands, a franchisor with a tumultuous history, sold its assets to four buyers for approximately $1 billion, following approval from a Texas bankruptcy court in May. The deal includes a group of lenders, FBG Bid Co., acquiring 14 brands such as Johnny Rockets, Fatburger, and Fazoli's for $595 million in a debt-to-equity transaction. Other transactions involved TwnPks Bid Co. acquiring Twin Peaks for $359.5 million in debt, while Elevation Burger was purchased by Kuwait-based TabCo International Food for $2.5 million, and Hot Dog on a Stick was acquired by Amazing Brands for $8 million.
FAT Brands' rollercoaster journey since its founding in 2017 includes two IPOs, a significant buying spree, and, ultimately, its delisting from Nasdaq and bankruptcy filing. The reappointed CEO Andy Wiederhorn was ousted following creditor pressures, adding to the uncertainty for franchisees. Robin Gagnon, CEO of We Sell Restaurants, advises that franchisees should monitor whether the new ownership will facilitate brand stability and support franchisees effectively. She emphasizes the importance of recognizing signals related to the restructuring phase, as it indicates whether brands are focused on long-term growth or preparing for another exit.
Franchisees face potential challenges in the ownership transition and should remain vigilant for any operational red flags as the new lenders take control. The impact on royalty structures and overall franchise support remains to be seen, depending on the operational strategies adopted by the new owners. Franchisees are encouraged to consider their own risk tolerance as they navigate this uncertain landscape.
