FAT Brands CEO denies fraud allegations and welcomes growth

Andy Wiederhorn says his lawyers will prove his innocence and FAT Brands is getting stronger.

Andy Wiederhorn, CEO of FAT Brands Inc., the parent company of Fatburger and 16 other restaurant brands, told investors Monday there was no need to worry about the ongoing lawsuits and investigation. of the FBI on allegations of securities and wire fraud, money laundering and attempted tax. evasion. He denied all allegations, saying he looks forward to his legal team demonstrating “that all transactions were properly documented, reviewed, approved and disclosed.”

Although the LA Times broke news of the investigation last month, citing the government affidavit, Wiederhorn said it should not have been made public because it was the subject of a court order. sealed. The CEO, who spent 15 months in jail after pleading guilty in 2005 charges of paying an illegal gratuity to a partner and filing a false tax return, said the company was not under investigation. Instead, the United States Attorney’s office focused on Wiederhorn and his family.

“Being a public company and a public figure brings its share of visibility,” Wiederhorn said on an earnings call, where he discussed the company’s fourth-quarter 2021 financial results for the 13-week period ending. on December 26, 2021. the story, it does not surprise me that the government is looking into the allegations also raised in the derivative complaint,” said Wiederhorn, who has publicly denied willfully breaking the law in connection with his guilty plea which was led to his imprisonment. “The LA Times article which published characterizations of the government’s position contains numerous factual errors and confuses the various entities and my family as if they were one.”

A shareholder, however, filed a lawsuit against FAT Brands and Fog Cutter Capital Group, alleging that Fog Cutter used funds borrowed from FAT Brands to produce $27 million in multi-year cash advances. He claimed Fog Cutter owed $38.7 million to FAT Brands, but said the company canceled loans to Wiederhorn before the merger. In January, a Delaware judge ruled the trial could proceed, but Wiederhorn does not allege wrongdoing.

“While these legal matters are certainly a personal distraction, our team is focused on managing our business and integrating the newly acquired brands into the FAT family brands,” said Wiederhorn.

These brands included Twin Peaks, which FAT bought for $300 million, as well as Fazoli’s, which cost the brand $130 million, and Native Grill & Wings acquired for $20 million. Wiederhorn estimated that the 2021 acquisitions would drive normalized incremental post-COVID EBITDA of $45-50 million in 2022.

“We are extremely pleased with the performance of the brands we acquired in 2021 which, if we were to include them, would have driven our same-store sales growth to 8.5% for the fourth quarter of 2021 compared to 2019,” did he declare.

Wiederhorn was pleased with the company’s other fourth quarter results, saying revenue increased 1,042% and adjusted EBITDA increased 500% from the year-ago quarter.

“FAT Brands is truly unique because we have a scalable platform that gives us the ability to synergistically integrate new concepts with minimal additional overhead,” he said. “We also have a long organic growth track with over 850 new sites in our pipeline, giving us potential unit growth of 33% and EBITDA growth of 50% over the next few years.”

The company reported same-store sales growth of 5.6% and a system-wide sales increase of 353% for the fourth quarter of 2021 compared to 2019.

By the end of the year, the company will open 120 locations and expects system-wide sales to increase by more than $2.3 billion, which will result in a rate of normalized execution of estimated post-COVID EBITDA of nearly $90-95 million for 2022. However, adding to its portfolio of brands, is no longer a focus.

“We’re one size and one scale now, but we don’t need to acquire additional brands,” Wiederhorn said. “We already have so many great ones with so much organic growth already committed and paid for.”

That doesn’t mean all acquisitions are irrelevant, though.

“Actually, we’re looking at some right now, but our focus this year has to be to digest what we’ve already gained by realizing the synergies,” Wiederhorn said. “Additionally, as previously mentioned, there are significant cross-selling opportunities within the franchisee community within our portfolio of 17 brands.”