QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | o | Accelerated filer | o | ||||||||
x | Smaller reporting company | ||||||||||
Emerging growth company |
March 26, 2023 | December 25, 2022 | ||||||||||
Audited | |||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash | $ | $ | |||||||||
Restricted cash | |||||||||||
Accounts receivable, net of allowances of $ as of March 26, 2023 and December 25, 2022, respectively | |||||||||||
Inventory | |||||||||||
Assets classified as held-for-sale | |||||||||||
Other current assets | |||||||||||
Total current assets | |||||||||||
Non-current restricted cash | |||||||||||
Operating lease right-of-use assets | |||||||||||
Goodwill | |||||||||||
Other intangible assets, net | |||||||||||
Property and equipment, net | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Stockholders’ Deficit | |||||||||||
Liabilities | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other liabilities | |||||||||||
Deferred income, current portion | |||||||||||
Accrued advertising | |||||||||||
Accrued interest payable | |||||||||||
Dividend payable on preferred shares | |||||||||||
Liabilities related to assets classified as held-for-sale | |||||||||||
Operating lease liability, current portion | |||||||||||
Redeemable preferred stock, current portion | |||||||||||
Long-term debt, current portion | |||||||||||
Acquisition purchase price payable | |||||||||||
Total current liabilities | |||||||||||
Deferred income, net of current portion | |||||||||||
Deferred income tax liabilities, net | |||||||||||
Operating lease liability, net of current portion | |||||||||||
Long-term debt, net of current portion | |||||||||||
Other liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 13) | |||||||||||
Stockholders’ deficit | |||||||||||
Preferred stock, $ | |||||||||||
Class A common stock and Class B common stock and additional paid-in capital as of March 26, 2023: $ | ( | ( | |||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ deficit | ( | ( | |||||||||
Total liabilities and stockholders’ deficit | $ | $ |
Thirteen Weeks Ended | ||||||||||||||
March 26, 2023 | March 27, 2022 | |||||||||||||
Revenue | ||||||||||||||
Royalties | $ | $ | ||||||||||||
Restaurant sales | ||||||||||||||
Advertising fees | ||||||||||||||
Factory revenues | ||||||||||||||
Franchise fees | ||||||||||||||
Other revenue | ||||||||||||||
Total revenue | ||||||||||||||
Costs and expenses | ||||||||||||||
General and administrative expense | ||||||||||||||
Cost of restaurant and factory revenues | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Refranchising loss | ||||||||||||||
Advertising fees | ||||||||||||||
Total costs and expenses | ||||||||||||||
Income from operations | ||||||||||||||
Other (expense) income, net | ||||||||||||||
Interest expense, net | ( | ( | ||||||||||||
Interest expense related to preferred shares | ( | ( | ||||||||||||
Other income, net | ||||||||||||||
Total other expense, net | ( | ( | ||||||||||||
Loss before income tax provision | ( | ( | ||||||||||||
Income tax provision | ||||||||||||||
Net loss | $ | ( | $ | ( | ||||||||||
Basic and diluted loss per common share | $ | ( | $ | ( | ||||||||||
Basic and diluted weighted average shares outstanding | ||||||||||||||
Cash dividends declared per common share | $ | $ |
Common Stock | Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Shares | Class B Shares | Class A Par Value | Class B Par Value | Additional Paid-In Capital | Total Common Stock | Shares | Par Value | Additional Paid-In Capital | Total Preferred Stock | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 25, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common and preferred stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid on common stock | — | — | — | — | ( | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid on Series B preferred stock | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 26, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | ( | $ | ( |
Common Stock | Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Shares | Class B Shares | Class A Par Value | Class B Par Value | Additional Paid-In Capital | Total Common Stock | Shares | Par Value | Additional Paid-In Capital | Total Preferred Stock | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 26, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common and preferred stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared on common stock | — | — | — | — | ( | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared on Series B preferred stock | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of Series B preferred stock put option | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 27, 2022 | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operations: | |||||||||||
Deferred income taxes | |||||||||||
Depreciation and amortization | |||||||||||
Share-based compensation | |||||||||||
Accretion of loan fees and interest | |||||||||||
Adjustments of purchase price liability | |||||||||||
Provision for bad debts | ( | ||||||||||
Change in: | |||||||||||
Accounts receivable | |||||||||||
Inventory | ( | ||||||||||
Other current and noncurrent assets | ( | ||||||||||
Operating lease assets and liabilities | |||||||||||
Deferred income | ( | ||||||||||
Accounts payable | ( | ||||||||||
Accrued expenses and other liabilities | ( | ( | |||||||||
Accrued advertising | ( | ||||||||||
Accrued interest payable | |||||||||||
Other current and noncurrent liabilities | ( | ||||||||||
Total adjustments | |||||||||||
Net cash used in operating activities | ( | ( | |||||||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Payments received on notes receivable | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from borrowings, net of issuance costs | |||||||||||
Repayments of borrowings | ( | ( | |||||||||
Proceeds from issuance of common and preferred shares | |||||||||||
Dividends paid on redeemable preferred stock | ( | ||||||||||
Dividends paid on common shares | ( | ( | |||||||||
Dividends paid on preferred shares | ( | ( | |||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net increase (decrease) in cash and restricted cash | ( | ||||||||||
Cash and restricted cash at beginning of the period | |||||||||||
Cash and restricted cash at end of the period | $ | $ | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for income taxes | $ | $ |
March 26, 2023 | December 25, 2022 | ||||||||||
Property and equipment | $ | $ | |||||||||
Operating lease right-of-use assets | |||||||||||
Total | $ | $ |
Thirteen Weeks Ended | |||||||||||
March 26, 2023 | March 27, 2022 | ||||||||||
Restaurant costs and expenses, net of revenue | $ | $ | |||||||||
Gain on store sales or closures | ( | ||||||||||
Refranchising loss | $ | $ |
March 26, 2023 | December 25, 2022 | ||||||||||
Real estate | $ | $ | |||||||||
Equipment | |||||||||||
$ | $ | ||||||||||
Accumulated depreciation | ( | ( | |||||||||
Property and equipment, net | $ | $ |
Amortizing Intangible Assets | Non-Amortizing Intangible Assets | ||||||||||||||||
Goodwill | Trademarks | ||||||||||||||||
December 25, 2022 | $ | $ | $ | ||||||||||||||
Amortization | ( | — | — | ||||||||||||||
March 26, 2023 | $ | $ | $ |
March 26, 2023 | December 25, 2022 | |||||||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||||||
Amortizing intangible assets | ||||||||||||||||||||||||||||||||||||||
Franchise agreements | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Customer relationships | ( | ( | ||||||||||||||||||||||||||||||||||||
Other | ( | ( | ||||||||||||||||||||||||||||||||||||
$ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
Non-amortizing intangible assets | ||||||||||||||||||||||||||||||||||||||
Trademarks | ||||||||||||||||||||||||||||||||||||||
Total amortizing and non-amortizing intangible assets, net | $ | $ |
Fiscal Year: | |||||
Remainder of 2023 | $ | ||||
2024 | |||||
2025 | |||||
2026 | |||||
2027 |
Thirteen Weeks Ended | |||||||||||||||||
March 26, 2023 | March 27, 2022 | ||||||||||||||||
Provision for income taxes | $ | $ | |||||||||||||||
Effective tax rate | ( | % | ( | % |
March 26, 2023 | December 25, 2022 | ||||||||||
Operating lease right-of-use assets | $ | $ | |||||||||
Right-of-use assets classified as held-for-sale | |||||||||||
Total right-of-use assets | $ | $ | |||||||||
Operating lease liabilities | $ | $ | |||||||||
Lease liabilities related to assets held-for-sale | |||||||||||
Total operating lease liabilities | $ | $ |
Fiscal year: | |||||
Remainder of 2023 | $ | ||||
2024 | |||||
2025 | |||||
2026 | |||||
2027 | |||||
Thereafter | |||||
Total lease payments | $ | ||||
Less imputed interest | ( | ||||
Total | $ |
Thirteen Weeks Ended | |||||||||||
March 26, 2023 | March 27, 2022 | ||||||||||
Cash paid for amounts included in the measurement of operating lease liabilities: | |||||||||||
Operating cash flows from operating leases | $ | $ |
March 26, 2023 | December 25, 2022 | ||||||||||||||||||||||||||||||||||
Final Maturity | Anticipated Call Date | Rate | Face Value | Book Value | Book Value | ||||||||||||||||||||||||||||||
Senior Debt | |||||||||||||||||||||||||||||||||||
FB Royalty Securitization | 4/25/2051 | 7/25/2023 | % | $ | $ | $ | |||||||||||||||||||||||||||||
GFG Royalty Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Twin Peaks Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Fazoli's/Native Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Senior Subordinated Debt | |||||||||||||||||||||||||||||||||||
FB Royalty Securitization | 4/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
GFG Royalty Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Twin Peaks Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Fazoli's/Native Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Subordinated Debt | |||||||||||||||||||||||||||||||||||
FB Royalty Securitization | 4/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
GFG Royalty Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Twin Peaks Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Fazoli's/Native Securitization | 7/25/2051 | 7/25/2023 | % | ||||||||||||||||||||||||||||||||
Total Securitized Debt | |||||||||||||||||||||||||||||||||||
Elevation Note | 7/19/2026 | N/A | % | ||||||||||||||||||||||||||||||||
Equipment Notes | 5/5/2027 to 3/7/2029 | N/A | |||||||||||||||||||||||||||||||||
Twin Peaks Construction Loan | 8/5/2023 | N/A | % | ||||||||||||||||||||||||||||||||
Twin Peaks Construction Loan II | 1/9/2024 | N/A | % | ||||||||||||||||||||||||||||||||
Total Debt | $ | ||||||||||||||||||||||||||||||||||
Current portion of long-term debt | ( | ( | |||||||||||||||||||||||||||||||||
Long-term Debt | $ | $ |
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | |||||||||||||||
Warrants exercisable at December 25, 2022 | $ | ||||||||||||||||
Exercised | ( | $ | |||||||||||||||
Warrants outstanding and exercisable at March 26, 2023 | $ |
Thirteen Weeks Ended | ||||||||||||||
March 26, 2023 | March 27, 2022 | |||||||||||||
United States | $ | $ | ||||||||||||
Other countries | ||||||||||||||
Total revenue | $ | $ |
Thirteen Weeks Ended | ||||||||||||||
March 26, 2023 | March 27, 2022 | |||||||||||||
Statements of Operations Data: | ||||||||||||||
Revenue | ||||||||||||||
Royalties | $ | 22,485 | $ | 20,898 | ||||||||||
Restaurant sales | 62,601 | 58,077 | ||||||||||||
Advertising fees | 9,351 | 9,361 | ||||||||||||
Factory revenues | 9,165 | 8,179 | ||||||||||||
Franchise fees | 802 | 714 | ||||||||||||
Other revenue | 1,287 | 174 | ||||||||||||
Total revenue | 105,691 | 97,403 | ||||||||||||
Costs and expenses | ||||||||||||||
General and administrative expense | 28,415 | 24,753 | ||||||||||||
Cost of restaurant and factory revenues | 59,087 | 54,799 | ||||||||||||
Depreciation and amortization | 7,116 | 6,561 | ||||||||||||
Refranchising loss | 159 | 548 | ||||||||||||
Advertising fees | 10,527 | 10,257 | ||||||||||||
Total costs and expenses | 105,304 | 96,918 | ||||||||||||
Income from operations | 387 | 485 | ||||||||||||
Total other expense, net | (29,977) | (19,716) | ||||||||||||
Loss before income tax provision | (29,590) | (19,231) | ||||||||||||
Income tax provision | 2,536 | 4,524 | ||||||||||||
Net loss | $ | (32,126) | $ | (23,755) |
March 26, 2023 | March 27, 2022 | ||||||||||
Net cash used in operating activities | $ | (11.7) | $ | (11.1) | |||||||
Net cash used in investing activities | (2.0) | (3.8) | |||||||||
Net cash provided by (used in) financing activities | 32.2 | (4.5) | |||||||||
Net cash flows | $ | 18.5 | $ | (19.4) |
Exhibit Number | Incorporated By Reference to | Filed Herewith | ||||||||||||||||||||||||||||||
Description | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||||
31.1 | X | |||||||||||||||||||||||||||||||
31.2 | X | |||||||||||||||||||||||||||||||
32.1 | X | |||||||||||||||||||||||||||||||
101.INS | Inline XBRL Instance Document | X (Furnished) | ||||||||||||||||||||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X (Furnished) | ||||||||||||||||||||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X (Furnished) | ||||||||||||||||||||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X (Furnished) | ||||||||||||||||||||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X (Furnished) | ||||||||||||||||||||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X (Furnished) |
FAT BRANDS INC. | ||||||||
May 9, 2023 | By | /s/ Kenneth J. Kuick | ||||||
Kenneth J. Kuick | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial officer and duly authorized signatory for the registrant) |
Date: May 9, 2023 | /s/ Kenneth J. Kuick | ||||
Kenneth J. Kuick | |||||
Co-Chief Executive Officer and Chief Financial Officer | |||||
(Principal Executive and Financial Officer) |
Date: May 9, 2023 | /s/ Robert G. Rosen | ||||
Robert G. Rosen | |||||
Co-Chief Executive Officer and Head of Debt Capital Markets | |||||
(Principal Executive Officer) |
Date: May 9, 2023 | By | /s/ Kenneth J. Kuick | ||||||
Kenneth J. Kuick | ||||||||
Co-Chief Executive Officer and Chief Financial Officer | ||||||||
(Principal Executive, Financial and Accounting Officer) | ||||||||
Date: May 9, 2023 | By | /s/ Robert G. Rosen | ||||||
Robert G. Rosen | ||||||||
Co-Chief Executive Officer and Head of Debt Capital Markets | ||||||||
(Principal Executive Officer) |
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT - USD ($) $ in Thousands |
Total |
Total Common Stock |
Class A Shares |
Class B Shares |
Class A Par Value |
Class B Par Value |
Common Stock Additional Paid-In Capital |
Total Preferred Stock |
Preferred Stock Shares |
Preferred Stock Par Value |
Preferred Stock Additional Paid-In Capital |
Accumulated Deficit |
---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 26, 2021 | 15,109,747 | 1,270,805 | ||||||||||
Beginning balance (in shares) at Dec. 26, 2021 | 3,221,471 | |||||||||||
Beginning balance, value at Dec. 26, 2021 | $ (21,655) | $ (24,837) | $ 2 | $ 0 | $ (24,839) | $ 55,661 | $ 0 | $ 55,661 | $ (52,479) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net loss | (23,755) | (23,755) | ||||||||||
Issuance of common and preferred stock (in shares) | 21,850 | |||||||||||
Issuance of common and preferred stock | 79 | 61 | 61 | 18 | 18 | |||||||
Share-based compensation | 2,112 | 2,112 | 2,112 | |||||||||
Dividends paid on common stock | (2,128) | (2,128) | (2,128) | |||||||||
Dividends paid on Series B preferred stock | (1,652) | (1,652) | (1,652) | |||||||||
Exercise of Series B preferred stock put option | (4,107) | (4,107) | (4,107) | |||||||||
Ending balance (in shares) at Mar. 27, 2022 | 15,131,597 | 1,270,805 | ||||||||||
Ending balance (in shares) at Mar. 27, 2022 | 3,221,471 | |||||||||||
Ending balance, value at Mar. 27, 2022 | $ (51,106) | (24,792) | 2 | 0 | (24,794) | 49,920 | 0 | 49,920 | (76,234) | |||
Beginning balance (in shares) at Dec. 25, 2022 | 16,571,675 | 15,300,870 | 1,270,805 | |||||||||
Beginning balance (in shares) at Dec. 25, 2022 | 3,252,154 | 3,252,154 | ||||||||||
Beginning balance, value at Dec. 25, 2022 | $ (159,178) | (26,015) | 2 | 0 | (26,017) | 45,504 | 0 | 45,504 | (178,667) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net loss | (32,126) | (32,126) | ||||||||||
Issuance of common and preferred stock (in shares) | 40,952 | 20,826 | ||||||||||
Issuance of common and preferred stock | 439 | 57 | 57 | 382 | 382 | |||||||
Share-based compensation | 1,095 | 1,095 | 1,095 | |||||||||
Dividends paid on common stock | (2,320) | (2,320) | (2,320) | |||||||||
Dividends paid on Series B preferred stock | $ (1,755) | (1,755) | (1,755) | |||||||||
Ending balance (in shares) at Mar. 26, 2023 | 16,612,627 | 15,341,822 | 1,270,805 | |||||||||
Ending balance (in shares) at Mar. 26, 2023 | 3,272,980 | 3,272,980 | ||||||||||
Ending balance, value at Mar. 26, 2023 | $ (193,845) | $ (27,183) | $ 2 | $ 0 | $ (27,185) | $ 44,131 | $ 0 | $ 44,131 | $ (210,793) |
ORGANIZATION AND RELATIONSHIPS |
3 Months Ended |
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Mar. 26, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND RELATIONSHIPS | ORGANIZATION AND RELATIONSHIPS Organization and Nature of Business FAT Brands Inc. (the "Company" or "FAT") is a leading multi-brand restaurant company that develops, markets, acquires and manages quick-service, fast casual, casual dining and polished casual dining restaurant concepts around the world. As of March 26, 2023, the Company owned seventeen restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli's, Twin Peaks, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses. As of March 26, 2023, the Company had approximately 2,300 locations open and under construction, of which approximately 95% were franchised. Each franchising subsidiary licenses the right to use its brand name and provides franchisees with operating procedures and methods of merchandising. Upon signing a franchise agreement, the franchisor is committed to provide training, some supervision and assistance and access to operations manuals. As needed, the franchisor will also provide advice and written materials concerning techniques of managing and operating the restaurants. The Company's operations have historically been comprised primarily of franchising a growing portfolio of restaurant brands. This growth strategy is centered on expanding the footprint of existing brands and acquiring new brands through a centralized management organization which provides substantially all executive leadership, marketing, training and accounting services. As part of these ongoing franchising efforts, the Company will, from time to time, make opportunistic acquisitions of operating restaurants and may convert them to franchise locations. During the refranchising period the Company may operate the restaurants and classifies the operational activities as refranchising gains or losses and the assets and associated liabilities as held-for sale. Through recent acquisitions, the Company also operates "company-owned" restaurant locations of certain brands. COVID-19 The outbreak of the COVID-19 pandemic in March 2020 had a number of adverse effects on our business and that of our franchisees, including temporary and permanent closures of restaurant locations, reduced or modified store operating hours, difficulties in staffing restaurants and supply chain disruptions. While the disruptions to our business from the COVID-19 pandemic have mostly subsided, the resurgence of COVID-19 or its variants, as well as an outbreak of other widespread health epidemics or pandemics, could cause a closure of restaurants and disrupt our operations and have a material adverse effect on our business, financial condition and results of operations. Liquidity The Company recognized income from operations of $0.4 million and $0.5 million during the thirteen weeks ended March 26, 2023 and March 27, 2022, respectively. The Company has a history of net losses and an accumulated deficit of $210.8 million as of March 26, 2023. Additionally, the Company had negative working capital of $128.8 million. Of this amount, $91.8 million represents the current portion of redeemable preferred stock as discussed in Note 9. Since the Company did not deliver the applicable cash proceeds at the related due dates, the amount accrues interest until the payments are completed. The Company had $46.2 million of unrestricted cash at March 26, 2023 and plans on the combination of cash flows from operations, cash on hand and $48.5 million of issued but not sold aggregate principal amount of fixed rate secured notes to be sufficient to cover any working capital requirements for the next twelve months from the date of this report. If the Company does not achieve its operating plan, additional forms of financing may be required through the issuance of debt or equity. Although management believes it will have access to financing, no assurances can be given that such financing will be available on acceptable terms, in a timely manner or at all.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
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Mar. 26, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentation – The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Our revenues are derived primarily from two sales channels, franchised restaurants and company-owned locations, which we operate as one reportable segment. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of the Company, all adjustments considered necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included and are of a normal, recurring nature. Nature of operations – The Company operates on a 52-week calendar and its fiscal year ends on the last Sunday of the calendar year. Consistent with industry practice, the Company measures its stores’ performance based upon 7-day work weeks. Using the 52-week cycle ensures consistent weekly reporting for operations and ensures that each week has the same days since certain days are more profitable than others. The use of this fiscal year means a 53rd week is added to the fiscal year every 5 or 6 years, as is the case for fiscal year 2023. In a 52-week year, all four quarters are comprised of 13 weeks. In a 53-week year, one extra week is added to the fourth quarter. Use of estimates in the preparation of the condensed consolidated financial statements – The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Significant estimates include the determination of fair values of goodwill and other intangible assets, allowances for uncollectible notes receivable and accounts receivable, and the valuation allowance related to deferred tax assets. Estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial statement reclassification – Certain account balances from prior periods have been reclassified in these condensed consolidated financial statements to conform to current period classifications. Recently Adopted Accounting Standards In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The purpose of this amendment is to enhance disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. It requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. The amendments should be applied prospectively and are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASC No. 2022-02 for the fiscal year beginning December 26, 2022, which did not have an effect on the Company's condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments. This guidance replaced the previous incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects its current estimate of credit losses expected to be incurred over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). The purpose of this amendment was to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities. This granted certain classes of companies, including Smaller Reporting Companies (“SRCs”), additional time to implement major FASB standards, including ASU 2016-13. Larger public companies had an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities were permitted to defer adoption of ASU 2016-13, and its related amendments, until fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of an SRC and adopted the deferral period for ASU 2016-13. The guidance requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption, if applicable. The Company adopted ASU No. 2016-13 for the fiscal year beginning December 26, 2022. The adoption did not require an adjustment to retained earnings and did not have an effect on the Company's condensed consolidated financial statements.
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REFRANCHISING |
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Mar. 26, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Refranchising | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REFRANCHISING | REFRANCHISINGAs part of its ongoing franchising efforts, the Company may, from time to time, sell operating restaurants built or acquired by the Company in order to convert them to franchise locations or acquire existing franchised locations to resell them to another franchisee across all of its brands. The following assets used in the operation of certain restaurants meet all of the criteria requiring that they be classified as held-for-sale, and have been classified accordingly in the accompanying condensed consolidated balance sheets as of March 26, 2023 and December 25, 2022 (in millions):
Operating lease liabilities related to the assets classified as held-for-sale in the amount of $3.4 million and $4.1 million have been classified as current liabilities in the accompanying condensed consolidated balance sheets as of March 26, 2023 and December 25, 2022, respectively. The following table highlights the operating results of the Company's refranchising program (in millions):
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PROPERTY AND EQUIPMENT, NET |
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Mar. 26, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET Property and equipment, net consists of the following (in millions):
Depreciation expense during the thirteen weeks ended March 26, 2023 and March 27, 2022 was $3.3 million and $2.9 million, respectively. Upon retirement or other disposal of property and equipment, the cost and related amounts of accumulated depreciation are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds, is recorded in earnings.
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GOODWILL AND OTHER INTANGIBLE ASSETS, NET |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS, NET | GOODWILL AND OTHER INTANGIBLE ASSETS, NET Changes in Carrying Value of Goodwill and Other Intangible Assets (in millions)
Gross Carrying Value and Accumulated Amortization of Other Intangible Assets (in millions)
Amortization expense for the three months ended March 26, 2023 and March 27, 2022 was $3.8 million and $3.7 million, respectively. The expected future amortization of definite-life intangible assets by fiscal year (in millions):
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INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES The following table presents the Company’s provision for income taxes (in millions):
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LEASES |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | LEASES The Company recognized lease expense of $4.8 million and $4.5 million for the thirteen weeks ended March 26, 2023 and March 27, 2022, respectively. Operating lease right-of-use assets and operating lease liabilities relating to the operating leases are as follows (in millions):
The contractual future maturities of the Company’s operating lease liabilities as of March 26, 2023, including anticipated lease extensions, are as follows (in millions):
The current portion of the operating lease liability as of March 26, 2023 was $14.9 million. Supplemental cash flow information for the thirteen weeks ended March 26, 2023 related to leases was as follows (in millions):
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DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT Long-term debt consisted of the following (in millions):
Terms of Outstanding Debt FB Royalty Securitization On April 26, 2021, FAT Brands Royalty I, LLC ("FB Royalty"), a special purpose, wholly-owned subsidiary of FAT Brands Inc., completed the issuance and sale of three tranches of fixed rate secured notes with a total aggregate principal amount of $144.5 million. On July 6, 2022, FB Royalty issued an additional $76.5 million aggregate principal amount of three tranches of fixed rate secured notes. Of the $76.5 million aggregate principal amount, $30.0 million was sold privately during the third quarter of 2022, resulting in net proceeds of $27.1 million (net of debt offering costs of $0.6 million and original issue discount of $2.3 million). The remaining $46.5 million in aggregate principal was sold privately on October 21, 2022, when the Company entered into an Exchange Agreement with the Twin Peaks sellers and redeemed 1,821,831 shares of the Company's 8.25% Series B Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and unpaid dividends to the date of redemption, in exchange for $46.5 million aggregate principal amount of secured debt ($43.2 million net of debt offering costs and original issue discount). Prior to the redemption, the Twin Peaks sellers held 2,847,393 shares of Series B Cumulative Preferred Stock. Pursuant to the Exchange Agreement, (i) at any time prior to July 25, 2023, the Company may call from the Twin Peaks sellers all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.86, plus any accrued plus unpaid interest thereon; (ii) at any time on or after the date of the Exchange Agreement, the Company may call from the Twin Peaks sellers, and at any time on or after July 25, 2023, the Twin Peaks sellers may put to the Company, all or a portion of the Class A-2 Notes and/or Class B-2 Notes at the outstanding principal balance multiplied by 0.94, plus any accrued plus unpaid interest thereon; and (iii) at any time on or after July 25, 2023, the Company may call from the Twin Peaks sellers, and the Twin Peaks sellers may put to the Company, all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.91, plus any accrued plus unpaid interest thereon. If the Company does not remit the applicable call price or put price upon a duly exercised call or put, as applicable, the amount owed by the Company will accrue interest at 10% per annum, which interest is due and payable in cash monthly by the Company. As of March 26, 2023, the outstanding principal balance owned by the Twin Peaks sellers and subject to the put/call option was $18.4 million. The FB Royalty securitization notes are generally secured by a security interest in substantially all the assets of FB Royalty and its subsidiaries. GFG Royalty Securitization In connection with the acquisition of GFG, on July 22, 2021, FAT Brands GFG Royalty I, LLC ("GFG Royalty"), a special purpose, wholly-owned subsidiary of FAT Brands, completed the issuance and sale in a private offering of three tranches of fixed rate secured notes with a total aggregate principal amount of $350.0 million. Immediately following the closing of the acquisition of GFG the Company contributed the franchising subsidiaries of GFG to GFG Royalty, pursuant to a Contribution Agreement. On December 15, 2022, 2022, GFG Royalty issued an additional $113.5 million aggregate principal amount of three tranches of fixed rate secured notes. Of the $113.5 million aggregate principal amount, $25.0 million was sold privately during the fourth quarter of 2022. In January 2023, an additional $40.0 million aggregate principal amount was sold privately, resulting in net proceeds of $34.8 million. The remaining $48.5 million in aggregate principal was issued to FAT Brands, Inc., pending sale to third party investors, and has been eliminated in consolidation as of March 26, 2023. The GFG Royalty securitization notes are generally secured by a security interest in substantially all the assets of GFG Royalty and its subsidiaries. Twin Peaks Securitization In connection with the acquisition of Twin Peaks on October 1, 2021, the Company completed the issuance and sale in a private offering through its special purpose, wholly-owned subsidiary, FAT Brands Twin Peaks I, LLC, of three tranches of fixed rate secured notes with a total aggregate principal amount of $250.0 million. Immediately following the closing of the acquisition of Twin Peaks the Company contributed the franchising subsidiaries of Twin Peaks to FAT Brands Twin Peaks I, LLC, pursuant to a Contribution Agreement. The Twin Peaks securitization notes are generally secured by a security interest in substantially all the assets of FAT Brands Twin Peaks I, LLC and its subsidiaries. Fazoli's / Native Securitization In connection with the acquisition of Fazoli's and Native Grill & Wings on December 15, 2021, the Company completed the issuance and sale in a private offering through its special purpose, wholly-owned subsidiary, FAT Brands Fazoli's Native I, LLC, of three tranches of fixed rate secured notes with a total aggregate principal amount of $193.8 million. Immediately following the closing of the acquisition of Fazoli's and Native the Company contributed the franchising subsidiaries of these entities to FAT Brands Fazoli's Native I, LLC, pursuant to a Contribution Agreement. The Fazoli's/Native securitization notes are generally secured by a security interest in substantially all the assets of FAT Brands Fazoli's Native I, LLC and its subsidiaries. Terms and Debt Covenant Compliance The FAT Royalty securitization notes, the GFG Royalty securitization notes, the Twin Peaks securitization notes and the Fazoli's/Native securitization notes (collectively, the "Securitization Notes"), require that the principal (if any) and interest obligations be segregated to ensure appropriate funds are reserved to pay the quarterly principal and interest amounts due. The amount of monthly cash flow that exceeds the required monthly interest reserve is generally remitted to the Company. Interest payments are required to be made on a quarterly basis and, unless repaid on or before July 25, 2023, additional interest equal to 1.0% per annum will accrue on the then outstanding principal balance of each tranche. Principal payments, with an amount equal to 0.5% of the initial principal amount, will be made on the scheduled quarterly payment date on and following the anticipated call date, starting in October 2023. The material terms of the Securitization Notes contain covenants which are standard and customary for these types of agreements, including the following financial covenants: (i) debt service coverage ratio, (ii) leverage ratio and (iii) senior leverage ratio. As of March 26, 2023, the Company was in compliance with these covenants. Elevation Note On June 19, 2019, the Company completed the acquisition of Elevation Burger. A portion of the purchase price included the issuance to the Seller of a convertible subordinated promissory note (the “Elevation Note”) with a principal amount of $7.5 million, bearing interest at 6.0% per annum and maturing in July 2026. The Elevation Note is convertible, under certain circumstances, into shares of the Company’s common stock at $12.00 per share. The annualized effective interest rate for the Elevation Note during the thirteen weeks ended March 26, 2023 was 21.5%. The Elevation Note is a general unsecured obligation of Company and is subordinated in right of payment to all indebtedness of the Company arising under any agreement or instrument to which Company or any of its Affiliates is a party that evidences indebtedness for borrowed money that is senior in right of payment. Equipment Financing (Twin Peaks) During fiscal year 2022, an indirect subsidiary of the Company entered into certain equipment financing arrangements to borrow up to $1.4 million, the proceeds of which will be used to purchase certain equipment for a new Twin Peaks restaurant and to retrofit existing restaurants with equipment (the "Equipment Financing"). The Equipment Financing has maturity dates between August 10, 2027 and April 1, 2028, and bear interest at fixed rates between 7.99% and 8.49% per annum. The Equipment Financing is secured by certain equipment of the Twin Peaks restaurant. Construction Loan Agreement (Twin Peaks) On December 5, 2022, an indirect subsidiary of the Company entered into a construction loan agreement to borrow up to $4.5 million, the proceeds of which will be used for a new corporate Twin Peaks restaurant (the "Construction Loan"). The Construction Loan has an initial maturity of August 5, 2023, with an optional six-month extension, bearing interest at the greater of the 3-month Secured Overnight Financing Rate (SOFR) plus 360 basis points, or 8% per year, and is secured by land and building. On March 9, 2023, an indirect subsidiary of the Company entered into a construction loan agreement to borrow up to $4.5 million, the proceeds of which will be used for a new corporate Twin Peaks in Sarasota, Florida (the "Sarasota Construction Loan"). The Sarasota Construction Loan has an initial maturity of January 9, 2024, with an optional three-month extension, bearing interest at the greater of the 3-month Overnight Financing Rate (SOFR) plus 575 basis points or 4% per year and is secured by land and building
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REDEEMABLE PREFERRED STOCK |
3 Months Ended |
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Mar. 26, 2023 | |
Equity [Abstract] | |
REDEEMABLE PREFERRED STOCK | REDEEMABLE PREFERRED STOCK GFG Preferred Stock Consideration On July 22, 2021, the Company completed the acquisition of GFG. A portion of the consideration paid included 3,089,245 newly issued shares of the Company’s Series B Cumulative Preferred Stock valued at $67.3 million (the "GFG Preferred Stock Consideration"). Additionally, on July 22, 2021, the Company entered into a put/call agreement with the GFG sellers, pursuant to which the Company may purchase, or the GFG Sellers may require the Company to purchase, the GFG Preferred Stock Consideration for $67.5 million plus any accrued but unpaid dividends on or before August 20, 2022 (extended from the original date of April 22, 2022), subject to the other provisions of the Put/Call Agreement. Since the Company did not deliver the applicable cash proceeds to the GFG Sellers by that date, the amount accrues interest at the rate of 5% per annum until repayment is completed. On March 22, 2022, the Company received a put notice on the GFG Preferred Stock Consideration and reclassified the GFG Preferred Stock Consideration from redeemable preferred stock to current liabilities on its consolidated balance sheet. As of March 26, 2023, the carrying value of the redeemable preferred stock was $67.5 million. On September 16, 2022, the Company entered into an agreement with one of the GFG sellers who held 1,544,623 put preferred shares. Pursuant to the agreement, the closing date of the redemption was extended from April 22, 2022 to July 23, 2023 and, effective August 23, 2022, the interest rate applicable to such holder's 1,544,623 put shares was increased from 5% to 10% per annum, payable monthly in arrears. In the fiscal quarter ended March 26, 2023, the Company paid $0.8 million for the accrued interest. On March 9, 2023, the Company entered into an agreement with the second GFG seller who held 1,544,623 put preferred shares. Pursuant to the agreement, the closing date of the redemption was extended from April 22, 2022 to July 23, 2023 and, effective August 23, 2022, the interest rate applicable to such holder's 1,544,623 put shares was increased from 5% to 10% per annum, payable on the date of redemption. Twin Peaks Preferred Stock Consideration On October 1, 2021, the Company completed the acquisition of Twin Peaks. A portion of the consideration paid included 2,847,393 shares of the Company’s Series B Cumulative Preferred Stock (the "Twin Peaks Preferred Stock Consideration") valued at $67.5 million. On October 1, 2021, the Company and the Twin Peaks Seller entered into a Put/Call Agreement (the “Put/Call Agreement”) pursuant to which the Company was granted the right to call from the Twin Peaks Seller, and the Twin Peaks Seller was granted the right to put to the Company, the Initial Put/Call Shares at any time until March 31, 2022 for a cash payment of $42.5 million, and the Secondary Put/Call Shares at any time until September 30, 2022 for a cash payment of $25.0 million (the Initial Put/call Shares together with the Secondary Put/Call Shares total $67.5 million), plus any accrued but unpaid dividends on such shares. Unpaid balances, when due, accrue interest at a rate of 10.0% per annum until repayment is completed. On October 7, 2021, the Company received a put notice on the Initial Put/Call Shares and the Secondary Put/Call Shares. On October 21, 2022, the Company entered into an Exchange Agreement with the Twin Peaks Seller and redeemed 1,821,831 shares of the Company’s 8.25% Series B Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and unpaid dividends to the date of redemption in exchange for $46.5 million aggregate principal amount of secured debt ($43.2 million net of debt offering costs and original issue discount) as discussed in Note 8. As of March 26, 2023, the carrying value of the Twin Peaks Preferred Stock Consideration totaled $24.3 million. The Company recognized interest expense relating to the Twin Peaks Preferred Stock Consideration in the amount of $0.6 million during the fiscal quarter ended March 26, 2023.
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SHARE-BASED COMPENSATION |
3 Months Ended |
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Mar. 26, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION Effective September 30, 2017, the Company adopted the 2017 Omnibus Equity Incentive Plan (the “Plan”). The Plan was amended on December 20, 2022 to increase the number of shares available for issuance under the Plan. The Plan is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, FAT Brands Inc. and its subsidiaries. The Plan provides a maximum of 5,000,000 shares available for grant. The Company has periodically issued stock options under the Plan. All of the stock options issued by the Company to date have included a vesting period of three years, with one-third of each grant vesting annually. As of March 26, 2023, there were 2,655,438 shares of stock options outstanding with a weighted average exercise price of $10.21. There were no new grants during the thirteen weeks ended March 26, 2023.The Company recognized share-based compensation expense in the amount of $1.1 million and $2.1 million during the thirteen weeks ended March 26, 2023 and March 27, 2022, respectively. As of March 26, 2023, there remains $5.4 million of related share-based compensation expense relating to non-vested grants, which will be recognized over the remaining vesting period, subject to future forfeitures.
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WARRANTS |
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WARRANTS | WARRANTS The Company’s warrant activity for the thirteen weeks ended March 26, 2023 was as follows:
During the thirteen weeks ended March 26, 2023, 24,046 warrants were exercised in exchange for 40,952 shares of common stock with net proceeds to the Company of $0.4 million.
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COMMON STOCK |
3 Months Ended |
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Mar. 26, 2023 | |
Common Stock | |
COMMON STOCK | COMMON STOCK On January 3, 2023, the Board of Directors declared a cash dividend of $0.14 per share of Class A common stock and Class B common stock, payable on March 1, 2023 to stockholders of record as of February 15, 2023, for a total of $2.3 million. On November 14, 2022, we entered into an ATM Sales Agreement (the "Sales Agreement") with ThinkEquity LLC (the "Agent"), pursuant to which we may offer and sell from time to time through the Agent up to $21,435,000 maximum aggregate offering price of shares of our Class A Common Stock and/or 8.25% Series B Preferred Stock. During the first quarter of 2023, pursuant to the Sales Agreement, we sold and issued 20,826 shares of Series B Cumulative Preferred Stock, at a weighted average share price of $17.95, paid the Agent commissions of $11,213 for such sales and received net proceeds of $362,544 (net of fees and commissions) for such sales.
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
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Mar. 26, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Litigation and Investigations James Harris and Adam Vignola, derivatively on behalf of FAT Brands Inc. v. Squire Junger, James Neuhauser, Edward Rensi, Andrew Wiederhorn, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc., and FAT Brands Inc., nominal defendant (Delaware Chancery Court, Case No. 2021-0511) On June 10, 2021, plaintiffs James Harris and Adam Vignola (“Plaintiffs”), putative stockholders of the Company, filed a shareholder derivative action in the Delaware Court of Chancery nominally on behalf of the Company against the Company’s current and former directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn (the “Individual Defendants”)), and the current and former majority stockholders of the Company, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc. (collectively with the Individual Defendants, “Defendants”). Plaintiffs assert claims of breach of fiduciary duty, unjust enrichment and waste of corporate assets arising out of the Company’s December 2020 merger with Fog Cutter Capital Group, Inc. Defendants filed a motion to dismiss Plaintiffs’ complaint, which the Court denied in an oral ruling on February 11, 2022 and subsequent written order on May 25, 2022. On April 7, 2022, the Court entered a Scheduling Order setting forth the key dates and deadlines that will govern the litigation, including a discovery cutoff of March 24, 2023 and trial date of February 5-9, 2024. To date, the parties have engaged in substantial written discovery, though no depositions have been taken. On February 3, 2023, the Company’s Board of Directors appointed a Special Litigation Committee ("SLC"), which retained independent counsel and moved for a six-month stay of the proceedings pending resolution of the SLC's investigation. On February 17, 2023, the Court granted the SLC’s motion to stay. On April 5, 2023, the Court granted Plaintiff's motion to lift the stay of the proceedings. On May 2, 2023, the Court entered a Second Amended Pre-Trial Scheduling Order resetting key dates and deadlines that will govern the litigation, including a fact discovery cutoff of August 4, 2023, and a trial date to be set sometime after May 10, 2023. Defendants dispute the allegations of the lawsuit and intend to vigorously defend against the claims. We cannot predict the outcome of this lawsuit. This lawsuit does not assert any claims against the Company. However, subject to certain limitations, we are obligated to indemnify our current and former directors in connection with defense costs for the lawsuit and any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect on our financial condition and results of operations. The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management. James Harris and Adam Vignola, derivatively on behalf of FAT Brands Inc. v. Squire Junger, James Neuhauser, Edward Rensi, Andrew Wiederhorn and Fog Cutter Holdings, LLC, and FAT Brands Inc., nominal defendant (Delaware Chancery Court, Case No. 2022-0254) On March 17, 2022, plaintiffs James Harris and Adam Vignola (“Plaintiffs”), putative stockholders of the Company, filed a shareholder derivative action in the Delaware Court of Chancery nominally on behalf of the Company against the Company’s current and former directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn (the “Individual Defendants”)), and the Company’s majority stockholder, Fog Cutter Holdings, LLC (collectively with the Individual Defendants, “Defendants”). Plaintiffs assert claims of breach of fiduciary duty in connection with the Company’s June 2021 recapitalization transaction. On May 27, 2022, Defendants filed a motion to dismiss Plaintiff's complaint (the "Motion"). Argument on the Motion was heard on November 17, 2022, and again on February 23, 2023, and the Court took its decision under advisement. The Court denied the motion on April 5, 2023. On May 2, 2023, the Court entered a pre-trial scheduling order setting key dates and deadlines that will govern the litigation, including a fact discovery cutoff of February 2, 2024, and a trial date to be set sometime after October 15, 2024. Defendants dispute the allegations of the lawsuit and intend to vigorously defend against the claims. As this matter is still in the early stages, we cannot predict the outcome of this lawsuit. This lawsuit does not assert any claims against the Company. However, subject to certain limitations, we are obligated to indemnify our current and former directors in connection with defense costs for the lawsuit and any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect on our financial condition and results of operations. The lawsuit and any related litigation also may be time consuming and divert the attention and resources of our management. Government Investigations In December 2021, the U.S. Attorney’s Office for the Central District of California (the “U.S. Attorney”) and the U.S. Securities and Exchange Commission (the “SEC”) informed the Company that they had opened investigations relating to the Company and our former Chief Executive Officer, Andrew Wiederhorn, and were formally seeking documents and materials concerning, among other things, the Company’s December 2020 merger with Fog Cutter Capital Group Inc., transactions between those entities and Mr. Wiederhorn, as well as compensation, extensions of credit and other benefits or payments received by Mr. Wiederhorn or his family from those entities. From August 23, 2022 until March 28, 2023, our Board of Directors maintained a Special Review Committee (the “SRC”) comprised of directors other than Mr. Wiederhorn to oversee a review of the issues raised by the U.S. Attorney and SEC investigations. The Company intends to cooperate with the U.S. Attorney and the SEC regarding these matters and is continuing to actively respond to inquiries and requests from the U.S. Attorney and the SEC. We believe that the Company is not currently a target of the U.S. Attorney’s investigation. At this stage, we are not able to reasonably estimate or predict the outcome or duration of either of the U.S. Attorney’s or the SEC’s investigations. Stratford Holding LLC v. Foot Locker Retail Inc. (U.S. District Court for the Western District of Oklahoma, Case No. 5:12-cv-772-HE) In 2012 and 2013, two property owners in Oklahoma City, Oklahoma sued numerous parties, including Foot Locker Retail Inc. and our subsidiary Fog Cutter Capital Group Inc. (now known as Fog Cutter Acquisition, LLC), for alleged environmental contamination on their properties, stemming from dry cleaning operations on one of the properties. The property owners seek damages in the range of $12.0 million to $22.0 million. From 2002 to 2008, a former Fog Cutter subsidiary managed a lease portfolio, which included the subject property. Fog Cutter denies any liability, although it did not timely respond to one of the property owners’ complaints and several of the defendants’ cross-complaints and thus is in default. The parties are currently conducting discovery, and the matter is scheduled for trial for October 2023. The Company is unable to predict the ultimate outcome of this matter, however, reserves have been recorded on the balance sheet relating to this litigation. There can be no assurance that the defendants will be successful in defending against these actions. SBN FCCG LLC v FCCGI (Los Angeles Superior Court, Case No. BS172606) SBN FCCG LLC (“SBN”) filed a complaint against Fog Cutter Capital Group, Inc. (“FCCG”) in New York state court for an indemnification claim (the “NY case”) stemming from an earlier lawsuit in Georgia regarding a certain lease portfolio formerly managed by a former FCCG subsidiary. In February 2018, SBN obtained a final judgment in the NY case for a total of $0.7 million, which included $0.2 million in interest dating back to March 2012. SBN then obtained a sister state judgment in Los Angeles Superior Court, Case No. BS172606 (the “California case”), which included the $0.7 million judgment from the NY case, plus additional statutory interest and fees, for a total judgment of $0.7 million. In May 2018, SBN filed a cost memo, requesting an additional $12,411 in interest to be added to the judgment in the California case, for a total of $0.7 million. In May 2019, the parties agreed to settle the matter for $0.6 million, which required the immediate payment of $0.1 million, and the balance to be paid in August 2019. FCCG wired $0.1 million to SBN in May 2019, but has not yet paid the remaining balance of $0.5 million. The parties have not entered into a formal settlement agreement, and they have not yet discussed the terms for the payment of the remaining balance. SBN FCCG LLC v FCCGI (Supreme Court of the State of New York, County of New York, Index No. 650197/2023) On January 13, 2023, SBN filed another complaint against FCCG in New York state court for an indemnification claim stemming from a lawsuit in Oklahoma City regarding the same lease portfolio formerly managed by Fog Cap, and a bankruptcy proceedings involving Fog Cap. SBN alleges that under a February 2008 stock purchase agreement, Fog Cutter is required to indemnify SBN and its affiliates. According to the complaint, SBN has, at the time of filing the complaint, incurred costs subject to indemnification of approximately $12 million. We are unable at this time to express any opinion as to the outcome of this matter or as to the possible range of loss, if any. The Company is involved in other claims and legal proceedings from time-to-time that arise in the ordinary course of business, including those involving the Company’s franchisees. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on its business, financial condition, results of operations, liquidity or capital resources. As of March 26, 2023, the Company had accrued an aggregate of $5.1 million for the specific matters mentioned above and claims and legal proceedings involving franchisees as of that date.
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GEOGRAPHIC INFORMATION |
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Geographic Information And Major Franchisees | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GEOGRAPHIC INFORMATION | GEOGRAPHIC INFORMATION Revenue by geographic area was as follows (in millions):
Revenue is shown based on the geographic location of our company-owned and franchisees’ restaurants. All assets are located in the United States. During the thirteen weeks ended March 26, 2023 and March 27, 2022, no individual franchisee accounted for more than 10% of the Company’s revenue.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Mar. 26, 2023 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation – The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Our revenues are derived primarily from two sales channels, franchised restaurants and company-owned locations, which we operate as one reportable segment. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of the Company, all adjustments considered necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included and are of a normal, recurring nature. |
Nature of operations | Nature of operations – The Company operates on a 52-week calendar and its fiscal year ends on the last Sunday of the calendar year. Consistent with industry practice, the Company measures its stores’ performance based upon 7-day work weeks. Using the 52-week cycle ensures consistent weekly reporting for operations and ensures that each week has the same days since certain days are more profitable than others. The use of this fiscal year means a 53rd week is added to the fiscal year every 5 or 6 years, as is the case for fiscal year 2023. In a 52-week year, all four quarters are comprised of 13 weeks. In a 53-week year, one extra week is added to the fourth quarter. |
Use of estimates in the preparation of the condensed consolidated financial statements | Use of estimates in the preparation of the condensed consolidated financial statements – The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Significant estimates include the determination of fair values of goodwill and other intangible assets, allowances for uncollectible notes receivable and accounts receivable, and the valuation allowance related to deferred tax assets. Estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Financial statement reclassification | Financial statement reclassification – Certain account balances from prior periods have been reclassified in these condensed consolidated financial statements to conform to current period classifications. |
Recently adopted accounting standards | Recently Adopted Accounting Standards In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The purpose of this amendment is to enhance disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. It requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. The amendments should be applied prospectively and are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASC No. 2022-02 for the fiscal year beginning December 26, 2022, which did not have an effect on the Company's condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments. This guidance replaced the previous incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects its current estimate of credit losses expected to be incurred over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). The purpose of this amendment was to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities. This granted certain classes of companies, including Smaller Reporting Companies (“SRCs”), additional time to implement major FASB standards, including ASU 2016-13. Larger public companies had an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities were permitted to defer adoption of ASU 2016-13, and its related amendments, until fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of an SRC and adopted the deferral period for ASU 2016-13. The guidance requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption, if applicable. The Company adopted ASU No. 2016-13 for the fiscal year beginning December 26, 2022. The adoption did not require an adjustment to retained earnings and did not have an effect on the Company's condensed consolidated financial statements.
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REFRANCHISING (Tables) |
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Mar. 26, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Refranchising | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Classified as Held for Sale | The following assets used in the operation of certain restaurants meet all of the criteria requiring that they be classified as held-for-sale, and have been classified accordingly in the accompanying condensed consolidated balance sheets as of March 26, 2023 and December 25, 2022 (in millions):
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Schedule of Operating Results of Refranchising Program | The following table highlights the operating results of the Company's refranchising program (in millions):
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PROPERTY AND EQUIPMENT, NET (Tables) |
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Mar. 26, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Property and Equipment, Net | Property and equipment, net consists of the following (in millions):
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GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Carrying Value of Goodwill and Other Intangible Assets and Gross Carrying Value and Accumulated Amortization of Other Intangible Assets | Changes in Carrying Value of Goodwill and Other Intangible Assets (in millions)
Gross Carrying Value and Accumulated Amortization of Other Intangible Assets (in millions)
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Schedule of Expected Future Amortization of Capitalized Franchise Agreements | The expected future amortization of definite-life intangible assets by fiscal year (in millions):
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INCOME TAXES (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Provision for Income Taxes | The following table presents the Company’s provision for income taxes (in millions):
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LEASES (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Operating Lease Right of Use Assets and Operating Lease Liabilities | Operating lease right-of-use assets and operating lease liabilities relating to the operating leases are as follows (in millions):
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Contractual Future Maturities of Operating Lease Liabilities | The contractual future maturities of the Company’s operating lease liabilities as of March 26, 2023, including anticipated lease extensions, are as follows (in millions):
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Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information for the thirteen weeks ended March 26, 2023 related to leases was as follows (in millions):
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DEBT (Tables) |
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Mar. 26, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt | Long-term debt consisted of the following (in millions):
|
WARRANTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 26, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Warrant Activity | The Company’s warrant activity for the thirteen weeks ended March 26, 2023 was as follows:
|
GEOGRAPHIC INFORMATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 26, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geographic Information And Major Franchisees | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenues by Geographic Area | Revenue by geographic area was as follows (in millions):
|
ORGANIZATION AND RELATIONSHIPS (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 26, 2023
USD ($)
location
franchise
|
Mar. 27, 2022
USD ($)
|
Dec. 25, 2022
USD ($)
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Number of franchise brands | franchise | 17 | ||
Number of locations | location | 2,300 | ||
Percent of total restaurants franchised | 95.00% | ||
Income from operations | $ 387 | $ 485 | |
Accumulated deficit | (210,793) | $ (178,667) | |
Working capital | (128,800) | ||
Redeemable preferred stock, current portion | 91,836 | 91,836 | |
Unrestricted cash | 46,188 | $ 28,668 | |
Principal amount | 1,086,700 | ||
Fixed Rate Secured Notes | |||
Debt Securities, Available-for-Sale [Line Items] | |||
Debt securities | $ 48,500 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 26, 2023
segment
salesChannel
| |
Accounting Policies [Abstract] | |
Number of sales channels | salesChannel | 2 |
Number of reportable segments | segment | 1 |
REFRANCHISING - Schedule of Remaining Assets Classified as Held for Sale (Details) - USD ($) $ in Thousands |
Mar. 26, 2023 |
Dec. 25, 2022 |
---|---|---|
Refranchising | ||
Property and equipment | $ 600 | $ 700 |
Operating lease right-of-use assets | 3,400 | 4,100 |
Total | $ 4,033 | $ 4,767 |
REFRANCHISING - Narrative (Details) - USD ($) $ in Thousands |
Mar. 26, 2023 |
Dec. 25, 2022 |
---|---|---|
Refranchising | ||
Liabilities related to assets classified as held for sale | $ 3,420 | $ 4,084 |
REFRANCHISING - Schedule of Operating Results of Refranchising Program (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
|
Long Lived Assets Held-for-sale [Line Items] | ||
Refranchising loss | $ 159 | $ 548 |
Restaurant sales | Assets classified as held for sale | ||
Long Lived Assets Held-for-sale [Line Items] | ||
Restaurant costs and expenses, net of revenue | 300 | 500 |
Gain on store sales or closures | (100) | 0 |
Refranchising loss | $ 200 | $ 500 |
PROPERTY AND EQUIPMENT, NET - Carrying Value of Property and Equipment (Details) - USD ($) $ in Thousands |
Mar. 26, 2023 |
Dec. 25, 2022 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 96,200 | $ 94,200 |
Accumulated depreciation | (18,300) | (15,000) |
Property and equipment, net | 77,850 | 79,189 |
Real estate | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 69,000 | 67,700 |
Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 27,200 | $ 26,500 |
PROPERTY AND EQUIPMENT, NET - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 3.3 | $ 2.9 |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Changes in Carrying Value of Goodwill and Other Intangible Assets (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
|
Finite-Lived Intangible Assets [Roll Forward] | ||
Amortizing Intangible Assets, Beginning balance | $ 162.1 | |
Amortization of Intangible Assets | (3.8) | $ (3.7) |
Amortizing Intangible Assets, Ending balance | 158.3 | |
Goodwill [Roll Forward] | ||
Goodwill, Beginning balance | 293.3 | |
Goodwill, Ending balance | 293.3 | |
Trademarks | ||
Indefinite-Lived Intangible Assets [Roll Forward] | ||
Trademarks, Beginning balance | 463.2 | |
Trademarks, Ending balance | $ 463.2 |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 3.8 | $ 3.7 |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Expected Future Amortization (Details) $ in Millions |
Mar. 26, 2023
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Remainder of 2023 | $ 11.2 |
2024 | 14.7 |
2025 | 14.5 |
2026 | 14.5 |
2027 | $ 14.5 |
INCOME TAXES - Schedule of Provision for Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
|
Income Tax Disclosure [Abstract] | ||
Provision for income taxes | $ 2,536 | $ 4,524 |
Effective tax rate | (8.60%) | (23.50%) |
Statutory tax rate | 21.00% | 21.00% |
LEASES - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
Dec. 25, 2022 |
|
Leases [Abstract] | |||
Lease expense recognized | $ 4,800 | $ 4,500 | |
Operating lease liability, current portion | $ 14,934 | $ 14,815 |
LEASES - Summary of Operating Lease Right of Use Assets and Operating Lease Liabilities (Details) - USD ($) $ in Thousands |
Mar. 26, 2023 |
Dec. 25, 2022 |
---|---|---|
Lessor, Lease, Description [Line Items] | ||
Operating lease right-of-use assets | $ 100,782 | $ 101,114 |
Corporate Offices and For Certain Restaurant Properties | ||
Lessor, Lease, Description [Line Items] | ||
Operating lease right-of-use assets | 104,300 | 105,200 |
Operating lease liabilities | 113,700 | 114,500 |
Corporate Offices and For Certain Restaurant Properties | Continuing operations | ||
Lessor, Lease, Description [Line Items] | ||
Operating lease right-of-use assets | 100,800 | 101,100 |
Operating lease liabilities | 110,300 | 110,400 |
Corporate Offices and For Certain Restaurant Properties | Held for sale | ||
Lessor, Lease, Description [Line Items] | ||
Operating lease right-of-use assets | 3,500 | 4,100 |
Operating lease liabilities | $ 3,400 | $ 4,100 |
LEASES - Schedule of Contractual Future Maturities (Details) - Corporate Offices and For Certain Restaurant Properties - USD ($) $ in Millions |
Mar. 26, 2023 |
Dec. 25, 2022 |
---|---|---|
Lessor, Lease, Description [Line Items] | ||
Remainder of 2023 | $ 14.6 | |
2024 | 16.0 | |
2025 | 15.4 | |
2026 | 14.1 | |
2027 | 13.8 | |
Thereafter | 168.1 | |
Total lease payments | 242.0 | |
Less imputed interest | (128.3) | |
Total | $ 113.7 | $ 114.5 |
LEASES - Summary of Supplemental Cash Flow Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
|
Corporate Offices and For Certain Restaurant Properties | ||
Lessor, Lease, Description [Line Items] | ||
Operating cash flows from operating leases | $ 4.4 | $ 4.3 |
SHARE-BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock options outstanding through share-based compensation agreement (in shares) | 2,655,438 | |
Weighted average exercise price of options (in dollars per share) | $ 10.21 | |
Granted (in shares) | 0 | |
Share-based compensation plan expense | $ 1.1 | $ 2.1 |
Share-based compensation expense related to non-vested grants | $ 5.4 | |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 3 years | |
Award vesting rights (percent) | 33.33% | |
2017 Omnibus Equity Incentive Plan | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares available for grant through share-based compensation agreement (in shares) | 5,000,000 |
WARRANTS - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 26, 2023
USD ($)
shares
| |
Warrant Activity | |
Issuance of common stock through exercise of warrants (in shares) | 40,952 |
Issuance of common and preferred stock | $ | $ 0.4 |
Warrant | |
Warrant Activity | |
Warrants exercised (in shares) | 24,046 |
COMMON STOCK - Narrative (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Jan. 03, 2023 |
Nov. 14, 2022 |
Mar. 26, 2023 |
Mar. 27, 2022 |
|
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Cash dividends declared per common share (in dollars per share) | $ 0.14 | $ 0.14 | $ 0.13 | |
Dividends payable | $ 2,300,000 | |||
Issuance of common and preferred stock | $ 439,000 | $ 79,000 | ||
ATM Sales Agreement | ThinkEquity LLC | Common Class A | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Maximum aggregate offering price | $ 21,435,000 | |||
ATM Sales Agreement | ThinkEquity LLC | Series B Preferred Stock | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Dividend rate on preferred stock | 8.25% | |||
Issuance of preferred stock (in shares) | 20,826 | |||
Weighted average price per share (in dollars per share) | $ 17.95 | |||
Payments of stock issuance costs | $ 11,213 | |||
Issuance of common and preferred stock | $ 362,544 |
GEOGRAPHIC INFORMATION - Schedule of Revenues by Geographic Area (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 26, 2023 |
Mar. 27, 2022 |
|
RestaurantFranchising [Line Items] | ||
Total revenue | $ 105,691 | $ 97,403 |
United States | ||
RestaurantFranchising [Line Items] | ||
Total revenue | 102,700 | 95,400 |
Other countries | ||
RestaurantFranchising [Line Items] | ||
Total revenue | $ 3,000 | $ 2,000 |
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