10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 25, 2023

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38250

FAT Brands Inc.

(Exact name of registrant as specified in its charter)

Delaware	82-1302696
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9720 Wilshire Blvd., Suite 500

Beverly Hills, CA 90212

(Address of principal executive offices, including zip code)

(310) 319-1850

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	FAT	The Nasdaq Stock Market LLC
Class B Common Stock, par value $0.0001 per share	FATBB	The Nasdaq Stock Market LLC
Series B Cumulative Preferred Stock, par value $0.0001 per share	FATBP	The Nasdaq Stock Market LLC
Warrants to purchase Class A Common Stock	FATBW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No x

As of July 28, 2023, there were 15,424,709 shares of Class A common stock and 1,270,805 shares of Class B common stock outstanding.

FAT BRANDS INC.

QUARTERLY REPORT ON FORM 10-Q

June 25, 2023

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	FAT Brands Inc. and Subsidiaries:
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations (Unaudited)	5
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
SIGNATURE		28

2

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

FAT BRANDS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

	June 25, 2023		December 25, 2022
			Audited
Assets
Current assets
Cash	$	30,569	$	28,668
Restricted cash	26,564		25,375
Accounts receivable, net of allowances of $11,814 and $24,207 as of June 25, 2023 and December 25, 2022, respectively	29,006		23,880
Inventory	6,254		6,925
Assets classified as held-for-sale	3,887		4,767
Other current assets	8,004		6,086
Total current assets	104,284		95,701
Non-current restricted cash	14,743		14,720
Operating lease right-of-use assets	101,587		101,114
Goodwill	293,282		293,282
Other intangible assets, net	617,755		625,294
Property and equipment, net	79,577		79,189
Other assets	4,613		4,003
Total assets	$	1,215,841	$	1,213,303
Liabilities and Stockholders’ Deficit
Liabilities
Current liabilities
Accounts payable	$	16,303	$	18,328
Accrued expenses and other liabilities	51,156		52,800
Deferred income, current portion	1,862		2,019
Accrued advertising	14,032		14,819
Accrued interest payable	16,722		13,241
Dividend payable on preferred shares	1,278		1,467
Liabilities related to assets classified as held-for-sale	3,479		4,084
Operating lease liability, current portion	14,904		14,815
Redeemable preferred stock	91,836		91,836
Long-term debt, current portion	35,848		49,611
Acquisition purchase price payable	4,000		4,000
Total current liabilities	251,420		267,020
Deferred income, net of current portion	22,529		21,698
Deferred income tax liabilities, net	29,147		27,181
Operating lease liability, net of current portion	95,815		95,620
Long-term debt, net of current portion	1,018,494		958,630
Other liabilities	1,631		2,332
Total liabilities	1,419,036		1,372,481

3

Commitments and contingencies (Note 13)
Stockholders’ deficit
Preferred stock, $0.0001 par value; 15,000,000 shares authorized; 3,338,573 shares issued and outstanding at June 25, 2023 and 3,252,154 shares issued and outstanding at December 25, 2022; liquidation preference $25 per share	43,566		45,504
Class A common stock and Class B common stock and additional paid-in capital as of June 25, 2023: $0.0001 par value per share; 51,600,000 shares authorized (Class A 50,000,000, Class B 1,600,000); 16,611,175 shares issued and outstanding (Class A 15,340,370, Class B 1,270,805). Common stock and additional paid-in capital as of December 25, 2022: $0.0001 par value; 51,600,000 shares authorized; 16,571,675 shares issued and outstanding (Class A 15,300,870, Class B 1,270,805)	(28,877)		(26,015)
Accumulated deficit	(217,884)		(178,667)
Total stockholders’ deficit	(203,195)		(159,178)
Total liabilities and stockholders’ deficit	$	1,215,841	$	1,213,303

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

FAT BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except share data)

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Revenue
Royalties	$	22,751	$	21,665	$	45,236	$	42,563
Restaurant sales	62,778		60,044		125,379		118,121
Advertising fees	9,668		9,568		19,019		18,929
Factory revenues	9,686		8,570		18,851		16,749
Franchise fees	763		1,295		1,565		2,009
Other revenue	1,118		1,643		2,405		1,817
Total revenue	106,764		102,785		212,455		200,188
Costs and expenses
General and administrative expense	9,947		20,841		38,362		45,437
Cost of restaurant and factory revenues	59,502		49,846		118,589		104,644
Depreciation and amortization	7,061		6,711		14,177		13,181
Refranchising loss	179		453		338		1,001
Acquisition costs	—		135		—		383
Advertising fees	11,610		11,596		22,137		21,853
Total costs and expenses	88,299		89,582		193,603		186,499
Income from operations	18,465		13,203		18,852		13,689
Other (expense) income, net
Interest expense	(20,008)		(18,998)		(45,098)		(38,026)
Interest expense related to preferred shares	(4,311)		(4,715)		(9,354)		(6,714)
Other income, net	109		2,071		265		3,381
Total other expense, net	(24,210)		(21,642)		(54,187)		(41,359)
Loss before income tax provision (benefit)	(5,745)		(8,439)		(35,335)		(27,670)
Income tax provision (benefit)	1,346		(251)		3,882		4,273
Net loss	$	(7,091)	$	(8,188)	$	(39,217)	$	(31,943)
Net loss	$	(7,091)	$	(8,188)	$	(39,217)	$	(31,943)
Dividends on preferred shares	(1,615)		(1,661)		(3,381)		(3,314)
	$	(8,706)	$	(9,849)	$	(42,598)	$	(35,257)
Basic and diluted loss per common share	$	(0.53)	$	(0.60)	$	(2.58)	$	(2.15)
Basic and diluted weighted average shares outstanding	16,522,379		16,405,108		16,521,590		16,396,896
Cash dividends declared per common share	$	0.14	$	0.13	$	0.28	$	0.26

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

FAT BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(dollars in thousands)

For the Twenty-Six Weeks Ended June 25, 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 25, 2022	15,300,870	1,270,805	$	2	$	—	$	(26,017)	$	(26,015)	3,252,154	$	—	$	45,504	$	45,504	$	(178,667)	$	(159,178)
Net loss	—	—	—		—		—		—		—	—		—		—		(39,217)		(39,217)
Issuance of common and preferred stock	39,500	—	—		—		209		209		86,419	—		1,443		1,443		—		1,652
Share-based compensation	—	—	—		—		1,572		1,572		—	—		—		—		—		1,572
Dividends paid on common stock	—	—	—		—		(4,643)		(4,643)		—	—		—		—		—		(4,643)
Dividends paid on Series B preferred stock	—	—	—		—		—		—		—	—		(3,381)		(3,381)		—		(3,381)
Balance at June 25, 2023	15,340,370	1,270,805	$	2	$	—	$	(28,879)	$	(28,877)	3,338,573	$	—	$	43,566	$	43,566	$	(217,884)	$	(203,195)

For the Twenty-Six Weeks Ended June 26, 2022

	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	15,109,747	1,270,805	$	2	$	—	$	(24,839)	$	(24,837)	3,221,471	$	—	$	55,661	$	55,661	$	(52,479)	$	(21,655)
Net loss	—	—	—		—		—		—		—	—		—		—		(31,943)		(31,943)
Issuance of common and preferred stock	21,850	—	—		—		64		64		—	—		19		19		—		83
Share-based compensation	—	—	—		—		4,076		4,076		—	—		—		—		—		4,076
Dividends paid on common stock	—	—	—		—		(4,263)		(4,263)		—	—		—		—		—		(4,263)
Dividends paid on Series B preferred stock	—	—	—		—		—		—		—	—		(3,314)		(3,314)		—		(3,314)
Exercise of Series B preferred stock put option	—	—	—		—		—		—		—	—		(4,107)		(4,107)		—		(4,107)
Balance at June 26, 2022	15,131,597	1,270,805	2		—		(24,962)		(24,960)		3,221,471	—		48,259		48,259		(84,422)		(61,123)

6

For the Thirteen Weeks Ended June 25, 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 March 26, 2023	15,341,822	1,270,805	$	2	$	—	$	(27,185)	$	(27,183)	3,272,980		$	—	$	44,131	$	44,131	$	(210,793)	$	(193,845)
Net loss	—	—	—		—		—		—		—		—		—		—		(7,091)		(7,091)
Issuance of common and preferred stock	(1,452)	—	—		—		152		152		65,593		—		1,050		1,050		—		1,202
Share-based compensation	—	—	—		—		477		477		—		—		—		—		—		477
Dividends paid on common stock	—	—	—		—		(2,322)		(2,322)		—		—		—		—		—		(2,322)
Dividends paid on Series B preferred stock	—	—	—		—		—		—		—		—		(1,615)		(1,615)		—		(1,615)
Balance at June 25, 2023	15,340,370	1,270,805	$	2	$	—	$	(28,879)	$	(28,877)	$	3,338,573	$	—	$	43,566	$	43,566	$	(217,884)	$	(203,195)

For the Thirteen Weeks Ended June 26, 2022

	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 March 27, 2022	15,131,597	1,270,805	$	2	$	—	$	(24,794)	$	(24,792)	3,221,471	$	—	$	49,920	$	49,920	$	(76,234)	$	(51,106)
Net loss	—	—	—		—		—		—		—	—		—		—		(8,188)		(8,188)
Share-based compensation	—	—	—		—		1,964		1,964		—	—		—		—		—		1,964
Dividends paid on common stock	—	—	—		—		(2,132)		(2,132)		—	—		—		—		—		(2,132)
Dividends paid on Series B preferred stock	—	—	—		—		—		—		—	—		(1,661)		(1,661)		—		(1,661)
Balance at June 26, 2022	15,131,597	1,270,805	$	2	$	—	$	(24,962)	$	(24,960)	3,221,471	$	—	$	48,259	$	48,259	$	(84,422)	$	(61,123)

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

FAT BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

For the Twenty-Six Weeks Ended June 25, 2023 and June 26, 2022

	2023		2022
Cash flows from operating activities:
Net loss	$	(39,217)	$	(31,943)
Adjustments to reconcile net loss to net cash used in operations:
Deferred income taxes	1,966		3,256
Depreciation and amortization	14,177		13,181
Share-based compensation	1,572		4,076
Accretion of loan fees and interest	8,520		5,787
Adjustments of purchase price liability	—		48
Provision for bad debts	(12,395)		423
Change in:
Accounts receivable	7,267		(16,530)
Inventory	672		(405)
Other current and noncurrent assets	(2,670)		(420)
Operating lease assets and liabilities	85		377
Deferred income	674		1,959
Accounts payable	(2,025)		(3,924)
Accrued expenses and other liabilities	(1,644)		(1,231)
Accrued advertising	(788)		2,985
Accrued interest payable	3,481		483
Other current and noncurrent liabilities	(887)		(6,413)
Total adjustments	18,005		3,652
Net cash used in operating activities	(21,212)		(28,291)
Cash flows from investing activities:
Acquisitions, net of cash acquired	—		(2,772)
Purchases of property and equipment	(7,026)		(10,523)
Payments received on notes receivable	143		1,647
Other	—		(192)
Net cash used in investing activities	(6,883)		(11,840)
Cash flows from financing activities:
Proceeds from borrowings, net of issuance costs	38,115		704
Repayments of borrowings	(535)		(514)
Proceeds from issuance of common and preferred shares	1,652		83
Dividends paid on redeemable preferred stock	—		(1,062)
Dividends paid on common shares	(4,643)		(4,263)
Dividends paid on preferred shares	(3,381)		(3,314)
Net cash provided by (used in) financing activities	31,208		(8,366)
Net increase (decrease) in cash and restricted cash	3,113		(48,497)
Cash and restricted cash at beginning of the period	68,763		99,921
Cash and restricted cash at end of the period	$	71,876	$	51,424
Supplemental disclosures of cash flow information:
Cash paid for interest	$	50,971	$	32,430
Cash paid for income taxes	$	675	$	447

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. 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 June 25, 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 June 25, 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 $18.9 million and $13.7 million during the twenty-six weeks ended June 25, 2023 and June 26, 2022, respectively. The Company has a history of net losses and an accumulated deficit of $217.9 million as of June 25, 2023. Additionally, the Company had negative working capital of $147.1 million. Of this amount, $91.8 million represents 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 $30.6 million of unrestricted cash at June 25, 2023 and plans on the combination of cash flows from operations, cash on hand, $92.7 million of issued but not sold aggregate principal amount of fixed rate secured notes and $63.5 million aggregate principal amount of repurchased but not re-sold fixed rate secured notes (see Note 8) 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.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

9

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. These financial statements should be read in conjunction with the audited financial statements and the related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 25, 2022

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.

Employee Retention Tax Credits - On March 27, 2020, the U.S. government enacted the Coronavirus Aid Relief and Security Act (the "CARES Act") to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit ("ERC"). As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to International Accounting Standard, Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20"). During 2022, the Company filed with the Internal Revenue Service credits totaling $22.0 million, $10.1 million of which was filed during the thirteen and twenty-six weeks ended June 26, 2022. During the fourth quarter of 2022, in accordance with IAS 20, the Company fully reserved the amounts claimed until such time that it has been determined that the Company has reasonable assurance that the credits will be realized. During the thirteen weeks ended June 25, 2023, the Company reversed $12.7 million of its reserve as it determined there is reasonable assurance that it will be realized.

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

10

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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NOTE 3. REFRANCHISING

As 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 June 25, 2023 and December 25, 2022 (in millions):

	June 25, 2023		December 25, 2022
Property and equipment	$	0.6	$	0.7
Operating lease right-of-use assets	3.3		4.1
Total	$	3.9	$	4.8

Operating lease liabilities related to the assets classified as held-for-sale in the amount of $3.5 million and $4.1 million have been classified as current liabilities in the accompanying condensed consolidated balance sheets as of June 25, 2023 and December 25, 2022, respectively.

The following table highlights the operating results of the Company's refranchising program (in millions):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Restaurant costs and expenses, net of revenue	$	0.2	$	0.5	$	0.4	$	1.0
Gain on store sales or closures	—		—		(0.1)		—
Refranchising loss	$	0.2	$	0.5	$	0.3	$	1.0

NOTE 4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following (in millions):

	June 25, 2023		December 25, 2022
Real estate	$	73.6	$	67.7
Equipment	25.4		26.5
	$	99.0	$	94.2
Accumulated depreciation	(19.4)		(15.0)
Property and equipment, net	$	79.6	$	79.2

Depreciation expense during the thirteen weeks ended June 25, 2023 and June 26, 2022 was $3.3 million and $3.0 million, respectively. Depreciation expense during the twenty-six weeks ended June 25, 2023 and June 26, 2022 was $6.7 million and $5.8 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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NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Changes in Carrying Value of Goodwill and Other Intangible Assets (in millions)

	Amortizing Intangible Assets		Non-Amortizing Intangible Assets
			Goodwill		Trademarks
December 25, 2022	$	162.1	$	293.3	$	463.2
Amortization	(7.5)		—		—
June 25, 2023	$	154.6	$	293.3	$	463.2

Gross Carrying Value and Accumulated Amortization of Other Intangible Assets (in millions)

	June 25, 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		$	109.2	$	(19.4)	$	89.8	$	109.2	$	(14.8)	$	94.4
Customer relationships		73.9		(10.9)		63.0		73.9		(8.1)		65.8
Other		2.1		(0.3)		1.8		2.1		(0.2)		1.9
		$	185.2	$	(30.6)	$	154.6	$	185.2	$	(23.1)	$	162.1
Non-amortizing intangible assets
Trademarks						463.2						463.2
Total amortizing and non-amortizing intangible assets, net						$	617.8					$	625.3

Amortization expense for the thirteen weeks ended June 25, 2023 and June 26, 2022 was $3.8 million and $3.7 million, respectively. Amortization expense for the twenty-six weeks ended June 25, 2023 and June 26, 2022 was $7.5 million and $7.4 million, respectively.

The expected future amortization of definite-life intangible assets by fiscal year (in millions):

Fiscal Year:
Remainder of 2023	$	7.5
2024	14.7
2025	14.5
2026	14.5
2027	14.5
Thereafter	88.9
Total	$	154.6

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NOTE 6. INCOME TAXES

The following table presents the Company’s provision (benefit) for income taxes (in millions):

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 25, 2023			June 26, 2022			June 25, 2023			June 26, 2022
Provision (benefit) for income taxes	$	1.3		$	(0.3)		$	3.9		$	4.3
Effective tax rate	(23.4)		%	3.0		%	(11.0)		%	(15.4)		%

The difference between the statutory tax rate of 21% and the effective tax rate of (23.4)% and (11.0)% in the thirteen weeks and twenty-six weeks ended June 25, 2023, respectively, was primarily due to increases in the valuation allowance, nondeductible expenses and the impact of state income taxes.

The difference between the statutory tax rate of 21% and the effective tax rate of 3.0% and (15.4)% in the thirteen weeks and twenty-six weeks ended June 26, 2022, respectively, was primarily due to increases in the valuation allowance, nondeductible expenses and the impact of state income taxes.

NOTE 7. LEASES

The Company recognized lease expense of $4.7 million and $4.8 million for the thirteen weeks ended June 25, 2023 and June 26, 2022, respectively. The Company recognized lease expense of $9.5 million and $9.3 million for the twenty-six weeks ended June 25, 2023 and June 26, 2022, respectively.

Operating lease right-of-use assets and operating lease liabilities relating to the operating leases are as follows (in millions):

	June 25, 2023		December 25, 2022
Operating lease right-of-use assets	$	101.6	$	101.1
Right-of-use assets classified as held-for-sale	3.3		4.1
Total right-of-use assets	$	104.9	$	105.2
Operating lease liabilities	$	110.7	$	110.4
Lease liabilities related to assets held-for-sale	3.5		4.1
Total operating lease liabilities	$	114.2	$	114.5

The contractual future maturities of the Company’s operating lease liabilities as of June 25, 2023, including anticipated lease extensions, are as follows (in millions):

Fiscal year:
Remainder of 2023	$	5.2
2024	15.5
2025	15.1
2026	13.8
2027	13.7
Thereafter	181.2
Total lease payments	$	244.5
Less imputed interest	(133.8)
Total	$	110.7

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The current portion of the operating lease liability as of June 25, 2023 was $14.9 million.

Supplemental cash flow information for the twenty-six weeks ended June 25, 2023 related to leases was as follows (in millions):

	Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases	$	8.8	$	8.1

NOTE 8. DEBT

Long-term debt consisted of the following (in millions):

	June 25, 2023								December 25, 2022
	Final Maturity	Anticipated Repayment Date	Rate		Face Value		Book Value		Book Value
Senior Debt
FB Royalty Securitization	4/25/2051	7/25/2026	4.75	%	$	139.8	$	135.9	$	135.3
GFG Royalty Securitization	7/25/2051	7/25/2026	6.00	%	274.0		265.1		228.9
Twin Peaks Securitization	7/25/2051	1/25/2025	7.00	%	150.0		148.4		147.5
Fazoli's/Native Securitization	7/25/2051	1/25/2025	6.00	%	128.8		125.7		124.8
Senior Subordinated Debt
FB Royalty Securitization	4/25/2051	7/25/2026	8.00	%	46.6		45.4		45.2
GFG Royalty Securitization	7/25/2051	7/25/2026	7.00	%	84.0		82.3		82.0
Twin Peaks Securitization	7/25/2051	1/25/2025	9.00	%	50.0		48.3		47.3
Fazoli's/Native Securitization	7/25/2051	1/25/2025	7.00	%	25.0		23.8		23.5
Subordinated Debt
FB Royalty Securitization	4/25/2051	7/25/2026	9.00	%	34.6		32.4		32.1
GFG Royalty Securitization	7/25/2051	7/25/2026	9.50	%	57.0		54.0		53.5
Twin Peaks Securitization	7/25/2051	1/25/2025	10.00	%	50.0		47.1		45.5
Fazoli's/Native Securitization	7/25/2051	1/25/2025	9.00	%	40.0		37.5		37.0
Total Securitized Debt					1,079.8		1,045.9		1,002.6
Elevation Note	7/19/2026	N/A	6.00	%	3.5		3.5		3.9
Equipment Notes	5/5/2027 to 3/7/2029	N/A	7.99% to 8.49%		1.2		1.2		1.3
Twin Peaks Construction Loan	8/5/2023	N/A	8.00	%	2.2		2.2		0.4
Twin Peaks Construction Loan II	1/9/2024	N/A	10.83	%	1.5		1.5		—
Total Debt					$	1,088.2	1,054.3		1,008.2
Current portion of long-term debt							(35.8)		(49.6)
Long-term Debt							$	1,018.5	$	958.6

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.

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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 June 25, 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, 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.

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

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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, beginning July 26, 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 June 25, 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 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.

FB Resid Holdings 1, LLC

On July 8, 2023, FB Resid Holdings I, LLC (“FB Resid”), a special purpose, wholly-owned subsidiary of FAT Brands, completed the issuance of two tranches of fixed rate secured notes with a total aggregate principal amount of $150.0 million. Of the $150.0 million aggregate principal amount, $105.8 million was sold privately, resulting in net proceeds of $105.3 million. A portion of the proceeds was used to purchase $64.6 million of outstanding Securitization Notes, which will be held pending re-sale to third party investors. The remaining $44.2 million in aggregate principal of notes issued by FB Resid was issued to a wholly-owned subsidiary of FAT Brands, Inc., pending sale to third party investors.

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NOTE 9. 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 June 25, 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, 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. During the thirteen and twenty-six weeks ended June 25, 2023, the Company paid $0.9 million and $1.7 million of interest, respectively.

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, 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 8.25% 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 June 25, 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 for the thirteen weeks and twenty-six weeks ended June 25, 2023 in the amount of $0.6 million and $1.2 million, respectively.

NOTE 10. 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 June 25, 2023, there were 2,929,954 shares of stock options outstanding with a weighted average exercise price of $9.49.

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During the thirteen and twenty-six weeks ended June 25, 2023, the Company granted a total of 566,907 stock options under the Plan with a grant date fair value of $1.0 million. The related compensation expense will be recognized over the vesting period. There were no new grants during the twenty-six weeks ended June 26, 2022.

The Company recognized share-based compensation expense in the amount of $0.5 million and $1.9 million during the thirteen weeks ended June 25, 2023 and June 26, 2022, respectively. The Company recognized share-based compensation expense in the amount of $1.6 million and $4.0 million during the twenty-six weeks ended June 25, 2023 and June 26, 2022, respectively. As of June 25, 2023, there remains $4.1 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.

NOTE 11. WARRANTS

The Company’s warrant activity for the twenty-six weeks ended June 25, 2023 was as follows:

	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants exercisable at December 25, 2022	1,591,256	$	3.88	2.4
Granted	1,918	$	3.01	2.1
Exercised	(84,432)	$	3.16	2.1
Warrants outstanding and exercisable at June 25, 2023	1,508,742	$	3.70	1.8

During the twenty-six weeks ended June 25, 2023, 84,432 warrants were exercised in exchange for 39,500 shares of common stock with net proceeds to the Company of $0.2 million.

NOTE 12. COMMON STOCK

On April 4, 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 June 1, 2023 to stockholders of record as of May 15, 2023, for a total of $2,320,469.

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 three months ended June 25, 2023 pursuant to the Sales Agreement, we sold and issued 65,593 shares of Series B Cumulative Preferred Stock, at a weighted average share price of $15.31, paid the Agent commissions of $30,123 for such sales and received net proceeds of $1.0 million (net of fees and commissions) for such sales.

NOTE 13. 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 Company’s majority stockholders, 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 would 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

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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 action pending resolution of the SLC's investigation, which the Court granted on February 17, 2023. On April 5, 2023, the Court granted Plaintiffs’ motion to lift the stay of the proceedings, and entered a Second Amended Pre-Trial Scheduling Order resetting key dates and deadlines, including a fact discovery cutoff of August 4, 2023, and a trial date to be set sometime after May 10, 2024. On May 4, 2023, a new SLC was appointed, and on May 8, 2023, the new SLC moved for a six-month stay of the action pending resolution of its investigation. Two days later, on May 10, 2023, the United States of America moved for a partial stay of discovery pending its own investigation. On May 31, 2023, the Court granted the United States of America’s Motion, except that it granted a six-month stay of all proceedings in the action, and on that basis deemed the SLC’s motion to be moot. 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 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. 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. On July 21, 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 action pending resolution of the SLC’s investigation. The Court has yet to rule or issue a briefing schedule as to the SLC’s Motion to Stay. 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 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. 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

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conducting discovery. The court has vacated the current trial date and has not yet reset the trial date. 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. FCCG has filed a motion to dismiss the complaint, or alternatively to stay the case, which motion is currently pending before the court. 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 June 25, 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.

NOTE 14. GEOGRAPHIC INFORMATION

Revenue by geographic area was as follows (in millions):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
United States	$	105.1	$	100.5	$	207.9	$	195.8
Other countries	1.7		2.3		4.6		4.4
Total revenue	$	106.8	$	102.8	$	212.5	$	200.2

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 twenty-six weeks ended June 25, 2023 and June 26, 2022, no individual franchisee accounted for more than 10% of the Company’s revenue.

NOTE 15. SUBSEQUENT EVENTS

In July 2023, the Company's subsidiary, FB Resid Holdings I, LLC, completed the sale to third parties of $105.8 million in aggregate principal amount of secured debt, as disclosed further in Note 8.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our results of operations, financial condition, and liquidity and capital resources should be read in conjunction with our financial statements and related notes for the thirteen weeks and twenty-six weeks ended June 25, 2023 and June 26, 2022, as applicable. Certain statements made or incorporated by reference in this report and our other filings with the Securities and Exchange Commission, in our press releases, and in statements made by or with the approval of authorized personnel constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are subject to the safe harbor created thereby. Forward-looking statements reflect intent, belief, current expectations, estimates or projections about, among other things, our industry, management’s beliefs, and future events and financial trends affecting us. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “will”, and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are reasonable, such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. These differences can arise as a result of the risks described in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K filed on February 24, 2023 “Item 1A. Risk Factors” and elsewhere in this report, as well as other factors that may affect our business, results of operations, or financial condition. Forward-looking statements in this report speak only as of the date hereof, and forward-looking statements in documents incorporated by reference speak only as of the date of those documents. Unless otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking statements contained in this report will, in fact, transpire.

Executive Overview

Business overview

FAT Brands Inc. is a leading multi-brand restaurant franchising company that develops, markets, and acquires primarily quick-service, fast casual, casual dining and polished casual restaurant concepts around the world. As of June 25, 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 June 25, 2023, the Company had approximately 2,300 locations open or under construction, of which approximately 95% were franchised.

Under our franchised business model, we generate revenue by charging franchisees an initial franchise fee as well as ongoing royalties. This asset light franchisor model provides the opportunity for strong profit margins and an attractive free cash flow profile while minimizing restaurant operating company risk, such as long-term real estate commitments or capital investments. Our scalable management platform enables us to add new stores and restaurant concepts to our portfolio with minimal incremental corporate overhead cost, while taking advantage of significant corporate overhead synergies. The acquisition of additional brands and restaurant concepts as well as expansion of our existing brands are key elements of our growth strategy. 

Our revenues are derived primarily from two sales channels, franchised restaurants and company owned restaurants, which we operate as one segment. The primary sources of revenues are the sale of food and beverages at our company restaurants and the collection of royalties, franchise fees and advertising revenue from sales of food and beverages at our franchised restaurants.

Results of Operations

We operate on a 52-week or 53-week fiscal year ending on the last Sunday of the calendar year. In a 52-week fiscal year, each quarter contains 13 weeks of operations. In a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations, which may cause our revenue, expenses and other results of operations to be higher due to an additional week of operations. The 2023 fiscal year is a 53-week year. The 2022 fiscal year was a 52-week year.

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Results of Operations of FAT Brands Inc.

The following table summarizes key components of our condensed consolidated results of operations for the thirteen weeks and twenty-six weeks ended June 25, 2023 and June 26, 2022.

(dollars in thousands)

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Statements of Operations Data:
Revenue
Royalties	$	22,751	$	21,665	$	45,236	$	42,563
Restaurant sales	62,778		60,044		125,379		118,121
Advertising fees	9,668		9,568		19,019		18,929
Factory revenues	9,686		8,570		18,851		16,749
Franchise fees	763		1,295		1,565		2,009
Other revenue	1,118		1,643		2,405		1,817
Total revenue	106,764		102,785		212,455		200,188
Costs and expenses
General and administrative expense	9,947		20,841		38,362		45,437
Cost of restaurant and factory revenues	59,502		49,846		118,589		104,644
Depreciation and amortization	7,061		6,711		14,177		13,181
Refranchising loss	179		453		338		1,001
Acquisition costs	—		135		—		383
Advertising fees	11,610		11,596		22,137		21,853
Total costs and expenses	88,299		89,582		193,603		186,499
Income from operations	18,465		13,203		18,852		13,689
Total other expense, net	(24,210)		(21,642)		(54,187)		(41,359)
Loss before income tax provision (benefit)	(5,745)		(8,439)		(35,335)		(27,670)
Income tax provision (benefit)	1,346		(251)		3,882		4,273
Net loss	$	(7,091)	$	(8,188)	$	(39,217)	$	(31,943)

For the Twenty-Six Weeks Ended June 25, 2023 and June 26, 2022:

Revenue - Revenue consists of royalties, franchise fees, advertising fees, restaurant sales, factory revenue and other revenue. Total revenue increased $12.3 million, or 6.1%, in the first two quarters of 2023 to $212.5 million compared to $200.2 million in the same period of 2022, driven by system-wide sales growth and revenues from new restaurant openings.

Costs and expenses – Costs and expenses consist of general and administrative expense, cost of restaurant and factory revenues, depreciation and amortization, refranchising loss and advertising fees. Costs and expenses increased $7.1 million, or 3.8%, in the first two quarters of 2023 to $193.6 million compared to the same period in the prior year, primarily due to increased activity from Company owned restaurants and the Company's factory, as well as professional fees related to certain litigation matters.

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General and administrative expense decreased $7.1 million, or 15.6%, in the first two quarters of 2023 compared to the same period in the prior year, primarily due to the recognition of $12.7 million in Employee Retention Credits during the second quarter of 2023, partially offset by professional fees related to certain litigation matters.

Cost of restaurant and factory revenues increased $13.9 million, or 13.3%, in the first two quarters of 2023, primarily due to higher company-owned restaurant and dough factory revenues and the recognition of $10.1 million in Employee Retention Credits recognized during the second quarter of 2022.

Depreciation and amortization increased $1.0 million, or 7.6% in the first two quarters of 2023 compared to the same period in the prior year, primarily due to depreciation of new property and equipment at company-owned restaurant locations.

Refranchising net loss in the first two quarters of 2023 of $0.3 million was comprised of $0.4 million in restaurant operating costs, net of food sales, partially offset by $0.1 million in net gains related to the sale or closure of refranchised restaurants. Refranchising losses in the first half of 2022 were $1.0 million and were comprised of restaurant operating costs, net of food sales.

Advertising expenses increased $0.3 million in the first two quarters of 2023 compared to the prior year period. These expenses vary in relation to advertising revenues.

Total other expense, net, for the first two quarters of 2023 and 2022 was $54.2 million and $41.4 million, respectively, which is inclusive of interest expense of $54.5 million and $44.7 million, respectively. This increase is primarily due to new debt offerings which occurred in the second half of fiscal year 2022 and first quarter of 2023.

Income tax provision (benefit) – The effective rate was (11.0)% and (15.4)% for the first two quarters of 2023 and 2022, respectively. The difference in effective rate was primarily due to increases in our valuation allowance.

For the Thirteen Weeks Ended June 25, 2023 and June 26, 2022:

Revenue - Revenue consists of royalties, franchise fees, advertising fees, restaurant sales, factory revenue and other revenue. Total revenue increased $4.0 million, or 3.9%, in the second quarter of 2023 to $106.8 million compared to $102.8 million in the same period of 2022, driven by by system-wide sales growth and revenues from new restaurant openings.

Costs and expenses – Costs and expenses consist of general and administrative expense, cost of restaurant and factory revenues, depreciation and amortization, refranchising loss and advertising fees. Costs and expenses decreased $1.3 million, or 1.4%, in the second quarter of 2023 to $88.3 million compared to the same period in the prior year. This decrease is due to the recognition of Employee Retention Credits, offset by increased activity from Company-owned restaurants and the Company's factory.

General and administrative expense decreased $10.9 million, or 52.3%, in the second quarter of 2023 compared to the same period in the prior year, primarily due to the recognition of $12.7 million in Employee Retention Credits during the second quarter of 2023, partially offset by professional fees related to certain litigation matters.

Cost of restaurant and factory revenues increased $9.7 million, or 19.4%, in the second quarter of 2023, primarily due to higher company-owned restaurant and dough factory revenues and the recognition of $10.1 million in Employee Retention Credits recognized during the second quarter of 2022.

Depreciation and amortization increased $0.4 million, or 5.2% in the second quarter of 2023 compared to the same period in the prior year, primarily due to depreciation of new property and equipment at company-owned restaurant locations.

Refranchising net loss in the second quarter of 2023 of $0.2 million was comprised of restaurant operating costs, net of food sales. Refranchising losses in the second quarter of 2022 were $0.5 million and were comprised of restaurant operating costs, net of food sales.

Advertising expenses in the second quarter of 2023 were consistent with the prior year period. These expenses vary in relation to advertising revenues.

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Total other expense, net, for the second quarter of 2023 and 2022 was $24.2 million and $21.6 million, respectively, which is inclusive of interest expense of $24.3 million and $23.7 million, respectively. This increase is primarily due to new debt offerings which occurred in the second half of fiscal year 2022 and first quarter of 2023.

Income tax provision (benefit) – The effective rate was (23.4)% and 3.0% for the second quarter of 2023 and 2022, respectively. The difference in effective rate was primarily due to increases in our valuation allowance.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations, acquisitions and expansion of franchised restaurant locations and for other general business purposes. Our primary sources of funds for liquidity during the twenty-six weeks ended June 25, 2023 consisted of cash on hand at the beginning of the period and net proceeds of $34.8 million from the sale of secured debt as discussed in Note 8 of the accompanying condensed consolidated financial statements.

We are involved in a world-wide expansion of franchise locations, which will require significant liquidity, primarily from our franchisees. If real estate locations of sufficient quality cannot be located and either leased or purchased, the timing of restaurant openings may be delayed. Additionally, if we or our franchisees cannot obtain capital sufficient to fund this expansion, the extent or timing of restaurant openings may be reduced or delayed.

We also may acquire additional restaurant concepts. These acquisitions typically require capital investments in excess of our normal cash on hand. We would expect that future acquisitions will necessitate financing with additional debt or equity transactions. If we are unable to obtain acceptable financing, our ability to acquire additional restaurant concepts likely would be negatively impacted.

We have liabilities of $91.8 million relating to put options exercised by others on our Series B Cumulative Preferred Stock. The Company has contractual options pursuant to the put/call agreements to extend this repayment via incremental interest payments and there are capital market options that the Company may consider. We believe that we have sufficient liquidity to meet our liquidity needs and capital resource requirements for at least the next twelve months primarily through currently available cash and cash equivalents, cash flows from operations and access to the capital markets.

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Comparison of Cash Flows

Our cash and restricted cash balance was $71.9 million as of June 25, 2023, compared to $68.8 million as of December 25, 2022.

The following table summarizes key components of our condensed consolidated cash flows for the 26 weeks ended June 25, 2023 and June 26, 2022:

For the Twenty-Six Weeks Ended

(in millions)

	June 25, 2023		June 26, 2022
Net cash used in operating activities	$	(21.2)	$	(28.3)
Net cash used in investing activities	(6.9)		(11.9)
Net cash provided by (used in) financing activities	31.2		(8.4)
Net cash flows	$	3.1	$	(48.5)

Operating Activities

Net cash used in operating activities decreased $7.1 million in the twenty-six weeks ended June 25, 2023 compared to 2022, primarily due to the receipt of Employee Retention Credits in the first quarter of 2023, partially offset by higher debt service costs associated with our securitizations and by changes in working capital.

Investing Activities

Net cash used in investing activities was $6.9 million in the twenty-six weeks ended June 25, 2023, compared to net cash used in investing activities of $11.9 million in the comparable period of 2022. The decrease was primarily due to 2022 acquisition activity that has not recurred in fiscal year 2023.

Financing Activities

Net cash provided by financing activities was $31.2 million in the twenty-six weeks ended June 25, 2023 and was primarily comprised of proceeds from borrowings offset by dividends paid on our Class A and Class B Common Stock and our Series B Cumulative Preferred Stock.

Dividends

On April 4, 2023, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B Common Stock, payable on June 1, 2023 to stockholders of record as of May 15, 2023, for a total of $2,320,469.

The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors. The amount and size of any future dividends will depend upon our future results of operations, financial condition, capital levels, cash requirements, and other factors. There can be no assurance that we will declare and pay dividends in future periods.

Capital Expenditures

As of June 25, 2023, we do not have any material commitments for capital expenditures.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in our Annual Report on Form 10-K for the year ended December 25, 2022. Critical accounting estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our

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judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. It is possible that materially different amounts would be reported using different assumptions. Our critical accounting estimates are identified and described in our annual consolidated financial statements and the related notes included in our Annual Report on Form 10-K for our fiscal year ended December 25, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Required.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive officers and principal financial officer, after evaluating the effectiveness of the Company’s “Disclosure Controls and Procedures” (as defined in the Securities and Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of June 25, 2023, have concluded that, in regard to the segregation of duties and the financial close process, our Disclosure Controls and Procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting in connection with an evaluation that occurred during the thirteen weeks ended June 25, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Inherent Limitations Over Internal Controls

We do not expect that our Disclosure Controls and Procedures will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedures are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of frauds, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, please see Note 13, Commitments and Contingencies, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, which Note is incorporated by reference in this Item 1.

ITEM 1A. RISK FACTORS

You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” and elsewhere in our Annual Report on Form 10-K filed on February 24, 2023, which could materially affect our business, financial condition, cash flows or future results. There have been no material changes in such factors discussed in our Annual Report. The risks described in our Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the fiscal quarter ended June 25, 2023, no director or officer of the Company adopted or terminated a "Rule 10-b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS

Exhibit Number		Incorporated By Reference to			Filed Herewith
	Description	Form	Exhibit	Filing Date
3.1	Amended and Restated Bylaws, effective as of May 2, 2023	8-K	3.1	5/08/2023
31.1	Co-Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.2	Co-Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
32.1	Certifications of the Co-Chief Executive Officers and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				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)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FAT BRANDS INC.
August 4, 2023	By	/s/ Kenneth J. Kuick
		Kenneth J. Kuick
		Co-Chief Executive Officer and Chief Financial Officer
		(Principal Financial Officer and duly authorized signatory for the registrant)

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Kenneth J. Kuick, certify that:

1.I have reviewed this quarterly report on Form 10-Q of FAT Brands Inc.:

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2023	/s/ Kenneth J. Kuick
	Kenneth J. Kuick
	Co-Chief Executive Officer and Chief Financial Officer
	(Principal Executive and Financial Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Robert G. Rosen, certify that:

1.I have reviewed this quarterly report on Form 10-Q of FAT Brands Inc.:

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2023	/s/ Robert G. Rosen
	Robert G. Rosen
	Co-Chief Executive Officer and Head of Debt Capital Markets
	(Principal Executive Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of FAT Brands Inc., that, to his or her knowledge, the Quarterly Report of FAT Brands Inc. on Form 10-Q for the period ended June 25, 2023 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the company.

Date: August 4, 2023	By	/s/ Kenneth J. Kuick
		Kenneth J. Kuick
		Co-Chief Executive Officer and Chief Financial Officer
		(Principal Executive, Financial and Accounting Officer)
Date: August 4, 2023	By	/s/ Robert G. Rosen
		Robert G. Rosen
		Co-Chief Executive Officer and Head of Debt Capital Markets
		(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to FAT Brands Inc. and will be retained by FAT Brands Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	6 Months Ended
	Jun. 25, 2023	Jul. 28, 2023
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 25, 2023
Document Transition Report	false
Entity File Number	001-38250
Entity Registrant Name	FAT Brands Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-1302696
Entity Address, Address Line One	9720 Wilshire Blvd.
Entity Address, Address Line Two	Suite 500
Entity Address, City or Town	Beverly Hills
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90212
City Area Code	(310)
Local Phone Number	319-1850
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Amendment Flag	false
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity Central Index Key	0001705012
Class A Common Stock
Document Information [Line Items]
Title of 12(b) Security	Class A Common Stock, par value $0.0001 per share
Trading Symbol	FAT
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding		15,424,709
Class B Common Stock
Document Information [Line Items]
Title of 12(b) Security	Class B Common Stock, par value $0.0001 per share
Trading Symbol	FATBB
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding		1,270,805
Series B Cumulative Preferred Stock
Document Information [Line Items]
Title of 12(b) Security	Series B Cumulative Preferred Stock, par value $0.0001 per share
Trading Symbol	FATBP
Security Exchange Name	NASDAQ
Warrants to Purchase Common Stock
Document Information [Line Items]
Title of 12(b) Security	Warrants to purchase Class A Common Stock
Trading Symbol	FATBW
Security Exchange Name	NASDAQ

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 25, 2023	Dec. 25, 2022
Current assets
Cash	$ 30,569	$ 28,668
Restricted cash	26,564	25,375
Accounts receivable, net of allowances of $11,814 and $24,207 as of June 25, 2023 and December 25, 2022, respectively	29,006	23,880
Inventory	6,254	6,925
Assets classified as held-for-sale	3,887	4,767
Other current assets	8,004	6,086
Total current assets	104,284	95,701
Non-current restricted cash	14,743	14,720
Operating lease right-of-use assets	101,587	101,114
Goodwill	293,282	293,282
Other intangible assets, net	617,755	625,294
Property and equipment, net	79,577	79,189
Other assets	4,613	4,003
Total assets	1,215,841	1,213,303
Current liabilities
Accounts payable	16,303	18,328
Accrued expenses and other liabilities	51,156	52,800
Deferred income, current portion	1,862	2,019
Accrued advertising	14,032	14,819
Accrued interest payable	16,722	13,241
Dividend payable on preferred shares	1,278	1,467
Liabilities related to assets classified as held-for-sale	3,479	4,084
Operating lease liability, current portion	14,904	14,815
Redeemable preferred stock	91,836	91,836
Long-term debt, current portion	35,848	49,611
Acquisition purchase price payable	4,000	4,000
Total current liabilities	251,420	267,020
Deferred income, net of current portion	22,529	21,698
Deferred income tax liabilities, net	29,147	27,181
Operating lease liability, net of current portion	95,815	95,620
Long-term debt, net of current portion	1,018,494	958,630
Other liabilities	1,631	2,332
Total liabilities	1,419,036	1,372,481
Commitments and contingencies (Note 13)
Stockholders’ deficit
Preferred stock, $0.0001 par value; 15,000,000 shares authorized; 3,338,573 shares issued and outstanding at June 25, 2023 and 3,252,154 shares issued and outstanding at December 25, 2022; liquidation preference $25 per share	43,566	45,504
Class A common stock and Class B common stock and additional paid-in capital as of June 25, 2023: $0.0001 par value per share; 51,600,000 shares authorized (Class A 50,000,000, Class B 1,600,000); 16,611,175 shares issued and outstanding (Class A 15,340,370, Class B 1,270,805). Common stock and additional paid-in capital as of December 25, 2022: $0.0001 par value; 51,600,000 shares authorized; 16,571,675 shares issued and outstanding (Class A 15,300,870, Class B 1,270,805)	(28,877)	(26,015)
Accumulated deficit	(217,884)	(178,667)
Total stockholders’ deficit	(203,195)	(159,178)
Total liabilities and stockholders’ deficit	$ 1,215,841	$ 1,213,303

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 25, 2023	Dec. 25, 2022
Accounts receivable, allowance for doubtful accounts	$ 11,814	$ 24,207
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, authorized (in shares)	15,000,000	15,000,000
Preferred stock, issued (in shares)	3,338,573	3,252,154
Preferred stock, outstanding (in shares)	3,338,573	3,252,154
Preferred stock, liquidation preference (in dollars per share)	$ 25	$ 25
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized (in shares)	51,600,000	51,600,000
Common stock, issued (in shares)	16,611,175	16,571,675
Common stock, outstanding (in shares)	16,611,175	16,571,675
Class A Common Stock
Common stock, authorized (in shares)	50,000,000
Common stock, issued (in shares)	15,340,370	15,300,870
Common stock, outstanding (in shares)	15,340,370	15,300,870
Class B Common Stock
Common stock, authorized (in shares)	1,600,000
Common stock, issued (in shares)	1,270,805	1,270,805
Common stock, outstanding (in shares)	1,270,805	1,270,805

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
Revenue
Total revenue	$ 106,764	$ 102,785	$ 212,455	$ 200,188
Costs and expenses
General and administrative expense	9,947	20,841	38,362	45,437
Depreciation and amortization	7,061	6,711	14,177	13,181
Refranchising loss	179	453	338	1,001
Acquisition costs	0	135	0	383
Advertising fees	11,610	11,596	22,137	21,853
Total costs and expenses	88,299	89,582	193,603	186,499
Income from operations	18,465	13,203	18,852	13,689
Other (expense) income, net
Interest expense	(20,008)	(18,998)	(45,098)	(38,026)
Interest expense related to preferred shares	(4,311)	(4,715)	(9,354)	(6,714)
Other income, net	109	2,071	265	3,381
Total other expense, net	(24,210)	(21,642)	(54,187)	(41,359)
Loss before income tax provision (benefit)	(5,745)	(8,439)	(35,335)	(27,670)
Income tax provision (benefit)	1,346	(251)	3,882	4,273
Net loss	(7,091)	(8,188)	(39,217)	(31,943)
Dividends on preferred shares	(1,615)	(1,661)	(3,381)	(3,314)
Net loss available to common stockholders, basic	(8,706)	(9,849)	(42,598)	(35,257)
Net loss available to common stockholders, diluted	$ (8,706)	$ (9,849)	$ (42,598)	$ (35,257)
Basic loss per common share (in dollars per share)	$ (0.53)	$ (600)	$ (2.58)	$ (2.15)
Diluted loss per common share (in dollars per share)	$ (0.53)	$ (600)	$ (2.58)	$ (2.15)
Basic weighted average shares outstanding (in shares)	16,522,379	16,405,108	16,521,590	16,396,896
Diluted weighted average shares outstanding (in shares)	16,522,379	16,405,108	16,521,590	16,396,896
Cash dividends declared per common share (in dollars per share)	$ 0.14	$ 0.13	$ 0.28	$ 0.26
Royalties
Revenue
Total revenue	$ 22,751	$ 21,665	$ 45,236	$ 42,563
Restaurant sales
Revenue
Total revenue	62,778	60,044	125,379	118,121
Advertising fees
Revenue
Total revenue	9,668	9,568	19,019	18,929
Factory revenues
Revenue
Total revenue	9,686	8,570	18,851	16,749
Franchise fees
Revenue
Total revenue	763	1,295	1,565	2,009
Other revenue
Revenue
Total revenue	1,118	1,643	2,405	1,817
Factory and restaurant sales
Costs and expenses
Cost of restaurant and factory revenues	$ 59,502	$ 49,846	$ 118,589	$ 104,644

XML

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	(31,943)											(31,943)
Issuance of common and preferred stock (in shares)			21,850
Issuance of common and preferred stock	83	64					64	19			19
Share-based compensation	4,076	4,076					4,076
Dividends paid on common stock	(4,263)	(4,263)					(4,263)
Dividends paid on Series B preferred stock	(3,314)							(3,314)			(3,314)
Exercise of Series B preferred stock put option	(4,107)							(4,107)			(4,107)
Ending balance (in shares) at Jun. 26, 2022			15,131,597	1,270,805
Ending balance (in shares) at Jun. 26, 2022									3,221,471
Ending balance, value at Jun. 26, 2022	(61,123)	(24,960)			2	0	(24,962)	48,259		0	48,259	(84,422)
Beginning balance (in shares) at Mar. 27, 2022			15,131,597	1,270,805
Beginning balance (in shares) at Mar. 27, 2022									3,221,471
Beginning balance, value at Mar. 27, 2022	(51,106)	(24,792)			2	0	(24,794)	49,920		0	49,920	(76,234)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(8,188)											(8,188)
Share-based compensation	1,964	1,964					1,964
Dividends paid on common stock	(2,132)	(2,132)					(2,132)
Dividends paid on Series B preferred stock	(1,661)							(1,661)			(1,661)
Ending balance (in shares) at Jun. 26, 2022			15,131,597	1,270,805
Ending balance (in shares) at Jun. 26, 2022									3,221,471
Ending balance, value at Jun. 26, 2022	$ (61,123)	(24,960)			2	0	(24,962)	48,259		0	48,259	(84,422)
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	(39,217)											(39,217)
Issuance of common and preferred stock (in shares)			39,500						86,419
Issuance of common and preferred stock	1,652	209					209	1,443			1,443
Share-based compensation	1,572	1,572					1,572
Dividends paid on common stock	(4,643)	(4,643)					(4,643)
Dividends paid on Series B preferred stock	$ (3,381)							(3,381)			(3,381)
Ending balance (in shares) at Jun. 25, 2023	16,611,175		15,340,370	1,270,805
Ending balance (in shares) at Jun. 25, 2023	3,338,573								3,338,573
Ending balance, value at Jun. 25, 2023	$ (203,195)	(28,877)			2	0	(28,879)	43,566		0	43,566	(217,884)
Beginning balance (in shares) at Mar. 26, 2023			15,341,822	1,270,805
Beginning balance (in shares) at Mar. 26, 2023									3,272,980
Beginning balance, value at Mar. 26, 2023	(193,845)	(27,183)			2	0	(27,185)	44,131		0	44,131	(210,793)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(7,091)											(7,091)
Issuance of common and preferred stock (in shares)			1,452						65,593
Issuance of common and preferred stock	1,202	152					152	1,050			1,050
Share-based compensation	477	477					477
Dividends paid on common stock	(2,322)	(2,322)					(2,322)
Dividends paid on Series B preferred stock	$ (1,615)							(1,615)			(1,615)
Ending balance (in shares) at Jun. 25, 2023	16,611,175		15,340,370	1,270,805
Ending balance (in shares) at Jun. 25, 2023	3,338,573								3,338,573
Ending balance, value at Jun. 25, 2023	$ (203,195)	$ (28,877)			$ 2	$ 0	$ (28,879)	$ 43,566		$ 0	$ 43,566	$ (217,884)

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022
Cash flows from operating activities:
Net loss	$ (39,217)	$ (31,943)
Adjustments to reconcile net loss to net cash used in operations:
Deferred income taxes	1,966	3,256
Depreciation and amortization	14,177	13,181
Share-based compensation	1,572	4,076
Accretion of loan fees and interest	8,520	5,787
Adjustments of purchase price liability	0	48
Provision for bad debts	(12,395)	423
Change in:
Accounts receivable	7,267	(16,530)
Inventory	672	(405)
Other current and noncurrent assets	(2,670)	(420)
Operating lease assets and liabilities	85	377
Deferred income	674	1,959
Accounts payable	(2,025)	(3,924)
Accrued expenses and other liabilities	(1,644)	(1,231)
Accrued advertising	(788)	2,985
Accrued interest payable	3,481	483
Other current and noncurrent liabilities	(887)	(6,413)
Total adjustments	18,005	3,652
Net cash used in operating activities	(21,212)	(28,291)
Cash flows from investing activities:
Acquisitions, net of cash acquired	0	(2,772)
Purchases of property and equipment	(7,026)	(10,523)
Payments received on notes receivable	143	1,647
Other	0	(192)
Net cash used in investing activities	(6,883)	(11,840)
Cash flows from financing activities:
Proceeds from borrowings, net of issuance costs	38,115	704
Repayments of borrowings	(535)	(514)
Proceeds from issuance of common and preferred shares	1,652	83
Dividends paid on redeemable preferred stock	0	(1,062)
Dividends paid on common shares	(4,643)	(4,263)
Dividends paid on preferred shares	(3,381)	(3,314)
Net cash provided by (used in) financing activities	31,208	(8,366)
Net increase (decrease) in cash and restricted cash	3,113	(48,497)
Cash and restricted cash at beginning of the period	68,763	99,921
Cash and restricted cash at end of the period	71,876	51,424
Supplemental disclosures of cash flow information:
Cash paid for interest	50,971	32,430
Cash paid for income taxes	$ 675	$ 447

XML

ORGANIZATION AND RELATIONSHIPS

6 Months Ended

Jun. 25, 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 June 25, 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 June 25, 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 $18.9 million and $13.7 million during the twenty-six weeks ended June 25, 2023 and June 26, 2022, respectively. The Company has a history of net losses and an accumulated deficit of $217.9 million as of June 25, 2023. Additionally, the Company had negative working capital of $147.1 million. Of this amount, $91.8 million represents 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 $30.6 million of unrestricted cash at June 25, 2023 and plans on the combination of cash flows from operations, cash on hand, $92.7 million of issued but not sold aggregate principal amount of fixed rate secured notes and $63.5 million aggregate principal amount of repurchased but not re-sold fixed rate secured notes (see Note 8) 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

6 Months Ended

Jun. 25, 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. These financial statements should be read in conjunction with the audited financial statements and the related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 25, 2022

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.

Employee Retention Tax Credits - On March 27, 2020, the U.S. government enacted the Coronavirus Aid Relief and Security Act (the "CARES Act") to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit ("ERC"). As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to International Accounting Standard, Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20"). During 2022, the Company filed with the Internal Revenue Service credits totaling $22.0 million, $10.1 million of which was filed during the thirteen and twenty-six weeks ended June 26, 2022. During the fourth quarter of 2022, in accordance with IAS 20, the Company fully reserved the amounts claimed until such time that it has been determined that the Company has reasonable assurance that the credits will be realized. During the thirteen weeks ended June 25, 2023, the Company reversed $12.7 million of its reserve as it determined there is reasonable assurance that it will be realized.

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

6 Months Ended

Jun. 25, 2023

Refranchising

REFRANCHISING

REFRANCHISING

As 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 June 25, 2023 and December 25, 2022 (in millions):

	June 25, 2023		December 25, 2022
Property and equipment	$	0.6	$	0.7
Operating lease right-of-use assets	3.3		4.1
Total	$	3.9	$	4.8

Operating lease liabilities related to the assets classified as held-for-sale in the amount of $3.5 million and $4.1 million have been classified as current liabilities in the accompanying condensed consolidated balance sheets as of June 25, 2023 and December 25, 2022, respectively.

The following table highlights the operating results of the Company's refranchising program (in millions):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Restaurant costs and expenses, net of revenue	$	0.2	$	0.5	$	0.4	$	1.0
Gain on store sales or closures	—		—		(0.1)		—
Refranchising loss	$	0.2	$	0.5	$	0.3	$	1.0

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PROPERTY AND EQUIPMENT, NET

6 Months Ended

Jun. 25, 2023

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT, NET

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following (in millions):

	June 25, 2023		December 25, 2022
Real estate	$	73.6	$	67.7
Equipment	25.4		26.5
	$	99.0	$	94.2
Accumulated depreciation	(19.4)		(15.0)
Property and equipment, net	$	79.6	$	79.2

Depreciation expense during the thirteen weeks ended June 25, 2023 and June 26, 2022 was $3.3 million and $3.0 million, respectively. Depreciation expense during the twenty-six weeks ended June 25, 2023 and June 26, 2022 was $6.7 million and $5.8 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

6 Months Ended

Jun. 25, 2023

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)

	Amortizing Intangible Assets		Non-Amortizing Intangible Assets
			Goodwill		Trademarks
December 25, 2022	$	162.1	$	293.3	$	463.2
Amortization	(7.5)		—		—
June 25, 2023	$	154.6	$	293.3	$	463.2

Gross Carrying Value and Accumulated Amortization of Other Intangible Assets (in millions)

	June 25, 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		$	109.2	$	(19.4)	$	89.8	$	109.2	$	(14.8)	$	94.4
Customer relationships		73.9		(10.9)		63.0		73.9		(8.1)		65.8
Other		2.1		(0.3)		1.8		2.1		(0.2)		1.9
		$	185.2	$	(30.6)	$	154.6	$	185.2	$	(23.1)	$	162.1
Non-amortizing intangible assets
Trademarks						463.2						463.2
Total amortizing and non-amortizing intangible assets, net						$	617.8					$	625.3

Amortization expense for the thirteen weeks ended June 25, 2023 and June 26, 2022 was $3.8 million and $3.7 million, respectively. Amortization expense for the twenty-six weeks ended June 25, 2023 and June 26, 2022 was $7.5 million and $7.4 million, respectively.

The expected future amortization of definite-life intangible assets by fiscal year (in millions):

Fiscal Year:
Remainder of 2023	$	7.5
2024	14.7
2025	14.5
2026	14.5
2027	14.5
Thereafter	88.9
Total	$	154.6

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INCOME TAXES

6 Months Ended

Jun. 25, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table presents the Company’s provision (benefit) for income taxes (in millions):

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 25, 2023			June 26, 2022			June 25, 2023			June 26, 2022
Provision (benefit) for income taxes	$	1.3		$	(0.3)		$	3.9		$	4.3
Effective tax rate	(23.4)		%	3.0		%	(11.0)		%	(15.4)		%

The difference between the statutory tax rate of 21% and the effective tax rate of (23.4)% and (11.0)% in the thirteen weeks and twenty-six weeks ended June 25, 2023, respectively, was primarily due to increases in the valuation allowance, nondeductible expenses and the impact of state income taxes.

The difference between the statutory tax rate of 21% and the effective tax rate of 3.0% and (15.4)% in the thirteen weeks and twenty-six weeks ended June 26, 2022, respectively, was primarily due to increases in the valuation allowance, nondeductible expenses and the impact of state income taxes.

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LEASES

6 Months Ended

Jun. 25, 2023

Leases [Abstract]

LEASES

LEASES

The Company recognized lease expense of $4.7 million and $4.8 million for the thirteen weeks ended June 25, 2023 and June 26, 2022, respectively. The Company recognized lease expense of $9.5 million and $9.3 million for the twenty-six weeks ended June 25, 2023 and June 26, 2022, respectively.

Operating lease right-of-use assets and operating lease liabilities relating to the operating leases are as follows (in millions):

	June 25, 2023		December 25, 2022
Operating lease right-of-use assets	$	101.6	$	101.1
Right-of-use assets classified as held-for-sale	3.3		4.1
Total right-of-use assets	$	104.9	$	105.2
Operating lease liabilities	$	110.7	$	110.4
Lease liabilities related to assets held-for-sale	3.5		4.1
Total operating lease liabilities	$	114.2	$	114.5

The contractual future maturities of the Company’s operating lease liabilities as of June 25, 2023, including anticipated lease extensions, are as follows (in millions):

Fiscal year:
Remainder of 2023	$	5.2
2024	15.5
2025	15.1
2026	13.8
2027	13.7
Thereafter	181.2
Total lease payments	$	244.5
Less imputed interest	(133.8)
Total	$	110.7

The current portion of the operating lease liability as of June 25, 2023 was $14.9 million.

Supplemental cash flow information for the twenty-six weeks ended June 25, 2023 related to leases was as follows (in millions):

	Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases	$	8.8	$	8.1

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DEBT

6 Months Ended

Jun. 25, 2023

Debt Disclosure [Abstract]

DEBT

DEBT

Long-term debt consisted of the following (in millions):

	June 25, 2023								December 25, 2022
	Final Maturity	Anticipated Repayment Date	Rate		Face Value		Book Value		Book Value
Senior Debt
FB Royalty Securitization	4/25/2051	7/25/2026	4.75	%	$	139.8	$	135.9	$	135.3
GFG Royalty Securitization	7/25/2051	7/25/2026	6.00	%	274.0		265.1		228.9
Twin Peaks Securitization	7/25/2051	1/25/2025	7.00	%	150.0		148.4		147.5
Fazoli's/Native Securitization	7/25/2051	1/25/2025	6.00	%	128.8		125.7		124.8
Senior Subordinated Debt
FB Royalty Securitization	4/25/2051	7/25/2026	8.00	%	46.6		45.4		45.2
GFG Royalty Securitization	7/25/2051	7/25/2026	7.00	%	84.0		82.3		82.0
Twin Peaks Securitization	7/25/2051	1/25/2025	9.00	%	50.0		48.3		47.3
Fazoli's/Native Securitization	7/25/2051	1/25/2025	7.00	%	25.0		23.8		23.5
Subordinated Debt
FB Royalty Securitization	4/25/2051	7/25/2026	9.00	%	34.6		32.4		32.1
GFG Royalty Securitization	7/25/2051	7/25/2026	9.50	%	57.0		54.0		53.5
Twin Peaks Securitization	7/25/2051	1/25/2025	10.00	%	50.0		47.1		45.5
Fazoli's/Native Securitization	7/25/2051	1/25/2025	9.00	%	40.0		37.5		37.0
Total Securitized Debt					1,079.8		1,045.9		1,002.6
Elevation Note	7/19/2026	N/A	6.00	%	3.5		3.5		3.9
Equipment Notes	5/5/2027 to 3/7/2029	N/A	7.99% to 8.49%		1.2		1.2		1.3
Twin Peaks Construction Loan	8/5/2023	N/A	8.00	%	2.2		2.2		0.4
Twin Peaks Construction Loan II	1/9/2024	N/A	10.83	%	1.5		1.5		—
Total Debt					$	1,088.2	1,054.3		1,008.2
Current portion of long-term debt							(35.8)		(49.6)
Long-term Debt							$	1,018.5	$	958.6

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 June 25, 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, 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.

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, beginning July 26, 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 June 25, 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 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.

FB Resid Holdings 1, LLC

On July 8, 2023, FB Resid Holdings I, LLC (“FB Resid”), a special purpose, wholly-owned subsidiary of FAT Brands, completed the issuance of two tranches of fixed rate secured notes with a total aggregate principal amount of $150.0 million. Of the $150.0 million aggregate principal amount, $105.8 million was sold privately, resulting in net proceeds of $105.3 million. A portion of the proceeds was used to purchase $64.6 million of outstanding Securitization Notes, which will be held pending re-sale to third party investors. The remaining $44.2 million in aggregate principal of notes issued by FB Resid was issued to a wholly-owned subsidiary of FAT Brands, Inc., pending sale to third party investors.

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REDEEMABLE PREFERRED STOCK

6 Months Ended

Jun. 25, 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 June 25, 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, 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. During the thirteen and twenty-six weeks ended June 25, 2023, the Company paid $0.9 million and $1.7 million of interest, respectively.

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, 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 8.25% 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 June 25, 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 for the thirteen weeks and twenty-six weeks ended June 25, 2023 in the amount of $0.6 million and $1.2 million, respectively.

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SHARE-BASED COMPENSATION

6 Months Ended

Jun. 25, 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 June 25, 2023, there were 2,929,954 shares of stock options outstanding with a weighted average exercise price of $9.49.

During the thirteen and twenty-six weeks ended June 25, 2023, the Company granted a total of 566,907 stock options under the Plan with a grant date fair value of $1.0 million. The related compensation expense will be recognized over the vesting period. There were no new grants during the twenty-six weeks ended June 26, 2022.The Company recognized share-based compensation expense in the amount of $0.5 million and $1.9 million during the thirteen weeks ended June 25, 2023 and June 26, 2022, respectively. The Company recognized share-based compensation expense in the amount of $1.6 million and $4.0 million during the twenty-six weeks ended June 25, 2023 and June 26, 2022, respectively. As of June 25, 2023, there remains $4.1 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

6 Months Ended

Jun. 25, 2023

Warrants

WARRANTS

WARRANTS

The Company’s warrant activity for the twenty-six weeks ended June 25, 2023 was as follows:

	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants exercisable at December 25, 2022	1,591,256	$	3.88	2.4
Granted	1,918	$	3.01	2.1
Exercised	(84,432)	$	3.16	2.1
Warrants outstanding and exercisable at June 25, 2023	1,508,742	$	3.70	1.8

During the twenty-six weeks ended June 25, 2023, 84,432 warrants were exercised in exchange for 39,500 shares of common stock with net proceeds to the Company of $0.2 million.

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COMMON STOCK

6 Months Ended

Jun. 25, 2023

Common Stock

COMMON STOCK

COMMON STOCK

On April 4, 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 June 1, 2023 to stockholders of record as of May 15, 2023, for a total of $2,320,469.

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 three months ended June 25, 2023 pursuant to the Sales Agreement, we sold and issued 65,593 shares of Series B Cumulative Preferred Stock, at a weighted average share price of $15.31, paid the Agent commissions of $30,123 for such sales and received net proceeds of $1.0 million (net of fees and commissions) for such sales.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 25, 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 Company’s majority stockholders, 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 would 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 action pending resolution of the SLC's investigation, which the Court granted on February 17, 2023. On April 5, 2023, the Court granted Plaintiffs’ motion to lift the stay of the proceedings, and entered a Second Amended Pre-Trial Scheduling Order resetting key dates and deadlines, including a fact discovery cutoff of August 4, 2023, and a trial date to be set sometime after May 10, 2024. On May 4, 2023, a new SLC was appointed, and on May 8, 2023, the new SLC moved for a six-month stay of the action pending resolution of its investigation. Two days later, on May 10, 2023, the United States of America moved for a partial stay of discovery pending its own investigation. On May 31, 2023, the Court granted the United States of America’s Motion, except that it granted a six-month stay of all proceedings in the action, and on that basis deemed the SLC’s motion to be moot. 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 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. 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. On July 21, 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 action pending resolution of the SLC’s investigation. The Court has yet to rule or issue a briefing schedule as to the SLC’s Motion to Stay. 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 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. 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. The court has vacated the current trial date and has not yet reset the trial date. 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. FCCG has filed a motion to dismiss the complaint, or alternatively to stay the case, which motion is currently pending before the court. 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 June 25, 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

6 Months Ended

Jun. 25, 2023

Geographic Information And Major Franchisees

GEOGRAPHIC INFORMATION

GEOGRAPHIC INFORMATION

Revenue by geographic area was as follows (in millions):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
United States	$	105.1	$	100.5	$	207.9	$	195.8
Other countries	1.7		2.3		4.6		4.4
Total revenue	$	106.8	$	102.8	$	212.5	$	200.2

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 twenty-six weeks ended June 25, 2023 and June 26, 2022, no individual franchisee accounted for more than 10% of the Company’s revenue.

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SUBSEQUENT EVENTS	6 Months Ended
	Jun. 25, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	SUBSEQUENT EVENTSIn July 2023, the Company's subsidiary, FB Resid Holdings I, LLC, completed the sale to third parties of $105.8 million in aggregate principal amount of secured debt, as disclosed further in Note 8.

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
Pay vs Performance Disclosure
Net loss	$ (7,091)	$ (8,188)	$ (39,217)	$ (31,943)

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Insider Trading Arrangements	3 Months Ended
	Jun. 25, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 25, 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. These financial statements should be read in conjunction with the audited financial statements and the related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 25, 2022

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)

6 Months Ended

Jun. 25, 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 June 25, 2023 and December 25, 2022 (in millions):

	June 25, 2023		December 25, 2022
Property and equipment	$	0.6	$	0.7
Operating lease right-of-use assets	3.3		4.1
Total	$	3.9	$	4.8

Schedule of Operating Results of Refranchising Program

The following table highlights the operating results of the Company's refranchising program (in millions):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Restaurant costs and expenses, net of revenue	$	0.2	$	0.5	$	0.4	$	1.0
Gain on store sales or closures	—		—		(0.1)		—
Refranchising loss	$	0.2	$	0.5	$	0.3	$	1.0

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PROPERTY AND EQUIPMENT, NET (Tables)

6 Months Ended

Jun. 25, 2023

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment, Net

Property and equipment, net consists of the following (in millions):

	June 25, 2023		December 25, 2022
Real estate	$	73.6	$	67.7
Equipment	25.4		26.5
	$	99.0	$	94.2
Accumulated depreciation	(19.4)		(15.0)
Property and equipment, net	$	79.6	$	79.2

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GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Tables)

6 Months Ended

Jun. 25, 2023

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)

	Amortizing Intangible Assets		Non-Amortizing Intangible Assets
			Goodwill		Trademarks
December 25, 2022	$	162.1	$	293.3	$	463.2
Amortization	(7.5)		—		—
June 25, 2023	$	154.6	$	293.3	$	463.2

Gross Carrying Value and Accumulated Amortization of Other Intangible Assets (in millions)

	June 25, 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		$	109.2	$	(19.4)	$	89.8	$	109.2	$	(14.8)	$	94.4
Customer relationships		73.9		(10.9)		63.0		73.9		(8.1)		65.8
Other		2.1		(0.3)		1.8		2.1		(0.2)		1.9
		$	185.2	$	(30.6)	$	154.6	$	185.2	$	(23.1)	$	162.1
Non-amortizing intangible assets
Trademarks						463.2						463.2
Total amortizing and non-amortizing intangible assets, net						$	617.8					$	625.3

Schedule of Expected Future Amortization of Capitalized Franchise Agreements

The expected future amortization of definite-life intangible assets by fiscal year (in millions):

Fiscal Year:
Remainder of 2023	$	7.5
2024	14.7
2025	14.5
2026	14.5
2027	14.5
Thereafter	88.9
Total	$	154.6

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INCOME TAXES (Tables)

6 Months Ended

Jun. 25, 2023

Income Tax Disclosure [Abstract]

Schedule of Provision (Benefit) for Income Taxes

The following table presents the Company’s provision (benefit) for income taxes (in millions):

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 25, 2023			June 26, 2022			June 25, 2023			June 26, 2022
Provision (benefit) for income taxes	$	1.3		$	(0.3)		$	3.9		$	4.3
Effective tax rate	(23.4)		%	3.0		%	(11.0)		%	(15.4)		%

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LEASES (Tables)

6 Months Ended

Jun. 25, 2023

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):

	June 25, 2023		December 25, 2022
Operating lease right-of-use assets	$	101.6	$	101.1
Right-of-use assets classified as held-for-sale	3.3		4.1
Total right-of-use assets	$	104.9	$	105.2
Operating lease liabilities	$	110.7	$	110.4
Lease liabilities related to assets held-for-sale	3.5		4.1
Total operating lease liabilities	$	114.2	$	114.5

Contractual Future Maturities of Operating Lease Liabilities

The contractual future maturities of the Company’s operating lease liabilities as of June 25, 2023, including anticipated lease extensions, are as follows (in millions):

Fiscal year:
Remainder of 2023	$	5.2
2024	15.5
2025	15.1
2026	13.8
2027	13.7
Thereafter	181.2
Total lease payments	$	244.5
Less imputed interest	(133.8)
Total	$	110.7

Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information for the twenty-six weeks ended June 25, 2023 related to leases was as follows (in millions):

	Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases	$	8.8	$	8.1

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DEBT (Tables)

6 Months Ended

Jun. 25, 2023

Debt Disclosure [Abstract]

Schedule of Long-term Debt

Long-term debt consisted of the following (in millions):

	June 25, 2023								December 25, 2022
	Final Maturity	Anticipated Repayment Date	Rate		Face Value		Book Value		Book Value
Senior Debt
FB Royalty Securitization	4/25/2051	7/25/2026	4.75	%	$	139.8	$	135.9	$	135.3
GFG Royalty Securitization	7/25/2051	7/25/2026	6.00	%	274.0		265.1		228.9
Twin Peaks Securitization	7/25/2051	1/25/2025	7.00	%	150.0		148.4		147.5
Fazoli's/Native Securitization	7/25/2051	1/25/2025	6.00	%	128.8		125.7		124.8
Senior Subordinated Debt
FB Royalty Securitization	4/25/2051	7/25/2026	8.00	%	46.6		45.4		45.2
GFG Royalty Securitization	7/25/2051	7/25/2026	7.00	%	84.0		82.3		82.0
Twin Peaks Securitization	7/25/2051	1/25/2025	9.00	%	50.0		48.3		47.3
Fazoli's/Native Securitization	7/25/2051	1/25/2025	7.00	%	25.0		23.8		23.5
Subordinated Debt
FB Royalty Securitization	4/25/2051	7/25/2026	9.00	%	34.6		32.4		32.1
GFG Royalty Securitization	7/25/2051	7/25/2026	9.50	%	57.0		54.0		53.5
Twin Peaks Securitization	7/25/2051	1/25/2025	10.00	%	50.0		47.1		45.5
Fazoli's/Native Securitization	7/25/2051	1/25/2025	9.00	%	40.0		37.5		37.0
Total Securitized Debt					1,079.8		1,045.9		1,002.6
Elevation Note	7/19/2026	N/A	6.00	%	3.5		3.5		3.9
Equipment Notes	5/5/2027 to 3/7/2029	N/A	7.99% to 8.49%		1.2		1.2		1.3
Twin Peaks Construction Loan	8/5/2023	N/A	8.00	%	2.2		2.2		0.4
Twin Peaks Construction Loan II	1/9/2024	N/A	10.83	%	1.5		1.5		—
Total Debt					$	1,088.2	1,054.3		1,008.2
Current portion of long-term debt							(35.8)		(49.6)
Long-term Debt							$	1,018.5	$	958.6

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WARRANTS (Tables)

6 Months Ended

Jun. 25, 2023

Warrants

Schedule of Warrant Activity

The Company’s warrant activity for the twenty-six weeks ended June 25, 2023 was as follows:

	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants exercisable at December 25, 2022	1,591,256	$	3.88	2.4
Granted	1,918	$	3.01	2.1
Exercised	(84,432)	$	3.16	2.1
Warrants outstanding and exercisable at June 25, 2023	1,508,742	$	3.70	1.8

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GEOGRAPHIC INFORMATION (Tables)

6 Months Ended

Jun. 25, 2023

Geographic Information And Major Franchisees

Schedule of Revenues by Geographic Area

Revenue by geographic area was as follows (in millions):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
United States	$	105.1	$	100.5	$	207.9	$	195.8
Other countries	1.7		2.3		4.6		4.4
Total revenue	$	106.8	$	102.8	$	212.5	$	200.2

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ORGANIZATION AND RELATIONSHIPS - Narrative (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 25, 2023 USD ($) location	Jun. 26, 2022 USD ($)	Jun. 25, 2023 USD ($) location franchise	Jun. 26, 2022 USD ($)	Dec. 25, 2022 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of franchise brands | franchise			17
Number of locations | location	2,300		2,300
Percent of total restaurants franchised (as a percent)	95.00%		95.00%
Income from operations	$ 18,465	$ 13,203	$ 18,852	$ 13,689
Accumulated deficit	(217,884)		(217,884)		$ (178,667)
Working capital	(147,100)		(147,100)
Redeemable preferred stock	91,836		91,836		91,836
Unrestricted cash	30,569		30,569		$ 28,668
Fixed Rate Secured Notes
Debt Securities, Available-for-Sale [Line Items]
Repurchased amount	63,500		63,500
Fixed Rate Secured Notes
Debt Securities, Available-for-Sale [Line Items]
Debt securities	$ 92,700		$ 92,700

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 25, 2023 USD ($)	Jun. 26, 2022 USD ($)	Jun. 25, 2023 salesChannel segment	Jun. 26, 2022 USD ($)	Dec. 25, 2022 USD ($)
Accounting Policies [Abstract]
Number of sales channels | salesChannel			2
Number of reportable segments | segment			1
CARES Act, Employee retention credit		$ 10.1		$ 10.1	$ 22.0
CARES Act, reversal of credit reserve	$ 12.7

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REFRANCHISING - Schedule of Remaining Assets Classified as Held for Sale (Details) - USD ($) $ in Thousands	Jun. 25, 2023	Dec. 25, 2022
Refranchising
Property and equipment	$ 600	$ 700
Operating lease right-of-use assets	3,300	4,100
Total	$ 3,887	$ 4,767

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REFRANCHISING - Narrative (Details) - USD ($) $ in Thousands	Jun. 25, 2023	Dec. 25, 2022
Refranchising
Liabilities related to assets classified as held for sale	$ 3,479	$ 4,084

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REFRANCHISING - Schedule of Operating Results of Refranchising Program (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
Long Lived Assets Held-for-sale [Line Items]
Refranchising loss	$ 179	$ 453	$ 338	$ 1,001
Restaurant sales | Assets classified as held for sale
Long Lived Assets Held-for-sale [Line Items]
Restaurant costs and expenses, net of revenue	200	500	400	1,000
Gain on store sales or closures	0	0	(100)	0
Refranchising loss	$ 200	$ 500	$ 300	$ 1,000

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PROPERTY AND EQUIPMENT, NET - Carrying Value of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 25, 2023	Dec. 25, 2022
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 99,000	$ 94,200
Accumulated depreciation	(19,400)	(15,000)
Property and equipment, net	79,577	79,189
Real estate
Property, Plant and Equipment [Line Items]
Property and equipment, gross	73,600	67,700
Equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 25,400	$ 26,500

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PROPERTY AND EQUIPMENT, NET - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
Property, Plant and Equipment [Abstract]
Depreciation	$ 3.3	$ 3.0	$ 6.7	$ 5.8

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GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Changes in Carrying Value of Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
Finite-Lived Intangible Assets [Roll Forward]
Amortizing Intangible Assets, Beginning balance			$ 162,100
Amortization of Intangible Assets	$ (3,800)	$ (3,700)	(7,500)	$ (7,400)
Amortizing Intangible Assets, Ending balance	154,600		154,600
Goodwill [Roll Forward]
Goodwill, Beginning balance			293,282
Goodwill, Ending balance	293,282		293,282
Trademarks
Indefinite-Lived Intangible Assets [Roll Forward]
Trademarks, Beginning balance			463,200
Trademarks, Ending balance	$ 463,200		$ 463,200

XML

GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Gross Carrying Value and Accumulated Amortization (Details) - USD ($) $ in Thousands	Jun. 25, 2023	Dec. 25, 2022
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 185,200	$ 185,200
Accumulated Amortization	(30,600)	(23,100)
Net Carrying Amount	154,600	162,100
Total amortizing and non-amortizing intangible assets, net	617,755	625,294
Trademarks
Finite-Lived Intangible Assets [Line Items]
Non-amortizing intangible assets	463,200	463,200
Franchise agreements
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	109,200	109,200
Accumulated Amortization	(19,400)	(14,800)
Net Carrying Amount	89,800	94,400
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	73,900	73,900
Accumulated Amortization	(10,900)	(8,100)
Net Carrying Amount	63,000	65,800
Other
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,100	2,100
Accumulated Amortization	(300)	(200)
Net Carrying Amount	$ 1,800	$ 1,900

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GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 3.8	$ 3.7	$ 7.5	$ 7.4

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GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Expected Future Amortization (Details) - USD ($) $ in Millions	Jun. 25, 2023	Dec. 25, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2023	$ 7.5
2024	14.7
2025	14.5
2026	14.5
2027	14.5
Thereafter	88.9
Net Carrying Amount	$ 154.6	$ 162.1

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INCOME TAXES - Schedule of Provision (Benefit) for Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
Income Tax Disclosure [Abstract]
Provision (benefit) for income taxes	$ 1,346	$ (251)	$ 3,882	$ 4,273
Effective tax rate	(23.40%)	3.00%	(11.00%)	(15.40%)
Statutory tax rate	21.00%	21.00%	21.00%	21.00%

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LEASES - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022	Dec. 25, 2022
Leases [Abstract]
Lease expense recognized	$ 4,700	$ 4,800	$ 9,500	$ 9,300
Operating lease liability, current portion	$ 14,904		$ 14,904		$ 14,815

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LEASES - Summary of Operating Lease Right of Use Assets and Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 25, 2023	Dec. 25, 2022
Lessor, Lease, Description [Line Items]
Operating lease right-of-use assets	$ 101,587	$ 101,114
Corporate Offices and For Certain Restaurant Properties
Lessor, Lease, Description [Line Items]
Operating lease right-of-use assets	104,900	105,200
Operating lease liabilities	114,200	114,500
Corporate Offices and For Certain Restaurant Properties | Continuing operations
Lessor, Lease, Description [Line Items]
Operating lease right-of-use assets	101,600	101,100
Operating lease liabilities	110,700	110,400
Corporate Offices and For Certain Restaurant Properties | Held for sale
Lessor, Lease, Description [Line Items]
Operating lease right-of-use assets	3,300	4,100
Operating lease liabilities	$ 3,500	$ 4,100

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LEASES - Schedule of Contractual Future Maturities (Details) - Corporate Offices and For Certain Restaurant Properties - USD ($) $ in Millions	Jun. 25, 2023	Dec. 25, 2022
Lessor, Lease, Description [Line Items]
Total	$ 114.2	$ 114.5
Continuing operations
Lessor, Lease, Description [Line Items]
Remainder of 2023	5.2
2024	15.5
2025	15.1
2026	13.8
2027	13.7
Thereafter	181.2
Total lease payments	244.5
Less imputed interest	(133.8)
Total	$ 110.7	$ 110.4

XML

LEASES - Summary of Supplemental Cash Flow Information (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022
Corporate Offices and For Certain Restaurant Properties
Lessor, Lease, Description [Line Items]
Operating cash flows from operating leases	$ 8.8	$ 8.1

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DEBT - Schedule of Securitization of Notes (Details) - USD ($)	Jun. 25, 2023	Jan. 31, 2023	Dec. 25, 2022	Dec. 15, 2022	Dec. 05, 2022	Sep. 25, 2022	Jul. 06, 2022	Dec. 15, 2021	Oct. 01, 2021	Jul. 22, 2021	Apr. 26, 2021
Debt Instrument [Line Items]
Face Value	$ 1,088,200,000
Book Value	1,054,300,000		$ 1,008,200,000
Long-term debt, current portion	(35,848,000)		(49,611,000)
Long-term debt, net of current portion	1,018,494,000		$ 958,630,000
FB Royalty Securitization
Debt Instrument [Line Items]
Face Value						$ 30,000,000	$ 76,500,000				$ 144,500,000
GFG Royalty Securitization
Debt Instrument [Line Items]
Face Value	$ 48,500,000	$ 40,000,000		$ 113,500,000						$ 350,000,000
Twin Peaks Securitization
Debt Instrument [Line Items]
Face Value									$ 250,000,000
Fazoli's/Native Securitization
Debt Instrument [Line Items]
Face Value								$ 193,800,000
Equipment Notes | Minimum
Debt Instrument [Line Items]
Rate			7.99%
Equipment Notes | Maximum
Debt Instrument [Line Items]
Rate			8.49%
Senior Debt | FB Royalty Securitization
Debt Instrument [Line Items]
Rate	4.75%
Face Value	$ 139,800,000
Book Value	$ 135,900,000		$ 135,300,000
Senior Debt | GFG Royalty Securitization
Debt Instrument [Line Items]
Rate	6.00%
Face Value	$ 274,000,000.0
Book Value	$ 265,100,000		228,900,000
Senior Debt | Twin Peaks Securitization
Debt Instrument [Line Items]
Rate	7.00%
Face Value	$ 150,000,000.0
Book Value	$ 148,400,000		147,500,000
Senior Debt | Fazoli's/Native Securitization
Debt Instrument [Line Items]
Rate	6.00%
Face Value	$ 128,800,000
Book Value	$ 125,700,000		124,800,000
Senior Subordinated Debt | FB Royalty Securitization
Debt Instrument [Line Items]
Rate	8.00%
Face Value	$ 46,600,000
Book Value	$ 45,400,000		45,200,000
Senior Subordinated Debt | GFG Royalty Securitization
Debt Instrument [Line Items]
Rate	7.00%
Face Value	$ 84,000,000.0
Book Value	$ 82,300,000		82,000,000.0
Senior Subordinated Debt | Twin Peaks Securitization
Debt Instrument [Line Items]
Rate	9.00%
Face Value	$ 50,000,000.0
Book Value	$ 48,300,000		47,300,000
Senior Subordinated Debt | Fazoli's/Native Securitization
Debt Instrument [Line Items]
Rate	7.00%
Face Value	$ 25,000,000.0
Book Value	$ 23,800,000		23,500,000
Subordinated Debt | FB Royalty Securitization
Debt Instrument [Line Items]
Rate	9.00%
Face Value	$ 34,600,000
Book Value	$ 32,400,000		32,100,000
Subordinated Debt | GFG Royalty Securitization
Debt Instrument [Line Items]
Rate	9.50%
Face Value	$ 57,000,000.0
Book Value	$ 54,000,000.0		53,500,000
Subordinated Debt | Twin Peaks Securitization
Debt Instrument [Line Items]
Rate	10.00%
Face Value	$ 50,000,000.0
Book Value	$ 47,100,000		45,500,000
Subordinated Debt | Fazoli's/Native Securitization
Debt Instrument [Line Items]
Rate	9.00%
Face Value	$ 40,000,000.0
Book Value	37,500,000		37,000,000.0
Securitized Debt
Debt Instrument [Line Items]
Face Value	1,079,800,000
Book Value	$ 1,045,900,000		1,002,600,000
Notes Payable, Other Payables | Elevation Note
Debt Instrument [Line Items]
Rate	6.00%
Face Value	$ 3,500,000
Book Value	3,500,000		3,900,000
Notes Payable, Other Payables | Equipment Notes
Debt Instrument [Line Items]
Face Value	1,200,000
Book Value	$ 1,200,000		1,300,000
Notes Payable, Other Payables | Equipment Notes | Minimum
Debt Instrument [Line Items]
Rate	7.99%
Notes Payable, Other Payables | Equipment Notes | Maximum
Debt Instrument [Line Items]
Rate	8.49%
Construction Loan | Twin Peaks Construction Loan
Debt Instrument [Line Items]
Rate	8.00%				8.00%
Face Value	$ 2,200,000				$ 4,500,000
Book Value	$ 2,200,000		400,000
Construction Loan | Twin Peaks Construction Loan II
Debt Instrument [Line Items]
Rate	10.83%
Face Value	$ 1,500,000
Book Value	$ 1,500,000		$ 0

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DEBT - Narrative (Details)					1 Months Ended			3 Months Ended		6 Months Ended
	Jul. 08, 2023 USD ($) iNTEGER	Mar. 09, 2023 USD ($)	Dec. 05, 2022 USD ($)	Oct. 21, 2022 USD ($) $ / shares shares	Oct. 31, 2023	Jul. 31, 2023 USD ($)	Jan. 31, 2023 USD ($)	Dec. 25, 2022 USD ($) $ / shares shares	Sep. 25, 2022 USD ($) shares	Jun. 25, 2023 USD ($) $ / shares shares	Dec. 15, 2022 USD ($) tranche	Oct. 20, 2022 shares	Jul. 06, 2022 USD ($) tranche	Dec. 15, 2021 USD ($) tranche	Oct. 01, 2021 USD ($) tranche	Jul. 22, 2021 USD ($) tranche	Apr. 26, 2021 USD ($) tranche	Jun. 19, 2019 USD ($) $ / shares
Debt Instrument [Line Items]
Principal amount										$ 1,088,200,000
Outstanding principal balance								$ 1,008,200,000		$ 1,054,300,000
Preferred stock, outstanding (in shares) | shares								3,252,154		3,338,573
Common stock, par value (in dollars per share) | $ / shares								$ 0.0001		$ 0.0001
Twin Peaks
Debt Instrument [Line Items]
Outstanding principal balance										$ 18,400,000
Interest rate										10.00%
Twin Peaks | Exchange Arrangement One
Debt Instrument [Line Items]
Option muitiplier | $ / shares										0.86
Twin Peaks | Exchange Arrangement Two
Debt Instrument [Line Items]
Option muitiplier | $ / shares										0.94
Twin Peaks | Exchange Arrangement Three
Debt Instrument [Line Items]
Option muitiplier | $ / shares										0.91
Series B Cumulative Preferred Stock | Twin Peaks
Debt Instrument [Line Items]
Redeemable preferred stock (in shares) | shares				1,821,831					1,821,831
Dividend rate on preferred stock				8.25%
Preferred stock redemption price (in dollars per share) | $ / shares				$ 23.69
Preferred stock, outstanding (in shares) | shares												2,847,393
Secured Debt
Debt Instrument [Line Items]
Principal amount				$ 46,500,000
Outstanding principal balance				$ 43,200,000
FB Royalty Securitization
Debt Instrument [Line Items]
Principal amount									$ 30,000,000				$ 76,500,000				$ 144,500,000
Number of tranches | tranche													3				3
Net proceeds								$ 27,100,000
Debt offering costs									600,000
Unamortized discount									$ 2,300,000
GFG Royalty Securitization
Debt Instrument [Line Items]
Principal amount							$ 40,000,000			$ 48,500,000	$ 113,500,000					$ 350,000,000
Number of tranches | tranche											3					3
Net proceeds								25,000,000
Proceeds from issuance of debt							$ 34,800,000
Twin Peaks Securitization
Debt Instrument [Line Items]
Principal amount															$ 250,000,000
Number of tranches | tranche															3
Fazoli's/Native Securitization
Debt Instrument [Line Items]
Principal amount														$ 193,800,000
Number of tranches | tranche														3
2021 Securitization Notes
Debt Instrument [Line Items]
Increase in interest rate (percent)										1.00%
2021 Securitization Notes | Forecast | Subsequent Event
Debt Instrument [Line Items]
Principal payment (percent)					0.50%
Elevation Note | Elevation Burger
Debt Instrument [Line Items]
Principal amount																		$ 7,500,000
Interest rate																		6.00%
Common stock, par value (in dollars per share) | $ / shares																		$ 12.00
Equipment Notes
Debt Instrument [Line Items]
Maximum borrowing capacity								$ 1,400,000
Equipment Notes | Minimum
Debt Instrument [Line Items]
Interest rate								7.99%
Equipment Notes | Maximum
Debt Instrument [Line Items]
Interest rate								8.49%
Twin Peaks Construction Loan | Construction Loan
Debt Instrument [Line Items]
Principal amount			$ 4,500,000							$ 2,200,000
Outstanding principal balance								$ 400,000		$ 2,200,000
Interest rate			8.00%							8.00%
Debt term extension period			6 months
Twin Peaks Construction Loan | Construction Loan | Secured Overnight Financing Rate (SOFR)
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)			36000.00%
Sarasota Construction Loan | Construction Loan
Debt Instrument [Line Items]
Principal amount		$ 4,500,000
Debt term extension period		3 months
Sarasota Construction Loan | Construction Loan | Secured Overnight Financing Rate (SOFR)
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)		57500.00%
Sarasota Construction Loan | Construction Loan | Minimum
Debt Instrument [Line Items]
Interest rate		4.00%
Fixed Rate Secured Notes | Subsequent Event
Debt Instrument [Line Items]
Principal amount	$ 150,000,000
Number of tranches | iNTEGER	2
Proceeds from issuance of debt	$ 105,300,000
Amount of debt sold	105,800,000					$ 105,800,000
Repurchase of existing secured notes	64,600,000
Fixed Rate Secured Notes | Subsequent Event | Subsidiaries
Debt Instrument [Line Items]
Principal amount	$ 44,200,000

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REDEEMABLE PREFERRED STOCK - Narrative (Details) - USD ($)			3 Months Ended			6 Months Ended
	Oct. 21, 2022	Jul. 22, 2021	Jun. 25, 2023	Sep. 25, 2022	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022	Mar. 09, 2023	Dec. 25, 2022	Oct. 20, 2022	Sep. 16, 2022	Aug. 23, 2022	Oct. 01, 2021
Class of Stock [Line Items]
Preferred stock, outstanding (in shares)			3,338,573			3,338,573			3,252,154
Interest expense related to preferred shares			$ 4,311,000		$ 4,715,000	$ 9,354,000	$ 6,714,000
Face amount of debt			1,088,200,000			1,088,200,000
Principal amount, net of offering costs and original issue discount			1,054,300,000			1,054,300,000			$ 1,008,200,000
Dividends paid in cash on redeemable preferred stock						0	$ 1,062,000
Secured Debt
Class of Stock [Line Items]
Face amount of debt	$ 46,500,000
Principal amount, net of offering costs and original issue discount	$ 43,200,000
Twin Peaks
Class of Stock [Line Items]
Principal amount, net of offering costs and original issue discount			18,400,000			18,400,000
Series B Cumulative Preferred Stock | Twin Peaks
Class of Stock [Line Items]
Preferred stock, outstanding (in shares)										2,847,393
Redeemable preferred stock (in shares)	1,821,831			1,821,831
Dividend rate on preferred stock	8.25%
Preferred stock redemption price (in dollars per share)	$ 23.69
Series B Cumulative Preferred Stock | GFG Sellers
Class of Stock [Line Items]
Interest rate on preferred stock		5.00%										10.00%
Preferred stock, outstanding (in shares)								1,544,623			1,544,623
Interest expense related to preferred shares			900,000			1,700,000
GFG Holdings Inc
Class of Stock [Line Items]
Equity interests transferred		$ 67,500,000
Interest rate on preferred stock		5.00%
Redeemable preferred stock			67,500,000			67,500,000
GFG Holdings Inc | Series B Cumulative Preferred Stock
Class of Stock [Line Items]
Temporary equity issued (in shares)		3,089,245
Temporary equity issued		$ 67,300,000
Twin Peaks
Class of Stock [Line Items]
Temporary equity issued			24,300,000			24,300,000
Initial put/call share agreement													$ 42,500,000
Secondary put/call share agreement													$ 25,000,000
Dividends paid in cash on redeemable preferred stock			$ 600,000			$ 1,200,000
Twin Peaks | Series B Cumulative Preferred Stock
Class of Stock [Line Items]
Temporary equity issued (in shares)													2,847,393
Temporary equity issued													$ 67,500,000
Interest rate on unpaid cash proceeds related to acquisition													10.00%

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SHARE-BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options outstanding through share-based compensation agreement (in shares)	2,929,954		2,929,954
Weighted average exercise price of options (in dollars per share)	$ 9.49		$ 9.49
Number of options granted (in shares)	566,907		566,907
Grant date fair value of options granted	$ 1.0		$ 1.0
Share-based compensation plan expense	0.5	$ 1.9	1.6	$ 4.0
Share-based compensation expense related to non-vested grants	$ 4.1		$ 4.1
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Stock options | Tranche one
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights (percent)			33.33%
Stock options | Tranche two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights (percent)			33.33%
Stock options | Tranche three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights (percent)			33.33%
Grant shares | Tranche one
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights (percent)			33.33%
Grant shares | Tranche two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights (percent)			33.33%
Grant shares | Tranche three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
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		5,000,000

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WARRANTS - Summary of Warrant Activity (Details) - Warrant - $ / shares	6 Months Ended	12 Months Ended
	Jun. 25, 2023	Dec. 25, 2022
Number of Shares
Warrants exercisable, Beginning balance (in shares)	1,591,256
Granted (in shares)	1,918
Exercised (in shares)	(84,432)
Warrants outstanding, Ending balance (in shares)	1,508,742	1,591,256
Warrants exercisable, Ending balance (in shares)	1,508,742
Weighted Average Exercise Price
Weighted average exercise price of outstanding warrants, Beginning balance (in dollars per share)	$ 3.88
Weighted average exercise price of warrants granted (in dollars per share)	3.01
Weighted average exercise price of warrants exercised (in dollars per share)	3.16
Weighted average exercise price of outstanding warrants, Ending balance (in dollars per share)	3.70	$ 3.88
Weighted average exercise price of exercisable warrants, Ending balance (in dollars per share)	$ 3.70
Weighted Average Remaining Contractual Life (Years)
Weighted average remaining contractual life (in years) of warrants outstanding. Beginning balance		2 years 4 months 24 days
Weighted average remaining contractual life (in years) of warrants granted	2 years 1 month 6 days
Weighted average remaining contractual life (in years) of warrants exercised	2 years 1 month 6 days
Weighted average remaining contractual life (in years) of warrants outstanding, Ending balance	1 year 9 months 18 days
Weighted average remaining contractual life (in years) of warrants exercisable, Ending balance	1 year 9 months 18 days

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WARRANTS - Narrative (Details) $ in Millions	6 Months Ended
	Jun. 25, 2023 USD ($) shares
Warrant Activity
Issuance of common stock through exercise of warrants (in shares)	39,500
Issuance of common and preferred stock | $	$ 0.2
Warrant
Warrant Activity
Warrants exercised (in shares)	84,432

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COMMON STOCK - Narrative (Details) - USD ($)			3 Months Ended		6 Months Ended
	Apr. 04, 2023	Nov. 14, 2022	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 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	$ 0.28	$ 0.26
Dividends payable	$ 2,320,469
Issuance of common and preferred stock			$ 1,202,000		$ 1,652,000	$ 83,000
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)			65,593
Weighted average price per share (in dollars per share)			$ 15.31		$ 15.31
Payments of stock issuance costs			$ 30,123
Issuance of common and preferred stock			$ 1,000,000

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COMMITMENTS AND CONTINGENCIES - Narrative (Details) - USD ($)				1 Months Ended			6 Months Ended
	Jul. 21, 2023	May 31, 2023	May 08, 2023	May 31, 2019	May 31, 2018	Feb. 28, 2018	Jun. 25, 2023	Jan. 13, 2023
Shareholder Derivative Action Related To the December 2020 Merger With Fog Cutter Capital Group
Loss Contingencies [Line Items]
Litigation Case, Stay Of Action, Period		6 months	6 months
Shareholder Derivative Action Related To The Company's June 2021 Recapitalization Transaction | Subsequent Event
Loss Contingencies [Line Items]
Litigation Case, Stay Of Action, Period	6 months
SBN FCCG LLC
Loss Contingencies [Line Items]
Payments for legal settlements				$ 100,000
Estimated litigation liability							$ 500,000
SBN FCCG LLC | Fog Cutter Capital Group Inc
Loss Contingencies [Line Items]
Amount awarded to other party related to litigation				600,000
Payments for legal settlements				$ 100,000
Estimated litigation liability							5,100,000
Indemnification costs								$ 12,000,000
SBN FCCG LLC | Fog Cutter Capital Group Inc | New York
Loss Contingencies [Line Items]
Amount awarded to other party related to litigation						$ 700,000
Litigation settlement interest						200,000
SBN FCCG LLC | Fog Cutter Capital Group Inc | California
Loss Contingencies [Line Items]
Amount awarded to other party related to litigation					$ 700,000	700,000
Litigation settlement interest					$ 12,411	$ 700,000
Minimum
Loss Contingencies [Line Items]
Damages sought							12,000,000
Maximum
Loss Contingencies [Line Items]
Damages sought							$ 22,000,000

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GEOGRAPHIC INFORMATION - Schedule of Revenues by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 25, 2023	Jun. 26, 2022	Jun. 25, 2023	Jun. 26, 2022
RestaurantFranchising [Line Items]
Total revenue	$ 106,764	$ 102,785	$ 212,455	$ 200,188
United States
RestaurantFranchising [Line Items]
Total revenue	105,100	100,500	207,900	195,800
Other countries
RestaurantFranchising [Line Items]
Total revenue	$ 1,700	$ 2,300	$ 4,600	$ 4,400

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SUBSEQUENT EVENTS - Narrative (Details) - USD ($) $ in Millions		1 Months Ended
	Jul. 08, 2023	Jul. 31, 2023
Subsequent Event | Fixed Rate Secured Notes
Subsequent Event [Line Items]
Amount of debt sold	$ 105.8	$ 105.8