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What changed in Fat Brands, Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Fat Brands, Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+228 added−224 removedSource: 10-K (2024-03-12) vs 10-K (2023-02-24)

Top changes in Fat Brands, Inc's 2023 10-K

228 paragraphs added · 224 removed · 173 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

31 edited+4 added−10 removed91 unchanged
Biggest changeTo date, we have not been materially adversely affected by such licensing and regulation or by any difficulty, delay or failure to obtain required licenses or approvals. International Operations . Our restaurants outside the U.S. are subject to national and local laws and regulations which in general are similar to those affecting U.S. restaurants.
Biggest changeTypically, licenses must be renewed annually and may be revoked or suspended for cause by such authority at any 11 Table of Contents time. To date, we have not been materially adversely affected by such licensing and regulation or by any difficulty, delay or failure to obtain required licenses or approvals. International Operations .
Furthermore, our commitment to food safety is strengthened through the direct relationship between our Supply Chain and Field Consultant Assistance teams. Management Information Systems 9 Table of Contents FAT Brands restaurants utilize a variety of back-office, computerized and manual, point-of-sale systems and tools.
Furthermore, our commitment to food safety is strengthened through the direct relationship between our Supply Chain and Field Consultant Assistance teams. 9 Table of Contents Management Information Systems FAT Brands restaurants utilize a variety of back-office, computerized and manual, point-of-sale systems and tools.
Our current franchise agreements generally provide for an initial franchise fee ranging from $0 to $50,000 per store, and a typical royalty fee of between 0.75% to 7.0% of net sales. In addition, franchisees typically pay an advertising fee based on net sales for local marketing and brand marketing. Development Agreements.
Our current franchise agreements generally provide for an initial franchise fee ranging from $20,000 to $50,000 per store, and a typical royalty fee of between 0.75% to 7.0% of net sales. In addition, franchisees typically pay an advertising fee based on net sales for local marketing and brand marketing. Development Agreements.
As our business has expanded to 17 brands, we have developed a robust and comprehensive management and systems platform designed to support the expansion of our existing brands while enabling for the accretive and efficient acquisition and integration of additional restaurant concepts.
As our business has expanded to 18 brands, we have developed a robust and comprehensive management and systems platform designed to support the expansion of our existing brands while enabling for the accretive and efficient acquisition and integration of additional restaurant concepts.
A uthentic. T asty (which we refer to as “ FAT ”). The success of our franchisor model is tied to consistent delivery by our restaurant operators of freshly prepared, made-to-order food that our customers desire.
T asty (which we refer to as “ FAT ”). The success of our franchisor model is tied to consistent delivery by our restaurant operators of freshly prepared, made-to-order food that our customers desire.
We have an enviable track record of delivering Fresh, Authentic, and Tasty meals across our franchise system, with leading brands in four categories. Our Fatburger, 6 Table of Contents Round Table Pizza, Twin Peaks, Johnny Rockets, Fazoli's and Buffalo’s concepts have built distinctive brand identities within their respective categories, providing made-to-order, high-quality food at competitive prices.
We have an enviable track record of delivering Fresh, Authentic, and Tasty meals across our franchise system, with leading brands in four categories. Our Fatburger, Round Table Pizza, Twin Peaks, Smokey Bones, Johnny Rockets, Fazoli's and Buffalo’s concepts have built distinctive brand identities within their respective categories, providing made-to-order, high-quality food at competitive prices.
In many cases, prospective franchisees have experience in and knowledge of markets where we are not currently active, facilitating a smoother brand introduction than we or our existing franchisees could achieve independently. • Expand Our Factory Business.
In many cases, prospective franchisees have experience in and knowledge of markets where we are not currently active, facilitating a smoother brand introduction than we or our existing franchisees could achieve independently. 7 Table of Contents • Expand Our Factory Business.
Our Concepts As of December 25, 2022, we were the owner and franchisor of the following restaurant brands in four main categories – Quick Service, Fast Casual, Casual Dining and Polished Casual Dining. Quick Service ● Round Table Pizza. Round Table Pizza is the franchisor of quick service restaurants located primarily in California and the western United States.
Our Concepts As of December 31, 2023, we were the owner and franchisor of the following restaurant brands in four main categories – Quick Service, Fast Casual, Casual Dining and Polished Casual Dining. Quick Service ● Round Table Pizza. Round Table Pizza is the franchisor of quick service restaurants located primarily in California and the western United States.
We operate a manufacturing facility in Atlanta, Georgia that supplies batter and pretzel mix to certain of our quick service restaurant brands and operates at approximately 1/3 capacity.
We operate a manufacturing facility in Atlanta, Georgia that supplies batter and pretzel mix to certain of our quick service restaurant brands and operates at approximately 40% capacity.
Additionally, we directly owned and operated approximately 130 restaurants as of such date. System wide sales of our franchised and owned locations during fiscal 2022 were approximately $2.2 billion. The FAT Brands Difference – Fresh. Authentic. Tasty. Our name represents the values that we embrace as a company and the food that we provide to customers – F resh.
Additionally, we directly owned and operated approximately 190 restaurants as of such date. System wide sales of our franchised and owned locations during fiscal 2023 were $2.3 billion. The FAT Brands Difference – Fresh. Authentic. Tasty. Our name represents the values that we embrace as a company and the food that we provide to customers – F resh. A uthentic.
We develop and produce most marketing initiatives for our brands in-house, including advertising campaigns, product placements and social media / digital marketing. We have developed a diverse and loyal base of more than 750 franchisees with restaurants located in 40 countries, including 48 states within the United States, without any excessive market concentration among the franchisees.
We develop and produce most marketing initiatives for our brands in-house, including advertising campaigns, product placements and social media / digital marketing. We have developed a diverse and loyal base of approximately 790 franchisees with restaurants located in 38 countries, including 49 states within the United States, without any excessive market concentration among the franchisees.
In addition to our restaurant operations, we own and operate a manufacturing and production facility in Atlanta, Georgia, which supplies our franchisees with cookie dough, pretzel dry mix and other ancillary products. As of December 25, 2022, our franchisee base consisted of more than 750 franchisees, who operated an aggregate of approximately 2,200 restaurants, including restaurants under construction.
In addition to our restaurant operations, we own and operate a manufacturing and production facility in Atlanta, Georgia, which supplies our franchisees with cookie dough, pretzel dry mix and other ancillary products. As of December 31, 2023, our franchisee base consisted of approximately 790 franchisees, who operated an aggregate of approximately 2,300 restaurants, including restaurants under construction.
Menu items include smashed and seared to order burgers, in-house smoked ribs, street tacos and hand-breaded chicken wings. We currently franchise, and also directly own and operate, Twin Peaks restaurants in various states in the United States, and we have two international franchised Twin Peaks restaurants in Mexico City, Mexico.
Menu items include smashed and seared to order burgers, in-house smoked ribs, street tacos and hand-breaded chicken wings. We currently franchise, and also directly own and operate, Twin Peaks restaurants in various states in the United States, and three international locations in Mexico. ● Smokey Bones. The Masters of Meat.
The information on our website is not incorporated by reference into, or a part of, this Annual Report.
Our principal Internet website address is www.fatbrands.com. The information on our website is not incorporated by reference into, or a part of, this Annual Report.
The Ponderosa and Bonanza brands deliver an authentic American steakhouse experience. Hurricane Grill & Wings and Native Grill & Wings offer customers fresh chicken wings with an assortment of sauces and rubs in a casual dining atmosphere. Yalla Mediterranean offers a healthful Mediterranean menu of wraps, plates, and bowls in a fast-casual setting.
The Ponderosa and Bonanza brands deliver an authentic American steakhouse experience. Hurricane Grill & Wings and Native Grill & Wings offer customers fresh chicken wings with an assortment of sauces and rubs in a casual dining atmosphere.
We have a diverse workforce and recently appointed an executive level Diversity, Equity & Inclusion Officer. As an equal opportunity employer, all qualified applicants receive consideration without regard to race, national origin, gender, gender identity, sexual orientation, protected veteran status, disability, age or any other legally protected status. Government Regulation U.S. Operations.
As an equal opportunity employer, all qualified applicants receive consideration without regard to race, national origin, gender, gender identity, sexual orientation, protected veteran status, disability, age or any other legally protected status. Government Regulation U.S. Operations.
Ponderosa Steakhouse, founded in 1965, and Bonanza Steakhouse, founded in 1963, offer the quintessential American steakhouse experience, for which there is strong and growing demand in international markets, particularly in Asia and the Middle East. Ponderosa and Bonanza Steakhouses offer guests a high-quality buffet and broad array of great tasting, affordably priced steak, chicken and seafood entrées.
Ponderosa Steakhouse, founded in 1965, and Bonanza Steakhouse, founded in 1963, offer the quintessential American steakhouse experience. Ponderosa and Bonanza Steakhouses offer guests a high-quality buffet and broad array of great tasting, affordably priced steak, chicken and seafood entrées.
Seasonality and Effects of Weather While some of our brands are subject to seasonal fluctuations in their sales and may be affected by inclement weather, our business overall does not experience significant seasonal variability in its financial performance.
The restaurant industry also has few barriers to entry and new competitors may emerge at any time. Seasonality and Effects of Weather While some of our brands are subject to seasonal fluctuations in their sales and may be affected by inclement weather, our business overall does not experience significant seasonal variability in its financial performance.
Twin Peaks has grown from 85 units to 95 units since our acquisition of the brand in October 2021. We will pursue the continued growth of this brand through additional company-owned and franchised units. • Acquire New Brands that Enhance Existing Categories.
Twin Peaks has grown from 85 units to 111 units since our acquisition of the brand in October 2021. We will pursue the continued growth of this brand through additional company-owned and franchised units. • Driving Store Growth Through Co-Branding.
From time to time, we also sponsor meal events for first responders and medical professionals during local disasters. As of December 25, 2022, we had approximately 5,400 employees, including approximately 1,100 full time employees. This amount includes approximately 825 full time and 4,300 part time employees at restaurants which we own and operate.
From time to time, we also sponsor meal events for first responders and medical professionals during local disasters. As of December 31, 2023, we had approximately 7,390 employees, including approximately 2,600 full time employees. This amount includes approximately 2,230 full time and 4,790 part time employees at restaurants which we own and operate.
In addition, alcoholic beverage control regulations require each of our restaurants which sells alcohol to apply to a federal and state authority and, in certain locations, municipal authorities for a license and permit to sell alcoholic beverages on and off-premises. Typically, licenses must be renewed annually and may be revoked or suspended for cause by such authority at any time.
In addition, alcoholic beverage control regulations require each of our restaurants which sells alcohol to apply to a federal and state authority and, in certain locations, municipal authorities for a license and permit to sell alcoholic beverages on and off-premises.
We are currently planning to redesign and reintroduce the brand with a rollout of new stores. Casual Dining 5 Table of Contents ● Buffalo’s Cafe and Buffalo’s Express.
Due primarily to the COVID-19 pandemic and the emphasis on catering orders, all Yalla Mediterranean stores were closed during the pandemic. We are currently planning to redesign and reintroduce the brand with a rollout of new stores. 5 Table of Contents Casual Dining ● Buffalo’s Cafe and Buffalo’s Express.
Our Corporate Information FAT Brands Inc. was formed as a Delaware corporation on March 21, 2017. Our corporate headquarters are located at 9720 Wilshire Blvd., Suite 500, Beverly Hills, California 90212. Our main telephone number is (310) 319-1850. Our principal Internet website address is www.fatbrands.com.
See “Risk Factors” for a discussion of risks relating to federal, state, local and international regulation of our business. Our Corporate Information FAT Brands Inc. was formed as a Delaware corporation on March 21, 2017. Our corporate headquarters are located at 9720 Wilshire Blvd., Suite 500, Beverly Hills, California 90212. Our main telephone number is (310) 319-1850.
Once open, FAT Brands continually provides ongoing operational and marketing support to our franchisees with the intention of offering advice to their management teams that they can use if they choose to more effectively operate their restaurants and increasing their stores financial profitability.
Once open, FAT Brands continually provides ongoing operational and marketing support to our franchisees with the intention of offering advice to their management teams that they can use if they choose to more effectively operate their restaurants and increasing their stores financial profitability. 10 Table of Contents Competition Our franchised and company owned restaurants compete in the quick service, fast casual, casual and polished casual dining categories of the restaurant industry, a highly competitive industry in terms of price, service, location, and food quality.
In the future, we plan to refinance these notes and may seek an investment rating on a portion of the notes in order to further reduce our cost of capital. • Continue Expanding FAT Brands Internationally. We have a significant global presence, with franchised stores in 40 countries, including 48 states within the United States.
In the future, we plan to refinance these notes and may seek an investment rating on a portion of the notes in order to further reduce our cost of capital. Additionally, we may consider selling or spinning off as standalone companies various assets. • Continue Expanding FAT Brands Internationally.
The restaurants outside the U.S. are also subject to tariffs and 11 Table of Contents regulations on imported commodities and equipment and laws regulating foreign investment, as well as anti-bribery and anti-corruption laws. See “Risk Factors” for a discussion of risks relating to federal, state, local and international regulation of our business.
Our restaurants outside the U.S. are subject to national and local laws and regulations which in general are similar to those affecting U.S. restaurants. The restaurants outside the U.S. are also subject to tariffs and regulations on imported commodities and equipment and laws regulating foreign investment, as well as anti-bribery and anti-corruption laws.
Founded in 2014, Yalla Mediterranean is a Los Angeles, California based restaurant chain specializing in authentic, healthful, Mediterranean cuisine with an environmentally conscience and focus on sustainability. The word “yalla”, which means “let’s go”, is embraced in every aspect of Yalla Mediterranean’s culture and is a key component of our concept.
Founded in 2014, Yalla Mediterranean began as a Los Angeles, California based restaurant chain specializing in authentic, healthful, Mediterranean cuisine with an environmental conscience and focus on sustainability.
We have identified additional categories of potential acquisitions that appeal to a broad base of U.S. and international customers and that would be accretive to our existing portfolio of brands, including restaurants focused on salads, sandwiches, health and organic foods, coffee and dessert outlets and sports bars. Franchise Program General.
Our management platform was designed and developed to cost-effectively and seamlessly scale with new restaurant concept acquisitions, particularly those in our existing restaurant categories. We have identified additional categories of potential acquisitions that appeal to a broad base of U.S. and international customers and that would be accretive to our existing portfolio of brands. Franchise Program General.
Furthermore, there are many well-established competitors with substantially greater financial resources than the Company's, including several national, international, regional and local store franchisors and operators. The restaurant industry also has few barriers to entry and new competitors may emerge at any time.
The restaurant industry is often affected by changes in consumer trends, economic conditions, demographics, traffic patterns, and concern about the nutritional content of food. Furthermore, there are many well-established competitors with substantially greater financial resources than the Company's, including several national, international, regional and local store franchisors and operators.
Yalla Mediterranean offers a healthful Mediterranean menu of wraps, plates and bowls in a fast-casual setting, with cuisine prepared fresh daily using, GMO-free, local ingredients for a menu that includes vegetarian, vegan, gluten-free and dairy-free options accommodating customers with a wide variety of dietary needs and preferences.
The word “yalla”, which means “let’s go”, is embraced in every aspect of Yalla Mediterranean’s culture and is a key component of our concept, which is based on a healthful Mediterranean menu of wraps, plates and bowls in a fast-casual setting, with cuisine prepared fresh daily using, GMO-free, local ingredients.
Our Competitive Strengths We believe that our competitive strengths include: • Management Team Designed to Support Multiple Brands and Categories.
Smokey Bones offers a variety of meats that are slow-smoked, fire-grilled, and available for dine-in, pick-up, online ordering, catering, and delivery. 6 Table of Contents Our Competitive Strengths We believe that our competitive strengths include: • Management Team Designed to Support Multiple Brands and Categories.
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The Yalla Mediterranean brand demonstrates its commitment to the environment by using responsibly sourced proteins and utensils, bowls and serving trays made from compostable materials. Due primarily to the COVID-19 pandemic and the emphasis on catering orders, all Yalla Mediterranean stores were closed during the pandemic.
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Smokey Bones Bar & Fire Grill is a full-service restaurant chain delivering great barbecue, award-winning ribs, perfectly seared steaks and memorable moments in 61 locations across 16 states.
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Our management platform was designed and developed to cost-effectively and seamlessly scale with new restaurant concept acquisitions, particularly those in our existing restaurant categories.
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Smokey Bones serves lunch, dinner, and late night, and has a full bar featuring a variety of bourbons and whiskeys, a selection of domestic, import and local craft beers, and several signature handcrafted cocktails.
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We may acquire additional categories of restaurant brands that appeal to a broad base of U.S. and 7 Table of Contents international customers and that would be accretive to our existing portfolio of brands, including restaurants focused on salads, sandwiches, health and organic foods, coffee and dessert outlets and sports bars. • Accelerate Same-Store Sales Growth.
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We have a significant global presence, with franchised stores in 38 countries, including 49 states within the United States.
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Same-store sales growth reflects the change in year-over-year sales for the comparable store base, which we define as the number of stores open for at least one full fiscal year. To optimize restaurant performance, we have embraced a multi-faceted same-store sales growth strategy.
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We have a diverse workforce and have initiated a program to enhance diversity, equity and inclusion among our employees and stakeholders, led by an executive level Diversity, Equity & Inclusion Officer.
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We utilize customer feedback and closely analyze sales data to introduce, test and improve existing and add new menu items. In addition, we regularly utilize public relations and experiential marketing, which we leverage via social media and targeted digital advertising to expand the reach of our brands and to drive traffic to our stores.
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Furthermore, we have embraced emerging technology and worked with the "Olo" platform to develop our own brand-specific mobile applications, allowing guests to find restaurants, order online, earn rewards and join our e-marketing providers.
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We have also partnered with third-party delivery service providers, including UberEATS, Grub Hub, DoorDash and Postmates, which provide online and app-based delivery services and constitute a sales channel for our existing locations.
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Finally, many of our franchisees are pursuing a capital expenditure program to remodel legacy restaurants and to opportunistically co-brand them with our concepts. • Driving Store Growth Through Co-Branding.
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Our management platform was designed and developed to cost-effectively and seamlessly scale with new restaurant concept acquisitions, particularly those in our existing restaurant categories.
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Competition Our franchised and company owned restaurants compete in the quick service, fast casual, casual and polished casual dining categories of the restaurant industry, a highly competitive industry in terms of price, service, location, and food quality. 10 Table of Contents The restaurant industry is often affected by changes in consumer trends, economic conditions, demographics, traffic patterns, and concern about the nutritional content of food.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

51 edited+17 added−10 removed146 unchanged
Biggest changeIn addition, if any governmental authority were to adopt and implement a broader standard for determining when two or more otherwise unrelated employers may be found to be a joint employer of the same employees under laws such as the National Labor Relations Act in a manner that is applied generally to franchise relationships (which broader standards in the past have been adopted by U.S. governmental agencies such as the National Labor Relations Board), this could cause us to be liable or held responsible for unfair labor practices and other violations of our franchisees.
Biggest changeIn October 2023, the National Labor Relations Board ("NLRB") issued a final rule adopting a new and broader standard for determining when two or more otherwise unrelated employers may be found to be a joint employer of the same employees under the National Labor Relations Act.
Our franchisees face many challenges associated with opening new restaurants, including: • identification and availability of suitable restaurant locations with the appropriate size; visibility; traffic patterns; local residential neighborhood, retail and business attractions; and infrastructure that will drive high levels of customer traffic and sales per restaurant; • competition with other restaurants and retail concepts for potential restaurant sites and anticipated commercial, residential and infrastructure development near new or potential restaurants; • ability to negotiate acceptable lease arrangements; • availability of financing and ability to negotiate acceptable financing terms; • recruiting, hiring and training of qualified personnel; • construction and development cost management; • completing their construction activities on a timely basis; 13 Table of Contents • obtaining all necessary governmental licenses, permits and approvals and complying with local, state and federal laws and regulations to open, construct or remodel and operate our franchised restaurants; • unforeseen engineering or environmental problems with the leased premises; • avoiding the impact of adverse weather during the construction period; and • other unanticipated increases in costs, delays or cost overruns.
Our franchisees face many challenges associated with opening new restaurants, including: • identification and availability of suitable restaurant locations with the appropriate size; visibility; traffic patterns; local residential neighborhood, retail and business attractions; and infrastructure that will drive high levels of customer traffic and sales per restaurant; • competition with other restaurants and retail concepts for potential restaurant sites and anticipated commercial, residential and infrastructure development near new or potential restaurants; • ability to negotiate acceptable lease arrangements; • availability of financing and ability to negotiate acceptable financing terms; • recruiting, hiring and training of qualified personnel; 13 Table of Contents • construction and development cost management; • completing their construction activities on a timely basis; • obtaining all necessary governmental licenses, permits and approvals and complying with local, state and federal laws and regulations to open, construct or remodel and operate our franchised restaurants; • unforeseen engineering or environmental problems with the leased premises; • avoiding the impact of adverse weather during the construction period; and • other unanticipated increases in costs, delays or cost overruns.
The retail food industry in which we operate is highly competitive with respect to price and quality of food products, new product development, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance of properties.
The retail food industry in which we operate is highly competitive. The retail food industry in which we operate is highly competitive with respect to price and quality of food products, new product development, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance of properties.
Fair Labor Standards Act, which governs matters such as minimum wages, overtime and other working conditions, as well as family leave mandates and a variety of similar state laws that govern these and other employment law matters; • Laws and regulations in government mandated health care benefits such as the Patient Protection and Affordable Care Act; • Laws and regulations relating to nutritional content, nutritional labeling, product safety, product marketing and menu labeling; • Laws relating to state and local licensing; • Laws relating to the relationship between franchisors and franchisees; • Laws and regulations relating to health, sanitation, food, workplace safety, child labor, including laws prohibiting the use of certain “hazardous equipment” by employees younger than the age of 18 years of age, and fire safety and prevention; • Laws and regulations relating to union organizing rights and activities; 21 Table of Contents • Laws relating to information security, privacy, cashless payments, and consumer protection; • Laws relating to currency conversion or exchange; • Laws relating to international trade and sanctions; • Tax laws and regulations; • Antibribery and anticorruption laws; • Environmental laws and regulations; and • Federal and state immigration laws and regulations in the U.S.
Fair Labor Standards Act, which governs matters such as minimum wages, overtime and other working conditions, as well as family leave mandates and a variety of similar state laws that govern these and other employment law matters; • Laws and regulations in government mandated health care benefits such as the Patient Protection and Affordable Care Act; • Laws and regulations relating to nutritional content, nutritional labeling, product safety, product marketing and menu labeling; • Laws relating to state and local licensing; • Laws relating to the relationship between franchisors and franchisees; • Laws and regulations relating to health, sanitation, food, workplace safety, child labor, including laws prohibiting the use of certain “hazardous equipment” by employees younger than the age of 18 years of age, and fire safety and prevention; • Laws and regulations relating to union organizing rights and activities; • Laws relating to information security, privacy, cashless payments, and consumer protection; • Laws relating to currency conversion or exchange; • Laws relating to international trade and sanctions; • Tax laws and regulations; • Antibribery and anticorruption laws; • Environmental laws and regulations; and • Federal and state immigration laws and regulations in the U.S.
These provisions include: • dual class structure of our Common Stock, which concentrates voting control with the current holders of Class B Common Stock; • net operating loss protective provisions, which require that any person wishing to become a “5% shareholder” (as defined in our certificate of incorporation) must first obtain a waiver from our Board of Directors, and any person that is already a “5% shareholder” of ours cannot make any additional purchases of our stock without a waiver from our board of directors; • authorizing the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares and thwart a takeover attempt; • limiting the ability of stockholders to call special meetings or amend our bylaws; • requiring all stockholder actions to be taken at a meeting of our stockholders; and • establishing advance notice and duration of ownership requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These provisions include: • dual class structure of our Common Stock, which concentrates voting control with the current holders of Class B Common Stock; • net operating loss protective provisions, which require that any person wishing to become a “5% shareholder” (as defined in our certificate of incorporation) must first obtain a waiver from our Board of Directors, and any person 23 Table of Contents that is already a “5% shareholder” of ours cannot make any additional purchases of our stock without a waiver from our board of directors; • authorizing the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares and thwart a takeover attempt; • limiting the ability of stockholders to call special meetings or amend our bylaws; • requiring all stockholder actions to be taken at a meeting of our stockholders; and • establishing advance notice and duration of ownership requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These factors, over which neither our franchisees nor we have control, may include such issues as (but not limited to): • recessionary or expansive trends in international markets; • changing labor conditions and difficulties in staffing and managing our foreign operations; • increases in the taxes we pay and other changes in applicable tax laws; • legal and regulatory changes, and the burdens and costs of our compliance with a variety of foreign laws; • changes in inflation rates; • changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds; • difficulty in protecting our brand, reputation and intellectual property; • difficulty in collecting our royalties and longer payment cycles; • expropriation of private enterprises; • increases in anti-American sentiment and the identification of our brands as American brands; • political and economic instability; and • other external factors.
These factors, over which neither our franchisees nor we have control, may include such issues as (but not limited to): • recessionary or expansive trends in international markets; • changing labor conditions and difficulties in staffing and managing our foreign operations; • increases in the taxes we pay and other changes in applicable tax laws; • legal and regulatory changes, and the burdens and costs of our compliance with a variety of foreign laws; • changes in inflation rates; • changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds; • difficulty in protecting our brand, reputation and intellectual property; • difficulty in collecting our royalties and longer payment cycles; • expropriation of private enterprises; • increases in anti-American sentiment and the identification of our brands as American brands; • political and economic instability; and 19 Table of Contents • other external factors.
For example, we and our franchisees are subject to laws and regulations such as (but not limited to): • Government orders regarding the response to health and other public safety concerns such as the various restrictions on business operations relating to the COVID-19 pandemic being experienced in 2020; • The Americans with Disabilities Act in the U.S. and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas; • The U.S.
For example, we and our franchisees are subject to laws and regulations such as (but not limited to): • Government orders regarding the response to health and other public safety concerns such as the various restrictions on business operations relating to the COVID-19 pandemic being experienced in 2020; • The Americans with Disabilities Act in the U.S. and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas; 21 Table of Contents • The U.S.
If we fail to comply with federal, state or local regulations, such licenses may be revoked and our Twin Peaks restaurants may be forced to terminate the sale of alcoholic beverages. Any termination of the sale of alcoholic beverages could have a significant negative impact on our revenues.
If we fail to comply with federal, state or local regulations, such licenses may be revoked and our Twin Peaks and Smokey Bones restaurants may be forced to terminate the sale of alcoholic beverages. Any termination of the sale of alcoholic beverages could have a significant negative impact on our revenues.
A judgment significantly in excess of insurance coverage or not covered by insurance could have a material adverse effect on our business, results of operations and financial condition. Adverse publicity resulting from these allegations may materially affect us and the Twin Peaks restaurants.
A judgment significantly in excess of insurance coverage or not covered by insurance could have a material adverse effect on our business, results of operations and financial condition. Adverse publicity resulting from these allegations may materially affect us and the Twin Peaks and Smokey Bones restaurants.
The sale of alcoholic beverages at Twin Peaks Restaurants subjects us to additional regulations and potential liability. The Twin Peaks restaurants that we own and operate sell alcoholic beverages, and we are therefore required to comply with the alcohol licensing requirements of the federal government, states and municipalities where such restaurants are located.
The sale of alcoholic beverages at Twin Peaks and Smokey Bones Restaurants subjects us to additional regulations and potential liability. The Twin Peaks and Smokey Bones restaurants that we own and operate sell alcoholic beverages, and we are therefore required to comply with the alcohol licensing requirements of the federal government, states and municipalities where such restaurants are located.
Regardless of whether any claims against us or our Twin Peaks operations are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from operations and hurt our financial performance.
Regardless of whether any claims against us or our Twin Peaks and Smokey Bones operations are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from operations and hurt our financial performance.
In addition, effective intellectual property protection may not be available in every 16 Table of Contents country in which our franchisees have, or intend to open or franchise, a restaurant. There can be no assurance that these protections will be adequate and defending or enforcing our service marks and other intellectual property could result in the expenditure of significant resources.
In addition, effective intellectual property protection may not be available in every country in which our franchisees have, or intend to open or franchise, a restaurant. There can be no assurance that these protections will be adequate and defending or enforcing our service marks and other intellectual property could result in the expenditure of significant resources.
Additionally, the failure of our franchisees to focus on the fundamentals of restaurant operations, such as quality service and cleanliness (even if such failures do not rise to the level of breaching the related franchise documents), could have a negative impact on our business. 12 Table of Contents Our franchisees could take actions that could harm our business and may not accurately report sales.
Additionally, the failure of our franchisees to focus on the fundamentals of restaurant operations, such as quality service and cleanliness (even if such failures do not rise to the level of breaching the related franchise documents), could have a negative impact on our business. Our franchisees could take actions that could harm our business and may not accurately report sales.
In addition, instances or allegations of foodborne illness or food safety issues, real or perceived, involving our franchised restaurants, restaurants of competitors, or suppliers or distributors (regardless 15 Table of Contents of whether we use or have used those suppliers or distributors), or otherwise involving the types of food served at our franchisees’ restaurants, could result in negative publicity that could adversely affect our revenues or the sales of our franchisees.
In addition, instances or allegations of foodborne illness or food safety issues, real or perceived, involving our franchised restaurants, restaurants of competitors, or suppliers or distributors (regardless of whether we use or have used those suppliers or distributors), or otherwise involving the types of food served at our franchisees’ restaurants, could result in negative publicity that could adversely affect our revenues or the sales of our franchisees.
Similarly, any reduction in state blood alcohol content limits on drivers, or laws relating to vehicle interlocking devices, could also have a significant negative impact on revenues of the Twin Peaks restaurants. In certain states in which Twin Peaks restaurants are situated, we may be subject to dram shop statutes.
Similarly, any reduction in state blood alcohol content limits on drivers, or laws relating to vehicle interlocking devices, could also have a significant negative impact on revenues of the Twin Peaks and Smokey Bones restaurants. In certain states in which Twin Peaks and Smokey Bones restaurants are situated, we may be subject to dram shop statutes.
In addition, a failure to reduce our greenhouse gas emissions or adopt other sustainable business practices or the perception of a failure to act responsibly with respect to the environment or to effectively respond to regulatory requirements concerning climate change or 18 Table of Contents other sustainable business practices can lead to adverse publicity, diminish the value of our brands and result in an adverse effect on our business.
In addition, a failure to reduce our greenhouse gas emissions or adopt other sustainable business practices or the perception of a failure to act responsibly with respect to the environment or to effectively respond to regulatory requirements concerning climate change or other sustainable business practices can lead to adverse publicity, diminish the value of our brands and result in an adverse effect on our business.
If a significant franchisee or a significant number of our franchisees become financially distressed, our operating and financial results could be impacted through reduced or delayed royalty payments. Our success also depends on the willingness and ability of our franchisees to implement major initiatives, which may include financial investment.
If a significant franchisee or a significant number of our franchisees become financially distressed, our operating and financial results could be impacted through reduced or delayed royalty payments. Our success also depends on the willingness and ability of our franchisees to implement major initiatives, which may include 12 Table of Contents financial investment.
Subject to certain limitations, we are obligated to indemnify our directors in connection with the 20 Table of Contents litigation and any related litigation or settlement amounts, which may be time-consuming, result in significant expense and divert the attention and resources of our management away from our operating business matters.
Subject to certain limitations, we are obligated to indemnify our directors in connection with the litigation and any related litigation or settlement amounts, which may be time-consuming, result in significant expense and divert the attention and resources of our management away from our operating business matters.
Any such incidents (even if resulting from actions of a competitor or franchisee) could cause a decline directly or indirectly in consumer confidence in, or the perception of, our brands and/or our products and reduce consumer demand for our products, which would likely result in lower revenues and profits.
Any such incidents (even if resulting from actions of a competitor or franchisee) could cause a decline directly or indirectly in 16 Table of Contents consumer confidence in, or the perception of, our brands and/or our products and reduce consumer demand for our products, which would likely result in lower revenues and profits.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability which could materially affect our results of operations.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability which could 17 Table of Contents materially affect our results of operations.
We may authorize or issue shares of preferred stock with voting, liquidation, dividend and other rights superior to the rights of our Common Stock. To date we have authorized and outstanding shares of Series B Preferred Stock, 23 Table of Contents which have liquidation and dividend rights superior to the rights of our Common Stock.
We may authorize or issue shares of preferred stock with voting, liquidation, dividend and other rights superior to the rights of our Common Stock. To date we have authorized and outstanding shares of Series B Preferred Stock, which have liquidation and dividend rights superior to the rights of our Common Stock.
Attorney or SEC investigations, or from our own independent investigations, we could be required to pay damages and/or penalties or have other remedies imposed on us, and the Company or our officers, directors or employees may be subject to additional civil litigation against the Company or our officers and directors regarding such matters.
Attorney or SEC investigations, or from our own independent investigations, we could be 20 Table of Contents required to pay damages and/or penalties or have other remedies imposed on us, and the Company or our officers, directors or employees may be subject to additional civil litigation against the Company or our officers and directors regarding such matters.
We currently have franchised restaurants in 40 countries, including 48 states within the United States, and we plan to continue to grow internationally. Expansion in international markets may be affected by local economic and market as well as geopolitical conditions.
We currently have franchised restaurants in 38 countries, including 49 states within the United States, and we plan to continue to grow internationally. Expansion in international markets may be affected by local economic and market as well as geopolitical conditions.
See “Business—Supply Chain Assistance.” Climate change and the shift to more sustainable business practices could negatively affect our business or damage our reputation.
See “Business—Supply Chain Assistance.” 18 Table of Contents Climate change and the shift to more sustainable business practices could negatively affect our business or damage our reputation.
Wiederhorn and other of our current or former officers, directors and employees. These investigations, the results of the investigations or remedial actions that we have taken or may take as a result of such investigations may materially adversely affect our business, financial condition and reputation. If we are subject to adverse findings resulting from the U.S.
These investigations, the results of the investigations or remedial actions that we have taken or may take as a result of such investigations may materially adversely affect our business, financial condition and reputation. If we are subject to adverse findings resulting from the U.S.
Additionally, allegations of foodborne illness or food safety issues could result in litigation involving us and our franchisees. The occurrence of foodborne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, which could result in disruptions in our supply chain and/or lower revenues and margins for us and our franchisees.
The occurrence of foodborne illnesses or food safety issues could also adversely affect the price and availability of 15 Table of Contents affected ingredients, which could result in disruptions in our supply chain and/or lower revenues and margins for us and our franchisees.
The FAST Recovery Act is poised to create the Fast Food Sector Council within the California Department of Industrial Relations (DIR).
The FAST Recovery Act provides increased rights to the state’s fast-food workers. The FAST Recovery Act is poised to create the Fast Food Sector Council within the California Department of Industrial Relations (DIR).
Food safety and foodborne illness concerns may have an adverse effect on our business. Foodborne illnesses, such as E. coli, hepatitis A, trichinosis and salmonella, occur or may occur within our system from time to time. In addition, food safety issues such as food tampering, contamination and adulteration occur or may occur within our system from time to time.
Foodborne illnesses, such as E. coli, hepatitis A, trichinosis and salmonella, occur or may occur within our system from time to time. In addition, food safety issues such as food tampering, contamination and adulteration occur or may occur within our system from time to time.
Any future inability to recruit and retain qualified individuals may delay the planned openings of new restaurants by us and our franchisees and could adversely impact our existing franchised and company owned restaurants.
The market for qualified employees in our industry is very competitive. Any future inability to recruit and retain qualified individuals may delay the planned openings of new restaurants by us and our franchisees and could adversely impact our existing franchised and company owned restaurants.
Changes in labor and other operating costs could adversely affect our results of operations. An increase in the costs of employee wages, benefits and insurance (including workers’ compensation, general liability, property and health) could result from government imposition of higher minimum wages or from general economic or competitive conditions.
Changes in labor and other operating costs could adversely affect our results of operations. An increase in the costs of employee wages, benefits and insurance (including workers’ compensation, general liability, property and health) at our franchised and corporate owned restaurants could arise from an increase in the federal or state minimum wage or from general economic or competitive conditions.
Wiederhorn or our other directors, officers or employees, which could harm the business and could result in reputational damage. Any proceedings commenced against us or Mr. Wiederhorn by a regulatory agency could result in administrative orders, the imposition of penalties and/or fines, and the imposition of sanctions against us, Mr.
Wiederhorn by a regulatory agency could result in administrative orders, the imposition of penalties and/or fines, and the imposition of sanctions against us, Mr. Wiederhorn and other of our current or former officers, directors and employees.
In addition, we may be required to obtain additional financing to fund future acquisitions, but there can be no assurance that we will be able to obtain additional financing on acceptable terms or at all. Health concerns arising from outbreaks of diseases, other than COVID-19, may have an adverse effect on our business.
In addition, we may be required to obtain additional financing to fund future acquisitions, but there can be no assurance that we will be able to obtain additional financing on acceptable terms or at all. Food safety and foodborne illness concerns may have an adverse effect on our business.
Any cybersecurity or similar incident involving confidential information of our business, our franchisees or our restaurant customers could result in negative publicity, damage to our reputation, a loss of revenues, disruption of our business, litigation and regulatory actions.
Any cybersecurity or similar incident involving confidential information of our business, our franchisees or our restaurant customers could result in negative publicity, damage to our reputation, a loss of revenues, disruption of our business, litigation and regulatory actions. Additional capital investments might be required to remediate any problems, infringements, misappropriations or other third-party claims.
Risks Relating to Our Business and Operations We have significant outstanding indebtedness under our whole-business securitization facilities, which require that we generate sufficient cash flow to satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default and lender remedies.
Any reduction of our brands’ goodwill, consumer confusion, or reputational dilution is likely to impact sales, and could materially and adversely impact our business and results of operations. 14 Table of Contents Risks Relating to Our Business and Operations We have significant outstanding indebtedness under our whole-business securitization facilities, which require that we generate sufficient cash flow to satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default and lender remedies.
Moreover, there could be developments of which we are not aware, which could result in further proceedings against our Company, Mr. Wiederhorn and our other directors, officers and employees. These matters may also divert management's attention from other business concerns, or result in the loss of the services of Mr.
Wiederhorn and our other directors, officers and employees. These matters may also divert management's attention from other business concerns, or result in the loss of the services of Mr. Wiederhorn or our other directors, officers or employees, which could harm the business and could result in reputational damage. Any proceedings commenced against us or Mr.
The Company acts as the manager of each of these subsidiaries under a Management Agreement and performs management, franchising, distribution, intellectual property and operational functions on behalf of the subsidiaries for which it receives a management fee.
The Company acts as the manager of each of these subsidiaries under a Management Agreement and performs management, franchising, distribution, intellectual property and operational functions on behalf of the subsidiaries for which it receives a management fee. The aggregate principal balance of the indebtedness under our whole-business securitization facilities was $1.2 billion as of December 31, 2023.
Moreover, unauthorized third parties may use our intellectual property to trade on the goodwill of our brands, resulting in consumer confusion or dilution of our brands’ value. Any reduction of our brands’ goodwill, consumer confusion, or reputational dilution is likely to impact sales, and could materially and adversely impact our business and results of operations.
Moreover, unauthorized third parties may use our intellectual property to trade on the goodwill of our brands, resulting in consumer confusion or dilution of our brands’ value.
The government investigations mentioned below in Item 3, Legal Proceedings present certain risks. At this stage, we are not able to reasonably estimate the outcome or duration of these investigations, nor can we predict what consequences any investigation may have on us, including significant legal and accounting expenses.
At this stage, we are not able to reasonably estimate the outcome or duration of these investigations, nor can we predict what consequences any investigation may have on us, including significant legal and accounting expenses. Moreover, there could be developments of which we are not aware, which could result in further proceedings against our Company, Mr.
In addition, competition for qualified employees could compel our franchisees to pay higher wages to attract or retain key crew members, which could result in higher labor costs and decreased profitability.
In addition, competition for qualified employees could compel us or our franchisees to pay higher wages to attract or retain key crew members, which could result in higher labor costs and decreased profitability. As more state and local jurisdictions implement minimum wage increases, we expect that labor costs will continue to increase.
In January 2022, the California State Assembly passed Assembly Bill (AB) No. 257, the Fast Food Accountability and Standards Recovery Act (FAST Recovery Act), and Governor Gavin Newsom signed the bill into law on September 5, 2022. The FAST Recovery Act provides increased rights to the state’s fast-food workers.
Publicity relating to any such noncompliance could also harm our reputation and adversely affect our revenues. In January 2022, the California State Assembly passed Assembly Bill (AB) No. 257, the Fast Food Accountability and Standards Recovery Act (FAST Recovery Act), and Governor Gavin Newsom signed the bill into law on September 5, 2022.
Restaurant operations are highly service oriented, and our success depends in part upon our franchisees’ and our ability to attract, retain and motivate a sufficient number of qualified employees, including restaurant managers and other crew members. The market for qualified employees in our industry is very competitive.
Labor shortages or difficulty finding qualified employees could slow our growth, harm our business and reduce our profitability. Restaurant operations are highly service oriented, and our success depends in part upon our franchisees’ and our ability to attract, retain and motivate a sufficient number of qualified employees, including restaurant managers and other crew members.
Risks Related to Our Class A Common Stock and Organizational Structure We are controlled by Fog Cutter Holdings LLC, whose interests may differ from those of our public stockholders. 22 Table of Contents Fog Cutter Holdings LLC controls approximately 55.2% of the voting power of our Common Stock and has significant influence over our corporate management and affairs and is able to control virtually all matters requiring stockholder approval, including election of directors and significant corporate transactions.
Fog Cutter Holdings LLC controls approximately 55.5% of the voting power of our Common Stock and has significant influence over our corporate management and affairs and is able to control virtually all matters requiring stockholder approval, including election of directors and significant corporate transactions.
Any increase in labor expenses, as well as increases in general operating costs such as rent and energy, could adversely affect our franchisees’ profit margins, their sales volumes and their ability to remain in business, which would adversely affect our results of operations. Risks Related to Government Regulation and Litigation The Company faces risks related to pending government investigations.
Further, the California law could prompt similar legislation in other states or localities. A material increase in labor expenses, as well as increases in general operating costs such as rent and energy, could adversely affect our franchisees’ profit margins, their sales volumes and their ability to remain in business, which would adversely affect our results of operations.
The aggregate principal balance of 14 Table of Contents the indebtedness under our whole-business securitization facilities was $1.0 billion as of December 25, 2022. Subject to contractual restrictions, we and our financing subsidiaries may incur additional indebtedness for various purposes, including to fund future acquisitions, the construction of company-owned restaurants and operational needs.
Subject to contractual restrictions, we and our financing subsidiaries may incur additional indebtedness for various purposes, including to fund future acquisitions, the construction of company-owned restaurants and operational needs.
Failure to comply with antibribery or anticorruption laws could adversely affect our business operations. The U.S. Foreign Corrupt Practices Act and other similar applicable laws prohibiting bribery of government officials and other corrupt practices are the subject of increasing emphasis and enforcement around the world.
Foreign Corrupt Practices Act and other similar applicable laws prohibiting bribery of government officials and other corrupt practices are the subject of increasing emphasis and enforcement around the world.
If our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts or if we reduce our guidance for future periods, the market price of our Class A Common Stock or Class B Common Stock may decline as well.
If our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts or if we reduce our guidance for future periods, the market price of our Class A Common Stock or Class B Common Stock may decline as well. 24 Table of Contents Our ability to pay regular dividends to our stockholders is subject to the discretion of our Board of Directors and may be limited by our holding company structure and applicable provisions of Delaware law.
We do not maintain key person life insurance policies on any of our executive officers other than Andrew Wiederhorn. We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in our industry.
We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in our industry. Our inability to meet our executive staffing requirements in the future could impair our growth and harm our business.
We have not elected to take advantage of the “controlled company” exemption to the corporate governance rules for companies listed on The Nasdaq Capital Market. Our anti-takeover provisions could prevent or delay a change in control of our company, even if such change in control would be beneficial to our stockholders.
Our anti-takeover provisions could prevent or delay a change in control of our company, even if such change in control would be beneficial to our stockholders.
In addition, it may not be possible to obtain adequate levels of insurance coverage in the future for alcohol related claims, and such coverage may not be available for reasonable insurance premiums. Our success depends substantially on our corporate reputation and on the value and perception of our brands.
In addition, it may not be possible to obtain adequate levels of insurance coverage in the future for alcohol related claims, and such coverage may not be available for reasonable insurance premiums. The impact global and domestic economic conditions have on consumer discretionary spending and our costs of operations could materially adversely affect our financial performance.
It is possible that the interests of Fog Cutter Holdings LLC may, in some circumstances, conflict with our interests and the interests of our other stockholders.
Under these rules, we are not required to have a majority of our Board of Directors be independent, nor are we required to have a compensation committee or independent nominating function. It is possible that the interests of Fog Cutter Holdings LLC may, in some circumstances, conflict with our interests and the interests of our other stockholders.
Publicity relating to any noncompliance or alleged noncompliance could also harm our reputation and adversely affect our revenues and results of operations.
Publicity relating to any noncompliance or alleged noncompliance could also harm our reputation and adversely affect our revenues and results of operations. Risks Related to Our Class A Common Stock and Organizational Structure We are controlled by Fog Cutter Holdings LLC, whose interests may differ from those of our public stockholders.
Removed
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.
Added
Additionally, allegations of foodborne illness or food safety issues could result in litigation involving us and our franchisees.
Removed
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.
Added
Geopolitical and macroeconomic events have impacted consumer spending and our costs of operations and may continue to do so for some time in the future.
Removed
Furthermore, since diseases may be transmitted through human contact, the risk of contracting diseases could cause employees or guests to avoid gathering in public places, which could adversely affect restaurant guest traffic or the ability to adequately staff our restaurants.
Added
Dining out is a discretionary expenditure that is influenced by domestic and global economic conditions, including, but not limited to: geopolitical instability, including armed conflicts, supply shortages, interest rates (including recent interest rates above historical norms), unemployment, significant cost inflation, health emergencies including the COVID-19 pandemic, consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home values, population growth, household incomes and tax policy.
Removed
We could also be adversely affected if jurisdictions in which our restaurants operate impose mandatory closures, seek voluntary closures or impose restrictions on operations of restaurants. Even if such measures are not implemented and a virus or other disease, the perceived risk of infection or health risk may adversely affect our business.
Added
Material changes to governmental policy related to domestic and international fiscal concerns, and/or changes in central bank policies with respect to monetary policy, also could affect consumer discretionary spending. Any factor affecting consumer discretionary spending may influence customer traffic in our restaurants and average check amount, thus potentially having a material impact on our financial performance.
Removed
Additional capital investments might be required to remediate any problems, infringements, misappropriations or other third-party claims. 17 Table of Contents The retail food industry in which we operate is highly competitive.
Added
Furthermore, negative economic conditions resulting from war, terrorist activities, global economic occurrences or trends or other geopolitical events or conflicts could cause consumers to make long-term changes to their discretionary spending behavior, whether on a temporary, extended or permanent basis.
Removed
Our inability to meet our executive staffing requirements in the future could impair our growth and harm our business. 19 Table of Contents Labor shortages or difficulty finding qualified employees could slow our growth, harm our business and reduce our profitability.
Added
Reductions in staff levels and restaurant closures could result from prolonged negative economic conditions, which could materially adversely affect our business, financial condition or results of operations. Our success depends substantially on our corporate reputation and on the value and perception of our brands.
Removed
Publicity relating to any such noncompliance could also harm our reputation and adversely affect our revenues.
Added
For example, California recently adopted a state-wide minimum wage of $20 per hour for employees of restaurants that are part of a national fast food chain effective April 1, 2024.
Removed
Further, a California law enacted in 2019 adopted an employment classification test to be used when determining employee or independent contractor status which establishes a high threshold to obtain independent contractor status.
Added
The increased labor costs at certain of our franchised restaurants in California could impact their profitability and the desire to open new stores or renew their franchise agreements for existing stores and result in price increases, which could impact demand for our products or lead to operational changes.
Removed
These laws and any similar laws enacted at the federal, state or local level, could increase our and our franchisees’ labor costs and decrease profitability or could cause employees of our franchisees to be deemed to be our employees.
Added
Risks Related to Government Regulation and Litigation The Company faces risks related to pending government investigations. The government investigations mentioned below in Item 3, Legal Proceedings present certain risks.
Removed
Our ability to pay regular dividends to our stockholders is subject to the discretion of our Board of Directors and may be limited by our holding company structure and applicable provisions of Delaware law.
Added
A broader standard for determining joint employer status recently adopted by the NLRB may adversely affect our business operations and increase our liabilities resulting from actions by our franchisees.
Added
Under the new standard, an entity, such as a franchisor, may be considered a joint employer of another entity’s employees if they share or codetermine one or more of the employees’ essential terms and 22 Table of Contents conditions of employment, as defined in the new rule.
Added
The new standard considers the authority to control essential terms and conditions of employment, whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect. The final rule was scheduled to become effective on February 26, 2024, but was recently vacated by a federal district court in Texas.
Added
The court’s decision to vacate the rule may be appealed and the original rule could be restored by an appellate court.
Added
If the original rule is restored on appeal or a similar rule is adopted in the future by the NLRB, the joint employer standard could cause us to be considered a joint employer of our franchisees’ employees, which could cause us to be held liable or responsible for unfair labor practices, violations of wage and hour laws, and other violations by our franchisees, and require us to conduct collective bargaining negotiations regarding employees of our franchisees.
Added
The joint employer standard could also make it easier to organize our franchisees’ staff into labor unions, and provide the staff and their union representatives with bargaining power to request that our franchisees raise wages.
Added
The effects of these changes could require us to modify our business practices, and could result in increased litigation, governmental investigations or proceedings, administrative enforcement actions, fines and civil penalties . Failure to comply with antibribery or anticorruption laws could adversely affect our business operations. The U.S.
Added
Since a majority of the outstanding voting power of our capital stock is held by one entity, we are considered a “controlled company” under the corporate governance rules of The Nasdaq Stock Market LLC.

Item 2. Properties

Properties — owned and leased real estate

5 edited+0 added−0 removed2 unchanged
Biggest changeWe believe that our existing facilities are in good operating condition and adequate to meet our current and foreseeable needs.
Biggest changeThe leases have remaining terms ranging from 1 month to 26.8 years. 26 Table of Contents We believe that our existing facilities are in good operating condition and adequate to meet our current and foreseeable needs. Additional information related to our operating leases are disclosed in Note 9.
Our subsidiary, GFG Management, LLC, leases an approximately 16,000 square foot warehouse location in Atlanta, GA under a lease expiring on May 31, 2024.
Our subsidiary, GFG Management, LLC, leases an approximately 16,000 square foot warehouse location in Atlanta, GA under a lease expiring on May 31, 2029.
Our subsidiary, Twin Restaurant Holding, LLC, leases offices in Dallas, TX comprising approximately 8,300 square feet under a lease expiring on April 30, 2025. 24 Table of Contents Our subsidiary, Fazoli's Holdings, LLC, leases offices located in Lexington, KY comprising approximately 19,200 square feet under a lease expiring on April 30, 2027.
Our subsidiary, Twin Restaurant Holding, LLC, leases offices in Dallas, TX comprising approximately 8,300 square feet under a lease expiring on April 30, 2025. Our subsidiary, Fazoli's Holdings, LLC, leases offices located in Lexington, KY comprising approximately 19,200 square feet under a lease expiring on April 30, 2027.
PROPERTIES Our corporate headquarters, including our principal administrative, sales and marketing, customer support, and research and development operations, are located in Beverly Hills, California, comprising approximately 13,000 square feet of space, pursuant to a lease that expires on September 29, 2025, as well as an additional approximately 3,000 square feet of additional space pursuant to a lease amendment that expires on February 29, 2024.
ITEM 2. PROPERTIES Our corporate headquarters, including our principal administrative, sales and marketing, customer support, and research and development operations, are located in Beverly Hills, California, comprising approximately 15,000 square feet of space, pursuant to a lease that expires on September 29, 2025.
In addition to the above locations, certain of our subsidiaries directly own and operate restaurant locations, substantially all of which are located in leased premises. As of December 25, 2022, we owned and operated 126 restaurant locations. The leases have remaining terms ranging from 1 month to 23.9 years.
In addition to the above locations, certain of our subsidiaries directly own and operate restaurant locations, substantially all of which are located in leased premises. As of December 31, 2023, we owned and operated 190 restaurant locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

23 edited+10 added−12 removed9 unchanged
Biggest changeTo date, the Court has not issued a ruling on the Motion, nor has the Court issued a scheduling order in this matter. 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.
Biggest changeOn December 4, 2023, the stay of all proceedings was extended through March 3, 2024, and on March 1, 2024, the stay of all proceedings was extended to June 3, 2024. Defendants dispute the allegations of the lawsuit and intend to vigorously defend against the claims. We cannot predict the outcome of this lawsuit.
Securities and Exchange Commission (the “SEC”) informed the Company that they had opened investigations relating to the Company and our 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.
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.
(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 million to $22 million. From 2002 to 2008, a former Fog Cutter subsidiary managed a lease portfolio, which included the subject property.
(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.
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.
We are unable at this time to express any opinion as to the eventual outcome of this matter or 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.
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 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”).
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”).
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 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.
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.
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.
The Company is unable to predict the ultimate outcome of this matter, however, reserves have been recorded on the balance sheet of FAT Brands 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.
On April 7, 2022, the Court entered a Scheduling Order setting forth the key dates and deadlines that will govern the litigation, including a discovery cutoff of March 24, 2023 and trial date of February 5-9, 2024. To date, the parties have engaged in substantial written discovery, though no depositions have been taken.
On 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.
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 and results of operations.
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.
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, Fog Cap Retail Investors LLC ("Fog Cap").
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.
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 and results of operations.
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.
In February 2018, SBN obtained 26 Table of Contents 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.
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.
District Court for the Western District of Oklahoma, Case No. 5:12-cv-00772-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.
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.
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. On February 17, 2023, the Court granted the SLC’s motion to stay.
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.
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 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 (the “OKC Litigation”), and a bankruptcy proceeding involving Fog Cap (the “Bankruptcy Proceeding”).
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. SBN has not yet served the complaint on FCCG.
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.
As of December 25, 2022 and December 26, 2021, 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. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 27 Table of Contents PART II
As of December 31, 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. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 29 Table of Contents PART II
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.
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.
Fog Cutter denies any liability, although it did not timely respond to one of the property owners’ complaints and several of the defendants’ cross-complaints and thus is in default. The parties are currently conducting discovery, and the matter is scheduled for trial for October 2023.
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.
Wiederhorn, as well as compensation, extensions of credit and other benefits or payments received by Mr. Wiederhorn or his family from those entities. Our Board of Directors has formed 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.
Wiederhorn, as well as compensation, extensions of credit and other benefits or payments received by Mr. Wiederhorn or his family from those entities prior to the merger. From August 23, 2022 until March 28, 2023, our Board of Directors maintained a Special Review Committee comprised of directors other than Mr.
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.
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.
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.
The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management. 27 Table of Contents 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.
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.
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. On February 15, 2024, the Company, Andrew Wiederhorn and one current and one former officer of the Company each received a “Wells Notice” from the Staff of the SEC.
Removed
The lawsuit and any related litigation also may be time-consuming and divert the attention and resources of our management. 25 Table of Contents Robert J. Matthews, et al., v.
Added
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.
Removed
FAT Brands, Inc., Andrew Wiederhorn, Ron Roe, Rebecca Hershinger and Ken Kuick (United States District Court for the Central District of California, Case No. 2:22-cv-01820) On March 18, 2022, plaintiff Robert J.
Added
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.
Removed
Matthews, a putative investor in the Company, filed a putative class action lawsuit against the Company, Andrew Wiederhorn, Ron Roe, Rebecca Hershinger and Ken Kuick, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), alleging that the defendants are responsible for false and misleading statements and omitted material facts in the Company’s reports filed with the SEC under the 1934 Act related to the LA Times story published on February 19, 2022 about the company and its management.
Added
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.
Removed
The plaintiff alleges that the Company’s public statements wrongfully inflated the trading price of the Company’s common stock, preferred stock and warrants.
Added
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.
Removed
On April 25, 2022, Kerry Chipman, a putative investor in the Company, filed a putative class action lawsuit against the Company, Andrew Wiederhorn, Ron Roe, Rebecca Hershinger and Ken Kuick in the United States District Court for the Central Division of California, asserting substantially the same claims as those made by Matthews in the above-referenced lawsuit.
Added
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.
Removed
On May 2, 2022, the Court entered an order consolidating the actions filed by Matthews and Chipman under the caption In re FAT Brands Inc. Securities Litigation. On June 13, 2022, the Court appointed plaintiff Robert Matthews as lead plaintiff and The Rosen Law Firm, P.A., as lead counsel in the consolidated action.
Added
On August 10, 2023, the parties filed a stipulation to stay the case for six months, conditioned upon Defendants continuing to review the documents in response to Plaintiffs' First Requests for Production and to produce non-privileged responsive documents to the SLC and to Plaintiffs no later than December 1, 2023. The Court granted the stipulation the same day.
Removed
Plaintiffs filed their Consolidated Amended Complaint on June 27, 2022. On July 19, 2022, the parties entered into a stipulation to stay the litigation so that they could engage in voluntary mediation.
Added
In accordance with the stipulation, Defendants produced documents to the SLC and Plaintiffs by the December 1, 2023 deadline. On February 7, 2024, the SLC requested, and the Court granted, an extension of the stay of all proceedings through May 6, 2024, granting the SLC an additional 90 days to complete its investigation.
Removed
In August 2022, after mediation, the Company reached an agreement in principle to settle this matter for a cash payment by the Company of $2.5 million and issuance of $0.5 million in Class A common stock.
Added
The Wells Notice issued to the Company alleges violations of Securities Act Section 17(a)(2), and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(k), and 14(a) and Rules 10b-5(b), 12b-20, 13a-1, 13a-13, 14a-3, and 14a-9 thereunder, relating solely to conduct occurring during or prior to fiscal year 2020.
Removed
The Stipulation of Settlement and other documents pertinent to the settlement, along with a motion for preliminary approval thereof, were filed with the court on September 23, 2022. The Court granted the motion for preliminary approval on November 8, 2022, and on January 31, 2023, plaintiffs moved for final approval of the settlement and certification of the settlement class.
Added
A Wells Notice is neither a formal charge of wrongdoing nor a determination that the recipient has violated any law. The Company is continuing its efforts to cooperate with the SEC and maintains that its actions were appropriate, and intends to pursue the Wells Notice process, including submitting a formal response to the SEC. Stratford Holding LLC v.
Removed
The hearing on the motion for final approval is set for February 28, 2023, at 9:00 am PT.
Added
On March 11, 2024, the court issued an order granting FCCG’s motion to dismiss SBN’s complaint without prejudice to refile 28 Table of Contents the complaint, if at all, once the underlying proceedings (the OKC Litigation and the Bankruptcy Proceeding) were complete.
Removed
Upon final approval by the court, the settlement will provide a full release of all claims by the settlement class members against all defendants, including the Company and the named officers and directors, will expressly deny any liability, wrongdoing or responsibility by any of the defendants, and will result in the dismissal of the litigation with prejudice.
Removed
Attorney and SEC investigations, reach findings and make a recommendation to the Board with respect to these matters. The SRC is authorized to review such documents and interview such persons, and retain legal counsel and other consultants on behalf of the Company, as the SRC deems necessary or appropriate to complete its review.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−5 removed3 unchanged
Biggest changeThe grantees are entitled to any common dividends relating to the Grant Shares during the vesting period. 28 Table of Contents The information presented in the table below is as of December 25, 2022: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders 2,748,906 $ 10.06 2,101,094 Equity compensation plans not approved by security holders — — — Total 2,748,906 $ 10.06 2,101,094 Issuer Purchases of Equity Securities We do not have a program in place to repurchase our own Common Stock or preferred stock and as of December 25, 2022, we have not repurchased any of these securities except for the cancellation of shares issued under the Plan, and as set forth in the following paragraph.
Biggest changeThe following table sets forth information as of December 31, 2023, with respect to compensation plans under which equity securities that we have authorized for issuance: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders 3,938,610 $ 7.68 2,084,828 Equity compensation plans not approved by security holders — — — Total 3,938,610 $ 7.68 2,084,828 Issuer Purchases of Equity Securities We do not have a program in place to repurchase our own Common Stock or Preferred Stock and as of December 31, 2023, we have not repurchased any of these securities except for the cancellation of shares issued under the Plan, and as set forth in the following paragraph. 30 Table of Contents On October 21, 2022, the Company entered into an Exchange Agreement with the sellers of Twin Peaks 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 original issue discount).
The number of record holders does not include persons who held such shares in nominee or “street name” accounts through brokers. Dividends The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors.
The number of record holders does not include persons who held such shares in nominee or “street name” accounts through brokers. Dividend Policy The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors.
The Plan is a comprehensive incentive compensation plan under which we 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 purpose of the Plan is to help attract, motivate and retain qualified personnel and thereby enhance stockholder value.
Equity Compensation Plan Information We maintain 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 purpose of the Plan is to help attract, motivate and retain qualified personnel and thereby enhance stockholder value.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Class A Common Stock, par value $0.0001 per share, is traded on the NASDAQ Capital Market under the ticker symbols “FAT” and our Class B Common Stock, par value $0.0001 per share, is traded on the NASDAQ Capital Market under the ticker symbol "FATBB." As of February 17, 2023, there were 45 stockholders of record for our Class A Common Stock and 42 stockholders of record for our Class B Common Stock.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Class A Common Stock, par value $0.0001 per share, is traded on the NASDAQ Capital Market under the ticker symbols “FAT” and our Class B Common Stock, par value $0.0001 per share, is traded on the NASDAQ Capital Market under the ticker symbol "FATBB." Holders of Our Common Stock As of March 5, 2024, there were approximately 41 stockholders of record of our Class A Common Stock and approximately 37 stockholders of record of our Class B Common Stock.
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. Equity Compensation Plan Information Effective September 30, 2017, we adopted the 2017 Omnibus Equity Incentive Plan (the “Plan”).
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.
Removed
The Plan was amended in September 2021 to increase the maximum shares issuable under the Plan to 4,000,000 shares and amended in December 2022 to increase the maximum shares issuable under the Plan to 5,000,000 shares.
Added
Awards which lapse or are forfeited become available again for grant. See Note 14 in our consolidated financial statements for more details on our share-based compensation.
Removed
Awards which lapse or are forfeited become available again for grant. As of December 25, 2022, we have granted options to purchase 2,166,822 shares of Class A Common Stock to employees, 536,130 shares of Class A Common Stock to non-employee directors, and 45,954 shares of Class A Common Stock to non-employee consultants.
Removed
Each grant is subject to a three-year vesting requirement, with one-third of the options vesting each ye ar. During the year ended December 25, 2022, the Company also granted an aggregate of 150,000 shares of its Class A Common Stock to five Board members (the “Grant Shares”).
Removed
The Grant Shares vest one-third each year on the anniversary date of the grant.
Removed
On October 21, 2022, the Company entered into an Exchange Agreement with the sellers of Twin Peaks 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 original issue discount).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

58 edited+23 added−14 removed24 unchanged
Biggest change(In Thousands) For the Fiscal Years Ended December 25, 2022 December 26, 2021 Consolidated statement of operations data: Revenues Royalties $ 87,921 $ 42,658 Franchise fees 3,706 4,023 Advertising fees 37,997 16,728 Restaurant sales 241,001 41,563 Factory revenue 33,504 13,470 Management fees and other income 3,095 439 Total revenues 407,224 118,881 Costs and expenses General and administrative expense 113,313 41,775 Cost of restaurant and factory revenues 221,627 44,242 Depreciation and amortization 27,015 8,474 Impairment of goodwill and other intangible assets 14,000 1,037 Refranchising loss 4,178 314 Acquisition fees 383 4,242 Advertising expense 44,612 17,973 Total costs and expenses 425,128 118,057 (Loss) income from operations (17,904) 824 Total other expense, net (89,474) (35,944) Loss before income tax (107,378) (35,120) Income tax provision (benefit) 18,810 (3,537) Net loss $ (126,188) $ (31,583) Net Loss - Net loss for the fiscal year ended December 25, 2022, totaled $126.2 million consisting of revenues of $407.2 million less costs and expenses of $425.1 million, other expense of $89.5 million, and income tax provision of $18.8 million.
Biggest change(In Thousands) For the Fiscal Years Ended December 31, 2023 December 25, 2022 Consolidated statement of operations data: Revenues Royalties $ 94,036 $ 87,921 Restaurant sales 299,029 241,001 Advertising fees 39,490 37,997 Factory revenue 37,983 33,504 Franchise fees 4,979 3,706 Other revenue 4,940 3,095 Total revenues 480,457 407,224 Costs and expenses General and administrative expense 93,117 113,313 Cost of restaurant and factory revenues 282,887 221,627 Depreciation and amortization 31,131 27,015 Impairment of goodwill and other intangible assets 500 14,000 Refranchising loss 2,873 4,178 Acquisition fees — 383 Advertising expense 47,619 44,612 Total costs and expenses 458,127 425,128 Income (loss) from operations 22,330 (17,904) Total other expense, net (118,695) (89,474) Loss before income tax provision (96,365) (107,378) Income tax provision (6,255) 18,810 Net loss $ (90,110) $ (126,188) Net loss for the fiscal year ended December 31, 2023, totaled $90.1 million consisting of revenues of $480.5 million less costs and expenses of $458.1 million, other expense of $118.7 million, and income tax provision of $6.3 million.
Financing Activities Net cash provided by financing activities was $28.7 million in 2022, primarily as a result of proceeds from borrowings, offset by dividends paid on our Class A and Class B Common Stock and our Series B Cumulative Preferred Stock.
Net cash provided by financing activities was $28.7 million in 2022, primarily as a result of proceeds from borrowings, offset by dividends paid on our Class A and Class B Common Stock and our Series B Cumulative Preferred Stock.
The remaining $46.5 million in aggregate principal amount 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 original issue discount).
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).
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 Cumulative Preferred Stock.
Equity Issuances 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 Cumulative Preferred Stock.
On July 6, 2022, FB Royalty issued an additional $76.5 million aggregate principal amount of three tranches of fixed rate senior secured notes as follows: Closing Date Class Seniority Principal Balance Coupon Final Legal Maturity Date 7/6/2022 A-2 Senior $42.7 4.75% 4/25/2051 7/6/2022 B-2 Senior Subordinated $14.2 8.00% 4/25/2051 7/6/2022 M-2 Subordinated $19.6 9.00% 4/25/2051 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).
On July 6, 2022, FB Royalty issued an additional $76.5 million aggregate principal amount of three tranches of fixed rate senior secured notes (in millions): Closing Date Class Seniority Principal Balance Coupon Final Legal Maturity Date 7/6/2022 A-2 Senior $42.7 4.75% 7/25/2051 7/6/2022 B-2 Senior Subordinated $14.2 8.00% 7/25/2051 7/6/2022 M-2 Subordinated $19.6 9.00% 7/25/2051 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).
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 is to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities.
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.
On December 15, 2022, GFG Royalty authorized the issuance of an additional $113.5 million aggregate principal amount of three tranches of fixed rate senior secured notes as follows: Closing Date Class Seniority Principal Balance Coupon Final Legal Maturity Date 12/13/2022 A-2 Senior $67.8 6.00% 7/25/2051 12/13/2022 B-2 Senior Subordinated $20.2 7.00% 7/25/2051 12/13/2022 M-2 Subordinated $25.5 9.50% 7/25/2051 Of the $113.5 million aggregate principal amount, $25.0 million was sold privately during the fourth quarter of 2022, resulting in net proceeds of $22.3 million (net of debt offering costs of $0.4 million and original issue discount of $2.3 million).
On December 15, 2022, GFG Royalty issued an additional $113.5 million aggregate principal amount of three tranches of fixed rate senior secured notes as follows (in millions): Closing Date Class Seniority Principal Balance Coupon Final Legal Maturity Date 12/13/2022 A-2 Senior $67.8 6.00% 7/25/2051 12/13/2022 B-2 Senior Subordinated $20.2 7.00% 7/25/2051 12/13/2022 M-2 Subordinated $25.5 9.50% 7/25/2051 Of the $113.5 million aggregate principal amount, $25.0 million was sold privately during the fourth quarter, resulting in net proceeds of $22.3 million (net of debt offering costs of $0.4 million and original issue discount of $2.3 million).
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.
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.
Debt Issuances (Whole-Business Securitizations) We financed our acquisitions and operations through the issuance of notes by four special purpose, wholly-owned financing subsidiaries identified below, which own substantially all of our operations.
Debt Issuances (Whole-Business Securitizations) We financed our acquisitions and operations through the issuance of notes by five special purpose, wholly-owned financing subsidiaries identified below, which own substantially all of our operations.
Goodwill and other intangible assets: Goodwill and other intangible assets with indefinite lives, such as trademarks, are not amortized but are reviewed for impairment annually, or more frequently if indicators arise, as was done in 2022 and 2021.
Goodwill and other intangible assets: Goodwill and other intangible assets with indefinite lives, such as trademarks, are not amortized but are reviewed for impairment annually, or more frequently if indicators arise, as was done in 2023 and 2022.
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 will have an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
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.
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 December 25, 2022, we do not have any material commitments for capital expenditures.
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 December 31, 2023, we do not have any material commitments for capital expenditures.
If the Company does not remit the applicable call price or put 33 Table of Contents 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.
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.
Net proceeds from the issuance of the GFG Securitization Notes totaled $338.9 million, which consisted of the combined face amount of $350.0 million, net of debt offering costs of $6.0 million and original issue discount of $5.1 million. Substantially all of the proceeds were used to acquire GFG.
Net proceeds totaled $338.9 million, which consisted of the combined face amount of $350.0 million, net of debt offering costs of $6.0 million and original issue discount of $5.1 million. Substantially all of the proceeds were used to acquire GFG.
Dividends The dividends declared on the Company's common stock by the Board of Directors during the fiscal year ended December 25, 2022 are as follows (in millions): Declaration Date Dividend Per Share Record Date Payment Date Total Dividend (in millions) January 11, 2022 $ 0.13 February 15, 2022 March 1, 2022 $ 2.2 April 12, 2022 $ 0.13 May 16, 2022 June 1, 2022 $ 2.1 July 12, 2022 $ 0.14 August 16, 2022 September 1, 2022 $ 2.3 October 25, 2022 $ 0.14 November 15, 2022 December 1, 2022 $ 2.3 The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors.
Dividends The dividends declared on the Company's common stock by the Board of Directors during the fiscal year ended December 31, 2023 are as follows (in millions): Declaration Date Dividend Per Share Record Date Payment Date Total Dividend (In Millions) January 3, 2023 $ 0.14 February 15, 2023 March 1, 2023 $ 2.3 April 4, 2023 $ 0.14 May 15, 2023 June 1, 2023 $ 2.3 July 11, 2023 $ 0.14 August 15, 2023 September 1, 2023 $ 2.3 October 3, 2023 $ 0.14 November 15, 2023 December 1, 2023 $ 2.4 The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There has been no change of accountants or any disagreements with accountants on any matter of accounting principles or practices, or financial statement disclosure required to be reported under this item.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no disagreements with accountants on any matter of accounting principles or practices, or financial statement disclosure required to be reported under this item.
As of December 25, 2022, the Company owned seventeen restaurant brands: R ound 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 December 31, 2023, the Company owned eighteen restaurant brands: R ound Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli's, Twin Peaks, Smokey Bones, 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.
All other entities are 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. Under the current SEC definitions, the Company meets the definition of an SRC and is adopting the deferral period for ASU 2016-13.
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.
FAT Brands Royalty I, LLC On April 26, 2021, FAT Brands Royalty I, LLC (“FB Royalty”), our special purpose, wholly-owned subsidiary, completed the Offering of three tranches of fixed rate senior secured notes (collectively, the “2021 FB Royalty Securitization Notes”).
FAT Brands Royalty I, LLC On April 26, 2021, FAT Brands Royalty I, LLC (“FB Royalty”), a special purpose, wholly-owned subsidiary of FAT Brands, completed the Offering of three tranches of fixed rate senior secured notes.
FAT Brands Twin Peaks I, LLC In connection with the acquisition of Twin Peaks, on October 1, 2021, we completed the issuance and sale in a private offering through our special purpose, wholly-owned subsidiary, FAT Brands Twin Peaks I, LLC, of an aggregate principal amount of $250.0 million of Series 2021-1 Fixed Rate Secured Notes (the "Twin Peaks Securitization Notes").
FAT Brands Twin Peaks I, LLC 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 an aggregate principal amount of $250.0 million.
The following table summarizes key components of our audited consolidated cash flows for the fiscal years ended December 25, 2022, and December 26, 2021 : (In thousands) For the Fiscal Years Ended December 25, 2022 December 26, 2021 Net cash (used in) provided by operating activities $ (47.4) $ 0.7 Net cash used in investing activities (12.5) (723.2) Net cash provided by financing activities 28.7 815.2 Net (decrease) increase in cash and restricted cash $ (31.2) $ 92.7 Operating Activities Net cash used in operating activities increased by $48.1 million in 2022 compared to 2021, primarily due to higher debt service costs associated with our securitizations and changes in working capital.
The following table summarizes key components of our audited consolidated cash flows for the fiscal years ended December 31, 2023, and December 25, 2022 : (In thousands) For the Fiscal Years Ended December 31, 2023 December 25, 2022 Net cash used in operating activities $ (35.6) $ (47.4) Net cash used in investing activities (59.8) (12.5) Net cash provided by financing activities 118.6 28.7 Net increase (decrease) in cash and restricted cash $ 23.2 $ (31.2) Operating Activities Net cash used in operating activities increased $11.8 million in 2023 compared to 2022, primarily due to higher debt service costs associated with our securitizations and by changes in working capital.
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. As of December 25, 2022, we had cash and restricted cash totaling $68.8 million.
We believe that we have sufficient 33 Table of Contents 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. As of December 31, 2023, we had cash and restricted cash totaling $91.9 million.
FAT Brands Fazoli's Native I, LLC In connection with the acquisition of Fazoli's and Native Grill & Wings, on December 15, 2021, we completed the issuance and sale in a private offering through our special purpose, wholly-owned subsidiary, FAT Brands Fazoli's Native I, LLC, of an aggregate principal amount of $193.8 million of Series 2021-1 Fixed Rate Secured Notes (the "Fazoli's-Native Securitization Notes").
FAT Brands Fazoli's Native I, LLC 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 an aggregate principal amount of $193.8 million.
Comparison of Cash Flows Our cash and restricted cash balance was $68.8 million as of December 25, 2022, compared to $99.9 million as of December 26, 2021.
Comparison of Cash Flows Our cash and restricted cash balance was $91.9 million as of December 31, 2023, compared to $68.8 million as of December 25, 2022.
The combined assets are valued at the lower of their carrying amount or fair value, net of costs to sell and included as current assets on the Company’s 36 Table of Contents consolidated balance sheet. Assets classified as held-for-sale are not depreciated.
The sale of these assets is generally expected to be completed within one year. The combined assets are valued at the lower of their carrying amount or fair value, net of costs to sell and included as current assets on the Company’s consolidated balance sheet. Assets classified as held-for-sale are not depreciated.
Net proceeds from the issuance of the Twin Peaks Securitization Notes totaled $236.9 million, which consisted of the combined face amount of $250.0 million, net of debt offering costs of $5.6 million and original issue discount of $7.5 million.
Net proceeds totaled $236.9 million, which consisted of the combined face amount of $250.0 million, net of debt offering costs of $5.6 million and original issue discount of $7.5 million. Substantially all of the proceeds were used to acquire Twin Peaks.
Refranchising net loss for the fiscal year ended December 26, 2021, was comprised of restaurant operating costs, net of food sales, of $3.0 million, partially offset by $2.7 million in net gains related to the sale or closure of refranchised restaurants. Acquisition costs during the 2022 fiscal year totaled $0.4 million.
Refranchising net loss for the fiscal year ended December 31, 2023, was comprised of restaurant operating costs, net of food sales, of $3.0 million, partially offset by $0.1 million in net gains related to the sale or closure of refranchised restaurants.
If we are unable to obtain acceptable financing, our ability to acquire additional restaurant concepts likely would be negatively impacted. 32 Table of Contents We have liabilities of $91.8 million relating to put options exercised by others on our Series B Cumulative Preferred Stock.
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 2022 and 2021 fiscal years were each 52-week years. 30 Table of Contents Results of Operations of FAT Brands Inc. The following table summarizes key components of our consolidated results of operations for the fiscal years ended December 25, 2022 and December 26, 2021 .
The 2022 fiscal year was a 52-week year. 31 Table of Contents Results of Operations of FAT Brands Inc. The following table summarizes key components of our consolidated results of operations for the fiscal years ended December 31, 2023 and December 25, 2022 .
The proceeds were used to finance the cash portion of the purchase price for the acquisition of Twin Peaks Buyer, LLC and its direct and indirect subsidiaries. FAT Brands Twin Peaks I, LLC owns the Twin Peaks restaurant brand.
The net proceeds from the sale of the Notes were used by the Company to finance the cash portion of the purchase price for the acquisition of Twin Peaks Buyer, LLC and its direct and indirect subsidiaries.
At December 25, 2022, the Company had approximately 2,300 locations open or under construction, of which approximately 95% were franchised. We generally do not own or operate restaurant locations, but rather generate revenue by charging franchisees an initial franchise fee as well as ongoing royalties.
At December 31, 2023, the Company had approximately 2,300 locations open or under construction, of which approximately 92% were franchised. Under our franchised business model, we generate revenue by charging franchisees an initial franchise fee as well as ongoing royalties.
Net proceeds from the issuance of the Fazoli's-Native Securitization Notes totaled $180.6 million, which consisted of the combined face amount of $193.8 million, net of debt offering costs of $3.8 million and original issue discount 34 Table of Contents of $9.4 million.
Net proceeds totaled $180.6 million, which consisted of the combined face amount of $193.8 million, net of debt offering costs of $3.8 million and original issue discount of $9.4 million. The proceeds were used to close the acquisitions of Fazoli's and Native, and to provide working capital for the 35 Table of Contents Company.
The remaining $88.5 million in aggregate principal was issued to FAT Brands Inc., pending sale to third party investors, and has been eliminated in consolidation as of December 25, 2022. In January 2023, an additional $40.0 million aggregate principal amount was sold privately, resulting in net proceeds of $34.8 million net of debt offering costs and original issue discount.
The remaining $88.5 million in aggregate principal was issued to FAT Brands Inc. and has been eliminated in consolidation. In January 2023, an additional $40.0 million aggregate principal amount was sold privately, resulting in net proceeds of $34.8 million. On September 20, 2023, an additional $2.8 million aggregate principal amount was sold privately resulting in net proceeds of $2.5 million.
FAT Brands GFG Royalty I, LLC In connection with the acquisition of GFG, on July 22, 2021, FAT Brands GFG Royalty I, LLC (“GFG Royalty”), our special purpose, wholly-owned subsidiary, completed the issuance and sale in a private offering (the “GFG Offering”) of three tranches of fixed rate senior secured notes (the "GFG Securitization Notes").
As of December 31, 2023, the outstanding principal balance subject to the put/call option was $17.3 million. 34 Table of Contents FAT Brands GFG Royalty I, LLC 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 the Company, completed the issuance and sale in a private offering (the “GFG Offering”) of three tranches of fixed rate senior secured notes.
Total other expense, net for the fiscal year ended December 26, 2021 was $35.9 million and consisted primarily of net interest expense of $29.1 million and net losses on extinguishment of debt in the amount of $7.6 million.
Total other expense, net for the fiscal year ended December 31, 2023 was $118.7 million and consisted primarily of net interest expense of $117.5 million and net losses on extinguishment of debt in the amount of $2.4 million.
Net loss for the fiscal year ended December 26, 2021, totaled $31.6 million consisting of revenues of $118.9 million less costs and expenses of $118.1 million, other expense of $35.9 million plus an income tax benefit of $3.5 million. Revenues - Revenues consist of royalties, franchise fees, advertising fees, restaurant sales, factory revenues, and other income.
Net loss for the fiscal year ended December 25, 2022, totaled $126.2 million consisting of revenues of $407.2 million less costs and expenses of $425.1 million, other expense of $89.5 million plus an income tax provision of $18.8 million. Revenues consist of royalties, franchise fees, advertising fees, restaurant sales, factory revenues, and other revenue.
Net proceeds from the issuance of the 2021 FB Royalty Securitization Notes totaled $140.8 million, which consisted of the combined face amount of $144.5 million, net of debt offering costs of $3.0 million and original issue discount of $0.7 million.
Net proceeds totaled $140.8 million, which consisted of the combined face amount of $144.5 million, net of debt offering costs of $3.0 million and original issue discount of $0.7 million. A portion of the proceeds was used to repay and retire notes issued in 2021 under the Base Indenture (the "2020 Securitization Notes").
The Company recorded impairment charges of $14.0 million and $1.0 million relating to goodwill and other intangible assets during the fiscal years ended December 25, 2022 and December 26, 2021, respectively.
We recorded non-cash impairment charges for goodwill and other intangible assets of $0.5 million and $14.0 million during the fiscal years ended December 31, 2023 and December 25, 2022, respectively.
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 of or timing of restaurant openings may be reduced or delayed. We also may acquire additional restaurant concepts.
Additionally, if we or our franchisees cannot obtain capital sufficient to fund this expansion, the extent of 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.
Depreciation and amortization increased $18.5 million in fiscal year 2022 compared to fiscal year 2021, primarily due to depreciation of company-owned restaurant property and equipment and amortizing intangible assets related to the 2021 Acquisitions.
Depreciation and amortization increased $4.1 million in fiscal year 2023 compared to fiscal year 2022, primarily due to the acquisition of Smokey Bones in September 2023 and depreciation of new property and equipment at company-owned restaurant locations.
Actual results could differ from those estimates. Recently Issued Accounting Standards In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments, and later amended the ASU in 2019, as described below. This guidance replaces the current incurred loss impairment methodology.
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.
Assets classified as held-for-sale: Assets are classified as held-for-sale when we commit to a plan to sell the asset, the asset is available for immediate sale in its present condition and an active program to locate a buyer at a reasonable price has been initiated. The sale of these assets is generally expected to be completed within one year.
The Company recorded impairment charges of $0.5 million and $14.0 million relating to goodwill and other intangible assets during the fiscal years ended December 31, 2023 and December 25, 2022, respectively. 37 Table of Contents Assets classified as held-for-sale: Assets are classified as held-for-sale when we commit to a plan to sell the asset, the asset is available for immediate sale in its present condition and an active program to locate a buyer at a reasonable price has been initiated.
A portion of the proceeds of the 2021 FB Royalty Securitization Notes were used to repay and retire similar notes issued in 2020 under the Base Indenture (the "2020 Securitization Notes"). The payoff amount totaled $83.7 million, which included principal of $80.0 million, accrued interest of $2.2 million and prepayment premiums of $1.5 million.
The payoff amount totaled $83.7 million, which included principal of $80.0 million, accrued interest of $2.2 million and prepayment premiums of $1.5 million.
Income tax provision (benefit) – We recorded an income tax provision of $18.8 million for the year ended December 25, 2022, compared to an income tax benefit of $3.5 million for the fiscal year ended December 26, 2021.
We recorded an income tax provision of $6.3 million for the year ended December 31, 2023, compared to an income tax provision of $18.8 million for the fiscal year ended December 25, 2022. These tax results were based on a net loss before taxes of $96.4 million for fiscal year 2023 and $107.4 million for fiscal year 2022.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Item 15 of Part IV of this Annual Report on Form 10-K. ITEM 9.
Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any off-balance sheet arrangements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Item 15 of Part IV of this Annual Report on Form 10-K. ITEM 9.
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. 29 Table of Contents 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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
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.
Actual results could differ from those estimates. 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.
These expenses vary in relation to advertising revenues and reflect increases related to the 2021 Acquisitions and the increase in customer activity as the recovery from COVID continues. Total other expense, net for the fiscal year ended December 25, 2022 was $89.5 million and consisted primarily of net interest expense of $94.8 million.
Total other expense, net for the fiscal year ended December 25, 2022 was $89.5 million and consisted primarily of net interest expense of $94.8 million. This increase is primarily due to new debt offerings which occurred in the second half of fiscal year 2022 and first three quarters of 2023.
The increase of $288.3 million reflects revenue from the 2021 Acquisitions and the continuing recovery from the negative effects of the COVID-19 pandemic on royalties from restaurant sales. 31 Table of Contents Costs and Expenses – Costs and expenses consist primarily of general and administrative costs and franchisee support, cost of restaurant and factory revenues, impairment of goodwill and other intangible assets, net refranchising (gains) losses, acquisition costs and advertising expense.
Costs and expenses consist of general and administrative expense, cost of restaurant and factory revenues, impairment of goodwill and other intangible assets, depreciation and amortization, refranchising losses, acquisition fees and advertising 32 Table of Contents expense.
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. The Company does not expect the adoption of this standard will have a material impact on its condensed consolidated financial statements.
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.
We recorded non-cash impairment charges for goodwill and other intangible assets of $14.0 million and $1.0 million during the fiscal years ended December 25, 2022 and December 26, 2021, respectively. Refranchising net loss for the fiscal year ended December 25, 2022, was comprised of restaurant operating costs, net of food sales, of $4.2 million.
Refranchising net loss for the fiscal year ended December 25, 2022, was comprised of restaurant operating costs, net of food sales, of $4.2 million. Advertising expense increased $3.0 million for the fiscal year ended December 31, 2023, compared to the prior year. These expenses vary in relation to advertising revenues.
It requires that an entity disclose current-period gross writeoffs 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 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.
Our costs and expenses increased from $118.1 million in the 2021 fiscal year to $425.1 million in the comparable period of 2022, primarily due to the 2021 Acquisitions.
Our costs and expenses increased from $425.1 million in the 2022 fiscal year to $458.1 million in the comparable period of 2023, primarily due to the acquisition of Smokey Bones in September 2023, increased activity from Company-owned restaurants and the Company's factory as well as professional fees related to certain litigation matters, partially offset by the recognition of Employee Retention Credits.
We earned revenues of $407.2 million for the fiscal year ended December 25, 2022 compared to $118.9 million for the fiscal year ended December 26, 2021.
We earned revenues of $480.5 million for the fiscal year ended December 31, 2023 compared to $407.2 million for the fiscal year ended December 25, 2022. The increase of $73.2 million reflects revenue from the system-wide sales growth, new restaurant openings and the acquisition of Smokey Bones in September 2023.
General and administrative expenses increased $71.5 million for the fiscal year ended December 25, 2022, compared to the prior year, primarily due to the 2021 Acquisitions, increased compensation costs reflecting the significant expansion of the organization and professional fees related to pending litigation and government investigations.
General and administrative expenses decreased $20.2 million for the fiscal year ended December 31, 2023, compared to the prior year, primarily due to the recognition of $16.9 million in Employee Retention Credits during 2023, partially offset by professional fees related to certain litigation matters.
Our primary sources of funds for liquidity during the fiscal year ended December 25, 2022 consisted of cash provided by borrowings and cash on hand at the beginning of the period. We are involved in a world-wide expansion of franchise locations, which will require significant liquidity, primarily from our franchisees.
Our primary sources of funds for liquidity during the fiscal year ended December 31, 2023 consisted of cash on hand at the beginning of the period and net proceeds of $127.4 million from the sale of secured debt as discussed in Note 10 of the accompanying consolidated financial statements.
Cost of restaurant and factory revenues totaled $221.6 million for the year ended December 25, 2022 and was related to the operations of the company-owned restaurant locations and the dough factory operated by GFG associated with the 2021 Acquisitions.
Cost of restaurant and factory revenues was related to the operations of the company-owned restaurant locations and dough factory and increased $61.3 million, or 27.6%, to $282.9 million in fiscal 2023 compared to fiscal 2022, primarily due to the acquisition of Smokey Bones in September 2023 and higher company-owned restaurant and factory sales.
We believe that we will be in compliance with our debt covenants and have sufficient sources of cash to meet our liquidity needs for the next twelve months. Equity Issuances On June 22, 2021, we completed an underwritten public offering of 460,000 shares of our 8.25% Series B Cumulative Preferred Stock at a price of $20.00 per share.
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. We believe that we will be in compliance with our debt covenants and have sufficient sources of cash to meet our liquidity needs for the next twelve months.
Removed
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
Added
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.
Removed
Certain account balances from the prior period have been reclassified to conform to current period presentation.
Added
On July 13, 2023, pursuant to the Exchange Agreement, the Twin Peaks sellers exercised their put option.
Removed
For the 2021 fiscal year acquisition costs totaled $4.2 million and were related primarily to the 2021 acquisitions. Advertising expense increased $26.6 million for the fiscal year ended December 25, 2022, compared to the prior year.
Added
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.
Removed
These tax results were based on a net loss before taxes of $107.4 million for fiscal year 2022 and $35.1 million for fiscal year 2021.
Added
The remaining $45.7 million in aggregate principal amount was issued to FAT Brands, Inc., pending sale to third party investors.
Removed
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.
Added
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.
Removed
The remaining proceeds were available for working capital. FB Royalty owns the following brands: Fatburger, Johnny Rockets, Buffalo's Cafe and Buffalo's Express, Ponderosa Steakhouse, Bonanza Steakhouse, Hurricane Grill & Wings and Yalla Mediterranean.
Added
On September 8, 2023, FAT Brands Twin Peaks I, LLC issued an additional $98.0 million aggregate principal amount of 2 tranches of fixed rate secured notes to FAT Brands Inc., pending sale to third party investors.
Removed
GFG Royalty owns our factory operations in Atlanta, GA and the following restaurant brands: Round Table Pizza, Marble Slab Creamery, Great American Cookies, Hot Dog on a Stick and Pretzelmaker.
Added
Of the $98.0 million aggregate principal amount, $48.0 million was sold privately during the third quarter of 2023 resulting in net proceeds of $45.2 million. A portion of the proceeds was used to purchase $14.9 million aggregate principal amount of outstanding Securitization Notes, which will be held pending re-sale to third party investors.
Removed
The proceeds were used to close the acquisitions of Fazoli's and Native, and to provide working capital for the Company. FAT Brands Fazoli's Native I, LLC owns the Fazoli's and Native Grill & Wings restaurant brands.
Added
In connection with the bonds repurchased, the Company recognized a $2.7 million net loss on extinguishment of debt. The remaining $50.0 million in aggregate principal of notes issued by FAT Twin Peaks I, LLC was issued to a wholly-owned subsidiary of FAT Brands, Inc., pending sale to third party investors.
Removed
The net proceeds of the offering totaled $8.3 million (net of $0.9 million in underwriting discounts and other offering expenses). On November 1, 2021, we closed an additional underwritten public offering of 1,000,000 shares of our 8.25% Series B Cumulative Preferred Stock at a price of $18.00 per share.
Added
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.
Removed
The net proceeds of this offering totaled $16.8 million (net of $1.2 million in underwriting discounts and other offering expenses).
Added
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.
Removed
Investing Activities Net cash used in investing activities was $12.5 million in fiscal year 2022, primarily related to purchases of property and equipment in connection with company-owned restaurants. Net cash used in investing activities was $723.2 million in 2021, primarily related to the acquisition of GFG, Twin Peaks, Fazoli's and Native Grill & Wings.
Added
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.

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