Los Angeles / CA. (fbb) FAT Brands Inc., parent company of Fatburger, reported fiscal fourth quarter and full fiscal year 2023 financial results for the fiscal year ended December 31, 2023.
«With the acquisition of Smokey Bones early in the fourth quarter, we have grown the FAT Brands portfolio to 18 iconic restaurant brands with annualized system wide sales of USD 2.5 billion,» said Chairman Andy Wiederhorn. «We opened 125 restaurants in 2023, including 29 in the fourth quarter. We are seeing strong franchisee interest in development opportunities, having signed more than 225 development agreements in 2023, bringing our total pipeline to 1,100 units. This represents the potential for over 50 percent Ebitda growth over the next several years.»
Co-Chief Executive Officer Ken Kuick: «While franchise interest remains high across all of our brands, we continue to be focused on the expansion of Twin Peaks. This year we opened 14 new lodges and ended the year with 109 lodges, a 33 percent increase since acquiring the brand in 2021. Our growth pipeline includes 113 lodges and Smokey Bones’ healthy real estate portfolio provides us with the opportunity to convert locations into Twin Peaks lodges, with the potential to significantly accelerate the growth of the brand.»
Co-Chief Executive Officer Rob Rosen: «We believe there are significant opportunities on the horizon for FAT Brands. Our seasoned leadership and strong brand management platform allow us to efficiently integrate new brands while maintaining a healthy and evolving pipeline for organic growth. These strengths position us for continued growth in the future, which will help deleverage our balance sheet.»
Fiscal Fourth Quarter 2023 Highlights
- Total revenue improved 52.8 percent to USD 158.6 million compared to USD 103.8 million in the fourth quarter of 2022
- System-wide sales growth of 16.5 percent in the fiscal fourth quarter of 2023 compared to the prior year fiscal quarter
- System-wide same-store sales declined 0.6 percent in the fiscal fourth quarter of 2023 compared to the prior fiscal year
- 29 new store openings during the fiscal fourth quarter of 2023
- Loss from operations of USD 3.1 million compared to USD 32.6 million in the fiscal fourth quarter of 2022
- Net loss of USD 26.2 million, or USD 1.68 per diluted share, compared to USD 70.8 million, or USD 4.39 per diluted share, in the fiscal fourth quarter of 2022
- Adjusted Ebitda of USD 27.0 million compared to USD 19.6 million in the fiscal fourth quarter of 2022
- Adjusted net loss of USD 17.3 million, or USD 1.15 per diluted share, compared to USD 43.0 million, or USD 2.70 per diluted share, in the fiscal fourth quarter of 2022
Fiscal Year 2023 Highlights
- Total revenue increased 18.0 percent to USD 480.5 million compared to USD 407.2 million in fiscal 2022
- System-wide sales growth of 6.9 percent compared to fiscal 2022
- System-wide same-store sales growth of 0.8 percent in fiscal 2023 compared to fiscal 2022
- 125 new store openings during fiscal 2023
- Income from operations of USD 22.3 million compared to loss from operations of USD 17.9 million in the fiscal quarter of 2022
- Net loss of USD 90.1 million, or USD 5.85 per diluted share, compared to USD 126.2 million, or USD 8.06 per diluted share, in fiscal 2022
- Adjusted Ebitda of USD 91.2 million compared to USD 88.8 million in fiscal 2022
- Adjusted net loss of USD 56.5 million, or USD 3.83 per diluted share, compared to USD 80.9 million, or USD 5.32 per diluted share, in fiscal 2022
Summary of Fourth Quarter 2023 Financial Results
Total revenue increased USD 54.8 million, or 52.8 percent, in the fiscal fourth quarter of 2023, to USD 158.6 million compared to USD 103.8 million in the same fiscal period of 2022, driven by a 10.4 percent increase in royalties, an 80.5 percent increase in company-owned restaurant revenues driven by new restaurant openings and the acquisition of Smokey Bones during the fourth quarter of 2023 and a 10.0 percent increase in revenues from our manufacturing facility.
Costs and expenses consist of general and administrative expense, cost of restaurant and factory revenues, depreciation and amortization, re-franchising net losses and advertising fees. Costs and expenses increased USD 25.4 million, or 18.6 percent, in the fiscal fourth quarter of 2023 to USD 161.8 million compared to USD 136.4 million in the same fiscal period in the prior fiscal year.
General and administrative expense decreased USD 8.8 million, or 22.6 percent, in the fiscal fourth quarter of 2023 compared to the same fiscal period in the prior fiscal year, primarily due to a USD 16.6 million non-cash reserve on claimed Employee Retention Credits recorded during the fourth quarter of 2022 and the recognition of USD 3.4 million related to Employee Retention Credits during the fiscal fourth quarter of 2023, partially offset by the acquisition of Smokey Bones in the fourth quarter of 2023 and higher professional fees related to certain litigation matters.
Cost of restaurant and factory revenues was related to the operations of the company-owned restaurant locations and our dough factory and increased USD 43.4 million, or 70.3 percent, in the fiscal fourth quarter of 2023 to USD 105.1 million, compared to the prior year quarter, primarily due to the acquisition of Smokey Bones in the fourth quarter of 2023.
Depreciation and amortization increased USD 3.0 million, or 42.9 percent in the fiscal fourth quarter of 2023 compared to the same fiscal period in the prior fiscal year, primarily due to the acquisition of Smokey Bones in the fourth quarter of 2023 and depreciation of new property and equipment at company-owned restaurant locations.
Re-franchising losses in the fiscal fourth quarter of 2023 and 2022 were USD 2.1 million and USD 3.1 million, respectively, and were comprised of restaurant costs and expenses, net of food sales.
Advertising expenses increased USD 2.2 million in the fiscal fourth quarter of 2023 compared to the prior fiscal year period. These expenses vary in relation to advertising revenues.
Total other expense, net for the fiscal fourth quarters of 2023 and 2022 was USD 31.9 million and USD 24.2 million, respectively, primarily comprised of net interest expense of USD 33.3 million and USD 25.6 million, respectively.
Adjusted net loss was USD 17.3 million, or USD 1.15 per diluted share, in the fiscal fourth quarter of 2023 compared to USD 43.0 million, or USD 2.70 per diluted share, in the fiscal fourth quarter of 2022.
Key Financial Definitions
New store openings: The number of new store openings reflects the number of stores opened during a particular reporting period. The total number of new stores per reporting period and the timing of stores openings has, and will continue to have, an impact on our results.
Same-store sales growth: 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 and in the FAT Brands system for at least one full fiscal year. For stores that were temporarily closed, sales in the current and prior period are adjusted accordingly. Given our focused marketing efforts and public excitement surrounding each opening, new stores often experience an initial start-up period with considerably higher than average sales volumes, which subsequently decrease to stabilized levels after three to six months. Additionally, when we acquire a brand, it may take several months to integrate fully each location of said brand into the FAT Brands platform. Thus, we do not include stores in the comparable base until they have been open and in the FAT Brands system for at least one full fiscal year.
System-wide sales growth: System wide sales growth reflects the percentage change in sales in any given fiscal period compared to the prior fiscal period for all stores in that brand only when the brand is owned by FAT Brands. Because of acquisitions, new store openings and store closures, the stores open throughout both fiscal periods being compared may be different from period to period.
