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FAT Brands’ boss fights for redemption, in our Deal of the Year


Andy Wiederhorn

Andy Wiederhorn, CEO of FAT Brands, clowns around with Fritz, his two-year-old German Shepherd, who regularly holds court in Fatburger’s Beverly Hills offices. Photos by Scott Witter

Andy Wiederhorn, CEO of FAT Brands, owner of Fatburger and Buffalo’s Cafe, had two of the usual strikes against him when he decided to take his company public. First, there wasn’t an appetite for restaurant companies on Wall Street—the last restaurant company before FAT to go public was in 2015. Second, investment bankers “thought we were too small.”

But the third strike was unique to Wiederhorn, the 52-year-old entrepreneur who made his first fortune buying and selling portfolios of foreclosed real estate back in the 1990s and racking up a $140 million fortune by age 32. “Me and my background,” was the problem. “It was doors slammed in my face left and right,” he said.

That background includes 14 months in federal prison in 2004 and 2005 after he pleaded guilty to two felony counts, for paying an illegal gratuity to a pension fund manager and for filing a false tax return.

Then the board of his company, called FogCutter Capital and the owner of Fatburger, agreed to pay him $4.6 million, which more than covered his $2 million government fine and his salary while he was in jail, violating federal rules and resulting in his company being delisted from Nasdaq.

Wiederhorn maintains to this day he was the victim of bad legal guidance, saying the law firm that advised him had to pay out malpractice claims, and over-zealous prosecutors. “It was the Enron era, and they were prosecuting executives for anything,” he declares in a boardroom at his Beverly Hills headquarters. “We bought Fatburger in 2003, then the government is knocking,” investigating “$150 million out of $300 billion in investments” by a pension fund manager, he recalls, scoffing at what he views as making much out of little. “We thought we had nothing to worry about. I spent five years and $7 million on defense lawyers. It was a really difficult decision” to plead guilty. “In every way possible it was the craziest thing that ever happened to me.”


When he tried to do a traditional IPO with FAT Brands, he understands why he was too hot to touch. If investment bankers have 10 deals on their desk and only one involves a convicted felon as CEO—he doesn’t have to finish that sentence to explain why his deal had no traditional takers.

So he turned to a new type of initial public offering called the Regulation A+ or mini-IPO, an offering under $50 million in which companies can market directly to individual shareholders, bypassing institutional investors and requiring far less lengthy paperwork and disclosures.

It’s a type of offering written into law in the 2015 JOBS Act, in which companies can fund a venture like they might through Kickstarter, but in this case investors hold real shares. FAT Brands is the first franchise brand to try one, raising $24 million and then buying the parent company of Ponderosa and Bonanaza for $10.5 million, and Hurricane Grill & Wings for $12.5 million.

“This is the third company I’ve taken public. The first two were super easy. This was the hardest I’ve done,” he said. Being back on the public market feels fine. “To some extent it’s a vindication. It’s a checkmark” showing a hurdle has been crossed. Wiederhorn must disclose his background on franchise disclosure documents and he’s scrupulous about doing so. If franchisees and shareholders can get past his past, why not everyone?

“There’s some amount of wanting to prove that this business model and plan and story is real, is validated,” he says about the new plan, in which FogCutter Capital, his family office, holds 80 percent of FAT Brands’ 10 million shares and public shareholders own 20 percent. In the future, he plans additional offerings of common or preferred shares to fuel further acquisitions.

“I have four of my six kids working here. As we’ve built the company, I want this platform to be in the position to grow over the long haul. I wanted to structure it as a vehicle to grow.”

And Wiederhorn, who at age 13 started working for the man who would become his father-in-law and vowed he would never be in the restaurant business, finds himself at the helm of a growing restaurant holding company that went public at $12 a share last October and was trading in early March at $7.30. This time around, he wants to build something that won’t vanish in scandal.

FAT Brands offices are on Wilshire Boulevard in beautiful Beverly Hills, where every other storefront is a high-end retailer and impeccable Maseratis and Porsches tool around town as the palm trees stand watch. On this February day, the day after the Presidents’ Day holiday, Wiederhorn has sprayed his office to cover up what he says is Fritz’s smell—they’d spent the weekend at the beachhouse, and his 2-year-old German Shepherd has the aroma to prove it.

Andy Wiederhorn

“Most people should not be entrepreneurs. Why put yourself through it?” Wiederhorn says.

It’s a big day for FAT Brands for a couple of reasons—the Impossible Burger just launched in all of their locations, putting the super-popular meatless burger in the hands of the masses, and generating the usual raving fans and occasional hater on social media. Also, the new president and COO of Fatburger, Toni Bianco, is in town, taking the spot of Don Berchtold, Wiederhorn’s ex-father-in-law.

Wiederhorn started working for Berchtold when he was 13, and was married for 30 years to Berchtold’s daughter, Tiffany, divorcing four years ago. They have six children, four who work in the company. Berchtold was great in his role, Wiederhorn said, but at 72 was considered by shareholders to need a younger replacement.

Wiederhorn lays out a several-part strategy for his new acquisitions. First, the idea is to cross-sell the brands to franchisees already established around the world—at the time of the offering, there were 154 Fatburger stores in five states and 18 countries, and 19 Buffalo’s Cafe plus 68 Buffalo’s Express, co-branded with Fatburger. “It gives the franchisee the ability to grow their business to be a multi-brand operator and only have one franchisor to deal with. We have leverage in our scale. It’s easy to support them,” he said.

Second, Berchtold is going to head up an initiative to create a fast-casual version of Ponderosa, and Wiederhorn believes both Ponderosa and Bonanza, with 96 and 19 restaurants, respectively,  have plenty of nostalgia and brand awareness. Hurricane Grill has 55 stores.

Third, he plans to implement delivery in casual dining domestically. “We’re finalizing the packaging. We’re rolling out in the spring,” he said about that option, and he’s a believer. “The trend that you see in fast-casual will translate to casual if the operators can execute.”

Fatburger itself has already emerged from its own crucible, when Wiederhorn took the parent company that owned corporate stores through Chapter 11 bankruptcy and sold the stores to franchisees, emerging from the ordeal in 2011.

On the corporate level, he said, his idea is to continue to acquire franchise brands, those in the 50- to 300-unit range that can struggle to attract equity. “If we acquire those brands, all that infrastructure cost goes away,” he said. He envisions buying a chicken brand, for example, a pizza brand, a sandwich brand, a coffee brand over time.

Five years from now, Wiederhorn says, “I would be disappointed if our market capitalization wasn’t $500- to $700 million,” he said, up from $100 million now. “It’s achievable with just a few more acquisitions. We’re a micro-cap now—it’s hard to get enough visibility” at the current size.

Wiederhorn’s early days in high finance were far different than today’s daily grind in the restaurant business. He grew up in Portland, Oregon, and started his business, Wilshire Capital, out of college when the FDIC was taking over failing savings and loans and banks. He would buy up pools of bad loans, a pioneering move in its day, and when a former professor went to work on Wall Street as a hedge fund manager, he made a connection for Wiederhorn with Eli Broad, the billionaire Los Angeles-based founder of SunAmerica.

Those were heady days. “I was 24 years old and was introduced to Eli Broad,” Wiederhorn recalls. His contact said, “Every new idea has to go through Eli. You’re on his calendar from 1:20 to 1:30.” When they got to the appointment, Broad said he didn’t like investment bankers, so his business partner had to sit in the hallway. Wiederhorn presented his piece of paper, outlining all the deals he’d done, and Broad went line by line, asking detailed question after detailed question. “Afterward I said, ‘This cranky old guy just beat the crap out of me for 20 minutes.’ That was the worst meeting ever,” Wiederhorn said.


But his partner said: “You were on the calendar for 10 minutes and he gave you 20. We’re in!” Broad invested $300 million with them and they were off, in the business of buying pools of loans, selling them to investors and then forming a company to service them. In 1996 Wilshire Financial Services went public, and in 1998 they took public a related company, FogCutter Capital Services.

By 1998, Wilshire was doing business in the United States and Europe when that era’s global economic crisis hit. “Wall Street panicked and called the credit lines overnight” of dozens of loan companies, including Wilshire, he recalled, leading to the firm’s collapse. “I was very young and didn’t realize Wall Street is a fair-weather friend.” In 1999, he defaulted on loans worth $160 million he had taken with Capital Consultants, a Portland pension fund adviser for union employees that turned out to be a Ponzi scheme.

Meanwhile, he was running the FogCutter business, and started making small private equity investments, buying Fatburger in 2003 and then just a year later pleading guilty to two felony counts. When he went to prison, he started at a minimum security facility, a so-called country club prison like those Michael Milken made famous. “They weren’t as posh as when Milken was there,” he says with a laugh.

Wiederhorn is a diabetic and his lawyer petitioned for a specific kind of medication, but authorities would not agree to dispense that medication in a minimum-security prison. “They moved me to a maximum security prison in Minnesota” for the last five months of the sentence, he said.

When he got out, he was a pariah in the tony circles he had enjoyed before in Portland. One union official in Portland put it this way,  after Wiederhorn put his $6.8 million Portland mansion for sale in a foreclosure auction. “To be able to ruin workers’ lives and then move down to L.A. to run a company and live in a very nice house is unbelievable,” Tom Chamberlain, president of the AFL-CIO of Oregon, told Willamette Week in a 2014 article. “It’s a shining example of what’s wrong with our criminal justice system and our economy.”

Figuring people in the real estate and finance market “might turn their back on me,” Wiederhorn decided to focus on Fatburger. “The restaurant industry for sure is made up of a bunch of characters. It hasn’t affected me in the general restaurant industry,” he said about his background. “I swore I would never be in this business and here I am,” he said, but in one way it’s a solace. “I thought it would be more forgiving. When you’re selling burgers, shakes and fries they don’t care.”

Wiederhorn doesn’t express remorse or accept the blame for anything. Several times, he likens the conviction and prison time to something that happened to him that was out of his control. “Things happen in life. You have two choices. You can curl up in a ball or you can get off the canvas and back into the ring.”

He shares that he’s an Eagle Scout and so are some of his children. His father died when he was 9 years old of lung cancer, so he made his own way up. “Most people shouldn’t be entrepreneurs. Why put yourself through it?” he said. “Having the tenacity to dig through it—the alternative is not attractive.”

Again, he states that no one can control everything that happens. “If the doctor tells you you have cancer, you can’t say, ‘I don’t want this.’ When the government prosecuted me, it’s like getting hit by the bus. You try not to put yourself in that position again.”

Asked if he is bitter, he shrugs. “It is what it is. What can you do about it? It’s not about coulda, woulda, shoulda. Sometimes when a tsunami comes in and you can’t get out of the way, all you can do is find something to hold onto.”

As for running a public company again, and trying to build it into a considerable enterprise after his first fortune was made and then lost, he’s determined. “The title of my book will be, ‘You should never have to make $100 million twice in your life.’ It happened.” The second time around, he vows to make his good fortune last.

About this project

Franchise Times Dealmakers is an editorial project and awards event designed to highlight excellence in buying and selling franchise companies to drive sustainable growth. Franchise Times calls for nominations the fourth quarter of each year, and presents the finalists to a panel of judges. The award winners are featured in the April issue of Franchise Times and will be honored at an awards luncheon in May. Nominations for next year’s project open October 1 at www.franchisetimes.com.

About the judges

We thank the Franchise Times Dealmakers judges, invited to serve because of their expertise in franchise finance, who evaluated nominations and helped to select winners.

Dealmakers judges

Left to Right: Rich Greenstein, DLA Piper; Jeff Hoffmann, Fifth Third Bank; Charles Yorke, Paragon Bank; Mark Kirsch, Gray Plant Mooty; Kevin Lane, Deloitte; Kay Ainsley, MSA; Lori Christensen, Wintrust Franchise Finance; Mike Elliott, Peak Franchise Capital


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