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FAT Brands Buys Elevation Burger But Financing Comes Slowly


The newly acquired Elevation Burger is the seventh chain under FAT Brands' umbrella.

Two key words are behind FAT Brands’ acquisition of Elevation Burger—geography and organic.

“One, we’re excited because they have a significant East Coast presence, which Fatburger does not have,” says CEO Andy Weiderhorn, with two-thirds of Elevation’s 44 U.S. stores snaking from Maine to Washington, D.C., to Pennsylvania. 

And two, Elevation Burger offers organic, free-range and grass-fed beef, which Wiederhorn plans to expand. “We think it’s a huge opportunity to introduce all the plant-based proteins and use this platform within FAT Brands as our healthy, organic direction.”

FAT Brands has had “huge success” with its Impossible burger, selling between 750,000 and 1 million of the plant-based burgers on an annualized basis; Fatburger as a whole sold 10 million burgers last year, he said.

A third word, financing, has constrained FAT Brands’ acquisition pace, which Wiederhorn said is not as fast as he’d like. “It’s been a slower build than we want, meaning we have a very, very full pipeline of brands we would like to acquire and we are having to work a little bit harder than usual on the financing side of things,” he said. “It’s important to us that we get the right capital structure.”

After a transaction failed last year, Wiederhorn said, FAT Brands borrowed $20 million from two investment funds managed by Sardar Biglari, Cracker Barrel’s largest shareholder, after Biglari sold some of his Cracker Barrel holdings. Wiederhorn called it an “expensive bridge loan,” which accrues interest at an annual fixed rate of 20 percent, but said it allowed for flexibility. Biglari’s loan to FAT Brands was used to repay its existing $16 million term loan with FB Lending. The new loan matures on June 30, 2020, according to SEC filings. 

The $10 million purchase of Elevation Burger was made with $50,000 in cash, warrants to buy 46,875 shares of FAT stock at $8 a share, and a seller’s note with a principal amount of $7.5 million at 6 percent per year and maturing in July 2026. The Biglari funds lent an additional $3.5 million to FAT in connection with the acquisition

 FAT Brands filed on June 3 a preferred stock and warrants offering seeking to raise $30 million. “I think that will be interesting to bring to the market,” Wiederhorn said, following Securities & Exchange Commission approval. Net proceeds will go to pay existing debt, and for general working capital and future acquisitions.

FAT Brands went public in October 2017, issuing 2 million shares of common stock at $12 per share. It bought Yalla Mediterranean in August 2018 and with Elevation Burgers now owns seven restaurant brands, including Fatburger, Buffalo’s Café, Buffalo’s Express, Hurricane Grill & Wings and Ponderosa and Bonanza Steakhouses that have approximately 335 locations open and 200 under development in 32 countries.

Last August RM Law filed a lawsuit against FAT Brands seeking class-action status when shares were trading for $8 per share, 25 percent lower than at the time of the IPO. The Rosen Law Firm announced an identical class-action effort in October 2018.

The lawsuit alleges FAT failed to disclose at the time of the IPO that FAT Brands’ sales growth “had significantly declined” and that FAT Brands’ free cash flow “was less than its annual $5 million dividend obligations,” among other claims. 

The court hearing the case recently granted a motion to dismiss the suit but said the plaintiffs could amend the complaint by this August, which they are planning to do, according to attorney Richard Maniskas of RM Law. 

Last May Seeking Alpha listed five reasons to be “extremely cautious” with FAT Brands stock, including that its “lack of financial flexibility does not bode well” for its corporate strategy of both pursuing acquisitions and paying out high dividends, and noting FAT has so far been unable to get loans at attractive rates.

FAT Brands reported $18.36 million in revenue for 2018, up from $2.17  million in 2017. Its net loss was $1.79 million in 2018, up from $613,000 the year before. Cash balance was $653,000 at the end of 2018, up from $32,000 the prior year.

Wiederhorn said he believes the Elevation Burger purchase will prove to investors the wisdom of his strategy, to purchase multiple brands in as many restaurant segments as possible and integrate them under the FAT umbrella. “Investors want to see us get the synergies of getting the brands onto our platform. This is our seventh core brand with the acquisition of Elevation,” he said. “We’ve proven that integrating the brands onto our platform has worked and we’re getting the synergies.”




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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at




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