FAT Brands takes Reg A+ IPO to NASDAQ

Overall, 2017 has been a tough year for restaurant stocks. While traditional sit-down restaurant stocks are down, QSRs that have long-term staying-power are highly franchised, adaptive to current consumer trends, and carry extensive brand loyalty. One company listing today, FAT Brands (FAT), fits the above criteria and has the potential to stick around for the long haul.

Who is FAT Brands?

  • A leading multi-brand restaurant franchising company behind Fatburger, Buffalo’s, and Buffalo’s Express.
  • The company recently made headlines for taking the road less travelled to go public using a little-known rule called Regulation A+.
  • Their IPO became fully subscribed in less than two weeks by selling all 2,000,000 shares at $12 per share to accredited and nonaccredited investors alike.

What Makes FAT Brands Poised for Success?

Growth Strategy

While it’s important for companies to exercise caution when expanding, FAT Brands seems to have nailed down the recipe for expansion and acquisition:

  • The company’s current footprint spans across 18 countries with 200 locations
  • FAT Brands recently added 120 new stores to the company’s diverse portfolio with the $10.5 million acquisition of Ponderosa Steakhouse and Bonanza Steakhouse.
  • The management team has over 200 years of combined restaurant experience.
  • FAT Brands achieved compound annual growth rates of 9.9% Net Revenue, 40.0% Net Income and 35.3% EBITDA, and the company’s EBITDA margin overall has expanded from 27.2% to 64.3%.

Franchisor Model

The franchiser model seems to be the most cost-effective. The decision eliminates operating risks, labor costs, real estate costs, etc. Even McDonald’s is gaining traction with their announcement that they are in the process of refranchising upwards of 4,000 locations. FAT Brands operates on a similar asset-light franchisor model. In fact, almost all of FAT Brands’ locations are franchised, driving strong profit margins and an attractive free cash flow. The company plans to offer investors a 4% annualized dividend paid out quarterly.

Adapting to Current Trends

In today’s multimedia landscape, consumers are becoming more and more accustomed to the online world. It’s survival of the fittest and the big chains are learning to adapt fast with customized ordering and payment apps.

  • Fat Brands has partnered with modern day delivery services such as UberEats and Postmates as well as other streamlined services and products made to reach a wide array of consumers.
  • The company also has created its own native ordering and payment app.
  • On the service front, the chain has added “The Impossible Burger,” a plant-based burger from Impossible Foods to reach a new and growing consumer base looking for healthier and fresh options outside of the standard beef burgers.

Final Notes

Although FAT Brands definitely has a lot going for it, it’s too soon to tell how it will fair against other industry leaders. It’s important to exercise due diligence when identifying the strongest companies, but a good place to start is by comparing them to those leading the pack. After all, large chains represent half of the best-performing restaurant stocks on Wall Street.

Modest Money is compensated by CrowdfundX on behalf of FAT Brands, Inc. for publicizing the offering of FAT Brands, Inc.’s securities. The total fees to be paid to Modest Money for its services are $350, payable in cash.