The sports bar does the highest volume in the company's portfolio, so there's motivation to grow it as fast as possible.

When FAT Brands chairman Andy Wiederhorn reflects on his company’s 2023, the first accomplishment that immediately comes to mind is the Smokey Bone’s acquisition.

While the executive is excited about a differentiated brand entering his portfolio of nearly 20 concepts, the bigger promise surrounds what the purchase means for Twin Peaks, which is arguably FAT Brands’ most precious asset. The chain’s unit count has grown 40 percent since it was acquired two years ago for $300 million. Twin Peaks ended 2023 with about 110 restaurants, and there are another 125 locations to build. That doesn’t include the roughly 40 Smokey Bone’s outlets that will be converted into Twin Peaks in the coming years. Altogether, the brand has enough committed stores to reach nearly 300 restaurants in the future.

The conversions make sense for multiple reasons, starting with development timelines. Wiederhorn notes ground-up builds can take as long as 2.5 years, but second-generation outfits only require roughly nine months. More than 75 percent of Twin Peaks restaurants are conversions from previous concepts, so it’s not an unfamiliar idea to the brand. Why Smokey Bones? A majority of the footprint isn’t close to an existing Twin Peaks restaurant. Wiederhorn looked at plenty of other brands where it made no sense to convert. One example is Bombshells, a military-themed sports bar based in Texas. The concept is reportedly looking to sell itself, but there’s a Twin Peaks unit adjacent to almost every Bombshells restaurant.

Of the 40 Smokey Bone’s locations to be converted, 10 are in corporate Twin Peaks markets (the sports bar is about 25 percent company-owned), and 20 are in franchise trade areas with an existing operator nearby. The remaining 10 are in franchise markets without a franchisee, so FAT Brands will either stretch operator territories to cover these units or expand corporate’s reach. A handful of conversions will be completed in 2024, but a larger share will be done in 2025. Wiederhorn anticipates completion of all 40 stores in two to three years.

The plan right now is to take Twin Peaks public via IPO. Wiederhorn said in November it could happen as early as Q2 or Q3, but the true timeline remains undefined. He wasn’t able to offer any updates at the ICR Conference in Orlando.

The chairman attributes Twin Peaks’ success to the brand’s unit-level economics. The chain earns $10 to $11 million in AUV thanks to a 49 percent alcohol mix and a barbell menu featuring high-priced tequilas and whiskeys and cheaper beer. That’s combined with food coming from a scratch kitchen. Wiederhorn also points out 25 percent of customers are women.

“It’s not just guys going there as you would think so,” Wiederhorn says. “It’s a female empowerment story, and when we do the IPO, we’ll probably talk to that because those girls want those jobs bad, and we never have problems finding front-of-the-house employees. Those girls make $500 to $1,000 per night. I mean, that’s a double shift, like lunch and dinner, but they can make a lot of money. And it’s like, ‘Oh, you’re working like six days a week banking the money? No, I work two days a week, three days a week. I pay my rent, I have money to drink. I’m going to school as a single mom.’ There’s all kinds of stories, but they make money. They want those jobs.”

FAT Brands loves the IPO option, but the company could be convinced to sell Twin Peaks if the other was attractive enough.

“If someone’s going to pay cash for the brand and inherit that growth, then we’ll sell it,” Wiederhorn says. “But if we can’t get that number, then we’ll just stick with the program. The big thing is we don’t have another brand in our portfolio growing by $150 million a year in value, right? You open 20 more stores, that’s a big number of incremental value, and we just don’t have another business like that. We’re better off waiting.”

The focus on Twin Peaks doesn’t mean FAT Brands is throwing Smokey Bones out the window. Twenty locations will be untouched because there’s a Twin Peaks nearby. The idea is to sell them as franchises and sign additional deals to open more restaurants.

Many of these future units could go right back into the market where Twin Peaks replaced them.

“We’re going to convert locations because they may be doing $5, $6, $7 million as Smokey Bones, but they’re capable of $10 to $11 million as Twin Peaks,” Wiederhorn says. “We should put Smokey Bone’s back in those markets because customers obviously like them if they’re doing that kind of volume. So to me it makes a lot of sense to back them. But we should just try to do it with franchisees, not with company-owned resources. I do think that there is an opportunity. We’ll see if we can. I think we can. … Who doesn’t love barbecue? Everyone loves barbecue. So let [our sales team] try to sell, let’s see how well they do.”

The motivation to boost Twin Peaks as quickly as possible is that a favorable IPO would go a long way in paying off FAT Brands’ debt. The company could also do that by continuing to grow organically and building EBITDA with hundreds of store openings per year. The third way is by adding capacity to its cookie dough and pretzel mix manufacturing facility in Atlanta—a building it took ownership of when it bought Global Franchise Group for more than $440 million in 2021. FAT Brands recently started selling cookies across its portfolio to ramp up production. Another consideration is buying a dessert concept that would fit seamlessly within the current production lines. Right now, it’s at 40 percent capacity. If the facility were to reach two-thirds capacity, it would increase the building’s value to $300 million to $400 million, and a sale would be a big help in paying down FAT Brands’ debt.

Chain Restaurants, Feature, Franchising, Growth