A deep look at Fat Brands’ financial problems

The owner of Fatburger faces bankruptcy over $1.4 billion in outstanding debt. | Photo: Shutterstock.

In early November, the trustee overseeing Fat Brands’ whole business securitization financing facilities demanded full payment on nearly $1.3 billion in debt. This came after the company didn’t have enough available funds to make a quarterly payment on the bonds accounting for that debt. 

But the owner of Fazoli’s, Fatburger and several other chains has shown signs of financial challenges long before that, including missed payments to vendors and other problems. These financial challenges could force the Beverly Hills, California-based company into bankruptcy.  

We looked at legal documents, public filings and comments, our own previous reports and those from other media outlets, to provide a picture of the company’s precarious financial position. Let’s sort everything out. 

Complexities and controversy

Andy Wiederhorn, the chairman and CEO of Fat Brands, has a long history we won’t get into, other than to note that he spent 14 months in federal prison in 2004 and 2005. His Fog Cutter Capital Group owned Fatburger. He bought Buffalo’s Café in 2011, then Ponderosa and Bonanza in 2017, using the chains to form Fat Brands.

The company went public that year in a so-called mini-IPO, and over the next couple of years bought chains mostly on the budget rack, often using creative financing to do so. Indeed, Wiederhorn plays the financial markets a lot like Harry Houdini does magic: He routinely seems close to perishing, only to escape unscathed at the last minute. 

Wiederhorn notably in 2019 received a $20 million, short-term loan from Sardar Biglari that carried an effective interest rate of 20%. 

Fat Brands’ finances were struggling badly enough that, on the company’s annual report in 2020, auditors issued a “going concern” warning about the future of the business. But that year, the company merged with Wiederhorn’s Fog Cutter Capital Group, which had just one asset: net operating loss carryforwards, which enabled Fat Brands to save on its tax bill in future years.

After that, Fat Brands went from needing short-term, high-interest loans and buying brands for a few million dollars to buying up far bigger companies. The company made a series of aggressive acquisitions in 2020 and 2021 for about $900 million: Johnny Rockets, Fazoli’s, Twin Peaks and the brand collector Global Franchise Group for about $900 million.

Fat Brands did this using a series of whole business securitization financing instruments, which use future revenue streams to guarantee bonds. 

The company is a complex maze of operating businesses and shell companies. Fat Brands is comprised of at least 42 different legal subsidiaries. The Wiederhorn family and other company insiders control about three-quarters of Fat Brands’ stock, making it a controlled company. In 2023, Fat Brands fired its board of directors and replaced it mostly with family members and other insiders.

Fat Brands spun off Twin Peaks in an IPO early this year, though it remains the casual-dining chain’s controlling shareholder. 

The U.S. Department of Justice in 2024 charged Wiederhorn in a $47 million loan scheme, in which Fat Brands would forgive millions in loans made to members of the family. Those charges were dropped earlier this year, a move that Wiederhorn praised. The attorney handling that case, however, blamed his firing on his prosecution of Wiederhorn, who has donated to President Trump and GOP candidates since 2019.

There are other controversies. One of the buyers of Fat Brands bonds was 352 Capital, whose backer was Jefferies’ Leucadia Asset Management. Jordan Chirico, 352’s portfolio manager, in 2024 was named head of debt capital markets for Fat Brands. He had to step down two weeks later after he was accused of fraud related to his use of the fund.

Weakening sales and profits

Fat Brands’ sales and profits have deteriorated over the past two years. 

Fat Brands does not break out sales results by its different restaurant chains. But the company’s collective same-store sales have declined for eight straight quarters. The company reported an operating loss for the first nine months of 2025 of $41.5 million. Interest expense on its debt on its own totaled more than $100 million in the first nine months. By comparison, Fat Brands took in $66 million in royalties.

Twin Peaks isn’t in much better shape. It has lost $26 million in the first nine months of 2025. Its same-store sales have fallen for four straight quarters. 

In early November, Wiederhorn acknowledged the company was negotiating a debt restructuring. He also said the company was planning to raise equity through Twin Peaks, presumably through a secondary IPO. He said the end of the legal challenges should save the company “at least $30 million a year” in legal costs and noted that the company had suspended its dividend, though it paid $2.3 million in dividends on preferred shares.

Later in the month, however, the company received the first of its two acceleration notices. UMB Bank, the trustee overseeing its securitized financing, was unable to pay bondholders because Fat Brands did not have enough money in its accounts to cover the payment. The total amount due to bondholders: $1.415 billion.

Fat Brands doesn’t have that kind of cash. The lenders have the right to foreclose on the company over the debt. “Any subsequent foreclosure may materially and adversely affect the company’s business, financial condition and liquidity and could cause the company and/or its subsidiaries to reorganize through a bankruptcy proceeding,” the filing says. 

Bond trades

Fat Brands’ various controversies have led to various lawsuits from shareholders, including a pair of derivative lawsuits out of Delaware that were recently settled for $10 million. There’s also a federal class action out of California originally filed last year that’s still ongoing.

Earlier this month, another shareholder named Kevin Gordon sued Fat Brands, seeking access to the company’s books while accusing the restaurant chain operator of using short-term financing to mask a liquidity crisis. 

That lawsuit appears to be an outgrowth of a failed deal this year between Fat Brands and the company Gordon works with, Alagna Advisors, an investment advisory company that has been a buyer of various Fat Brands bonds. 

In July, Fat Brands sued Alagna. Fat Brands in its complaint said that the two companies agreed to swap bonds. Fat Brands would buy $6.4 million worth of Twin Peaks bonds from Alagna, and Alagna would buy the same amount of Fazoli’s bonds held by Fat Brands. 

Fat Brands said it wired $6.4 million to Alagna for the Twin Peaks bonds, but that Alagna did not keep up its end of the bargain. A Fat Brands spokesperson called Gordon’s shareholder lawsuit a “side show” and said that it is Alagna that has the liquidity crisis.

“They are trying to create a books and records side show as a shareholder with $1,650 of stock ownership,” the spokesperson said over email. “They claimed they had investor redemptions and needed the money for that reason. They are clearly in a liquidity crisis.”

Yet even that lawsuit suggested that Fat Brands had some cash problems of its own: In sending $6.4 million to Alagna, without the advisor’s return bond purchase, Fat Brands’ bank placed it into an “overdraft position” and charged the company 3% interest until it recovered the funds, according to the lawsuit.

Gordon’s lawsuit says that Fat Brands used these types of bond trades as a form of short-term financing to hide its liquidity crisis, saying that it would buy bonds from an investor and agree to buy them back later at a higher price. The lawsuit says Alagna bought $16 million of bonds from Fat Brands in February and then refused to buy them back, citing its own liquidity needs. It also says that Fat Brands made two other such deals with different investors worth another $14 million total.

Fat Brands has not responded to that issue specifically. And the bond trade it refers to in its own lawsuit would have netted the company just $600.

Merchant cash advances

The Gordon lawsuit accuses Fat Brands of another form of short-term financing: Merchant cash advances, or MCAs.

MCAs are a particularly costly form of short-term financing. The MCA provider sends the borrower a lump sum and then deducts the payment directly from their bank. 

They’re common among small companies in need of short-term cash but are dangerous because they carry interest rates of 40% to as much as 200%. Funds are paid weekly, which can worsen financial challenges. Use of such financing pushed a Del Taco franchisee into bankruptcy in July, for instance. 

Gordon’s lawsuit accuses Fat Brands of taking out as much as $15 million worth of MCAs.

When we asked Fat Brands about such financing, the spokesperson noted that, “None of our franchise brands have outstanding merchant cash advance loans. We use many types of financings from time to time, like securitizations, term loans, restaurant equipment loans or leases, sale-leasebacks for corporate real estate, etc. Some of the same lenders and investors are also in the merchant cash advance business.”

Yet Smokey Bones, the barbecue chain Fat Brands bought in 2023, did take out at least three MCA financing arrangements totaling $6.15 million. That’s according to a lawsuit that Barbecue Integrated Inc. (BII), the subsidiary that technically operates Smokey Bones, filed against an MCA company called Funders App, also known as Fundonatic. 

BII took out three such advances between May and July, according to the lawsuit. Funders App was to receive $8.91 million from those loans through weekly payments over 140- to 160-day periods. The effective, annualized interest rates for those loans was more than 100% on average. At least $1.5 million of the $6 million Fat Brands was to receive was used to pay off the first cash advance. And Funders App charged the operator a fee to do so, according to the lawsuit.

BII made $1.8 million in payments to Funders App before it missed a payment in late July. At the same time, however, BII’s sales were falling because the company was closing Smokey Bones locations. Weekly sales fell by nearly a third between June and September. 

Fat Brands took Funders App to court, accusing it of “loan sharking,” and won a temporary restraining order against the provider. The two sides then reached a settlement and the lawsuit was dismissed. 

When we asked about the Smokey Bones MCAs, the Fat Brands spokesperson said, “That was the only restaurant brand of ours that used a small MCA facility” and then referred again to the Alagna lawsuit. 

“If you are going to say that every restaurant company in America that borrows money from someone other than a bank has liquidity problems you better make an awfully long list,” they said. “That is not what this is about. We were defrauded in a securities trade.”

Franchising controversies

Fat Brands’ financial problems don’t appear to be leaving their franchised brands, or their franchisees, unscathed. Most of the company’s chains are franchises.

In February, we reported that Fat Brands was sued in a Florida state court by some franchisees of the company’s Hurricane Grill and Wings brand, accusing it of raiding their marketing fund. They said that the company’s marketing staff was “understaffed, underperforming and/or not performing.” 

Franchisees of Round Table Pizza accused its franchisor of “intentional mismanagement” of the company’s marketing fund. The franchisor missed payments to a marketing vendor that places the chain’s television ads, leaving the company without that advertising for months. Google search ads also stopped between late March and late August. 

Franchisees told us that the loss of ads led to a drop in sales over the summer. 

Round Table franchisees also complained that another Fat Brands subsidiary, a company called Enliven, that collected rebates from Pepsi, the pizza chain’s beverage provider, that are to paid quarterly to franchisees. Round Table franchisees allege that they have not received their rebates since 2023. 

Where all this ultimately goes remains to be seen. Fat Brands is apparently working on its plan to avoid bankruptcy and renegotiate its debt.

Twin Peaks filed last month to sell up to 10 million shares of stock at between $3 and $4 per share, or up to $40 million. But the company’s shares closed at $1.63 the day it was filed. Twin Peaks’ shares trade at less than 60 cents as of Monday. The casual-dining chain’s shares are down 95% since that IPO spinoff. Fat Brands’ stock is down 94%.

The first risk factor in the filing cites the debt problem and the ongoing losses at the company in noting that, “There is substantial doubt about our ability to continue as a going concern.”

On Fat Brands’ last earnings call, Wiederhorn said that he hoped to resolve the debt restructuring during the current quarter, which is over in less than 10 days. If the financial magician escapes this one, it’ll be his biggest feat yet.

Restaurant Business Editor-in-Chief Jonathan Maze is a longtime industry journalist who writes about restaurant finance, mergers and acquisitions and the economy, with a particular focus on quick-service restaurants.

View All Articles by This Author