The proprietor of Fatburger faces chapter over $1.4 billion in excellent debt. | Photograph: Shutterstock.
In early November, the trustee overseeing Fats Manufacturers’ complete enterprise securitization financing amenities demanded full cost on almost $1.3 billion in debt. This got here after the corporate didn’t have sufficient obtainable funds to make a quarterly cost on the bonds accounting for that debt.
However the proprietor of Fazoli’s, Fatburger and several other different chains has proven indicators of monetary challenges lengthy earlier than that, together with missed funds to distributors and different issues. These monetary challenges may power the Beverly Hills, California-based firm into chapter 11.
We checked out authorized paperwork, public filings and feedback, our personal earlier experiences and people from different media retailers, to offer an image of the corporate’s precarious monetary place. Let’s type every little thing out.
Complexities and controversy
Andy Wiederhorn, the chairman and CEO of Fats Manufacturers, has a protracted historical past we received’t get into, apart from to notice that he spent 14 months in federal jail in 2004 and 2005. His Fog Cutter Capital Group owned Fatburger. He purchased Buffalo’s Café in 2011, then Ponderosa and Bonanza in 2017, utilizing the chains to type Fats Manufacturers.
The corporate went public that 12 months in a so-called mini-IPO, and over the following couple of years purchased chains totally on the finances rack, typically utilizing inventive financing to take action. Certainly, Wiederhorn performs the monetary markets quite a bit like Harry Houdini does magic: He routinely appears near perishing, solely to flee unscathed on the final minute.
Wiederhorn notably in 2019 acquired a $20 million, short-term mortgage from Sardar Biglari that carried an efficient rate of interest of 20%.
Fats Manufacturers’ funds had been struggling badly sufficient that, on the corporate’s annual report in 2020, auditors issued a “going concern” warning about the way forward for the enterprise. However that 12 months, the corporate merged with Wiederhorn’s Fog Cutter Capital Group, which had only one asset: web working loss carryforwards, which enabled Fats Manufacturers to save lots of on its tax invoice in future years.
After that, Fats Manufacturers went from needing short-term, high-interest loans and shopping for manufacturers for just a few million {dollars} to purchasing up far larger firms. The corporate made a sequence of aggressive acquisitions in 2020 and 2021 for about $900 million: Johnny Rockets, Fazoli’s, Twin Peaks and the model collector International Franchise Group for about $900 million.
Fats Manufacturers did this utilizing a sequence of complete enterprise securitization financing devices, which use future income streams to ensure bonds.
The corporate is a posh maze of working companies and shell firms. Fats Manufacturers is comprised of a minimum of 42 completely different authorized subsidiaries. The Wiederhorn household and different firm insiders management about three-quarters of Fats Manufacturers’ inventory, making it a managed firm. In 2023, Fats Manufacturers fired its board of administrators and changed it largely with relations and different insiders.
Fats Manufacturers spun off Twin Peaks in an IPO early this 12 months, although it stays the casual-dining chain’s controlling shareholder.
The U.S. Division of Justice in 2024 charged Wiederhorn in a $47 million mortgage scheme, wherein Fats Manufacturers would forgive tens of millions in loans made to family members. These expenses had been dropped earlier this 12 months, a transfer that Wiederhorn praised. The legal professional dealing with that case, nevertheless, blamed his firing on his prosecution of Wiederhorn, who has donated to President Trump and GOP candidates since 2019.
There are different controversies. One of many patrons of Fats Manufacturers bonds was 352 Capital, whose backer was Jefferies’ Leucadia Asset Administration. Jordan Chirico, 352’s portfolio supervisor, in 2024 was named head of debt capital markets for Fats Manufacturers. He needed to step down two weeks later after he was accused of fraud associated to his use of the fund.
Weakening gross sales and income
Fats Manufacturers’ gross sales and income have deteriorated over the previous two years.
Fats Manufacturers doesn’t get away gross sales outcomes by its completely different restaurant chains. However the firm’s collective same-store gross sales have declined for eight straight quarters. The corporate reported an working loss for the primary 9 months of 2025 of $41.5 million. Curiosity expense on its debt by itself totaled greater than $100 million within the first 9 months. By comparability, Fats Manufacturers took in $66 million in royalties.
Twin Peaks isn’t in significantly better form. It has misplaced $26 million within the first 9 months of 2025. Its same-store gross sales have fallen for 4 straight quarters.
In early November, Wiederhorn acknowledged the corporate was negotiating a debt restructuring. He additionally stated the corporate was planning to lift fairness by means of Twin Peaks, presumably by means of a secondary IPO. He stated the tip of the authorized challenges ought to save the corporate “a minimum of $30 million a 12 months” in authorized prices and famous that the corporate had suspended its dividend, although it paid $2.3 million in dividends on most well-liked shares.
Later within the month, nevertheless, the corporate acquired the primary of its two acceleration notices. UMB Financial institution, the trustee overseeing its securitized financing, was unable to pay bondholders as a result of Fats Manufacturers didn’t find the money for in its accounts to cowl the cost. The overall quantity on account of bondholders: $1.415 billion.
Fats Manufacturers doesn’t have that form of money. The lenders have the proper to foreclose on the corporate over the debt. “Any subsequent foreclosures might materially and adversely have an effect on the corporate’s enterprise, monetary situation and liquidity and will trigger the corporate and/or its subsidiaries to reorganize by means of a chapter continuing,” the submitting says.
Bond trades
Fats Manufacturers’ varied controversies have led to numerous lawsuits from shareholders, together with a pair of by-product lawsuits out of Delaware that had been just lately settled for $10 million. There’s additionally a federal class motion out of California initially filed final 12 months that’s nonetheless ongoing.
Earlier this month, one other shareholder named Kevin Gordon sued Fats Manufacturers, looking for entry to the corporate’s books whereas accusing the restaurant chain operator of utilizing short-term financing to masks a liquidity disaster.
That lawsuit seems to be an outgrowth of a failed deal this 12 months between Fats Manufacturers and the corporate Gordon works with, Alagna Advisors, an funding advisory firm that has been a purchaser of assorted Fats Manufacturers bonds.
In July, Fats Manufacturers sued Alagna. Fats Manufacturers in its criticism stated that the 2 firms agreed to swap bonds. Fats Manufacturers would purchase $6.4 million value of Twin Peaks bonds from Alagna, and Alagna would purchase the identical quantity of Fazoli’s bonds held by Fats Manufacturers.
Fats Manufacturers stated it wired $6.4 million to Alagna for the Twin Peaks bonds, however that Alagna didn’t sustain its finish of the cut price. A Fats Manufacturers spokesperson known as Gordon’s shareholder lawsuit a “aspect present” and stated that it’s Alagna that has the liquidity disaster.
“They’re making an attempt to create a books and data aspect present as a shareholder with $1,650 of inventory possession,” the spokesperson stated over electronic mail. “They claimed they’d investor redemptions and wanted the cash for that cause. They’re clearly in a liquidity disaster.”
But even that lawsuit recommended that Fats Manufacturers had some money issues of its personal: In sending $6.4 million to Alagna, with out the advisor’s return bond buy, Fats Manufacturers’ financial institution positioned it into an “overdraft place” and charged the corporate 3% curiosity till it recovered the funds, based on the lawsuit.
Gordon’s lawsuit says that Fats Manufacturers used some of these bond trades as a type of short-term financing to cover its liquidity disaster, saying that it might purchase bonds from an investor and agree to purchase them again later at a better value. The lawsuit says Alagna purchased $16 million of bonds from Fats Manufacturers in February after which refused to purchase them again, citing its personal liquidity wants. It additionally says that Fats Manufacturers made two different such offers with completely different traders value one other $14 million whole.
Fats Manufacturers has not responded to that challenge particularly. And the bond commerce it refers to in its personal lawsuit would have netted the corporate simply $600.
Service provider money advances
The Gordon lawsuit accuses Fats Manufacturers of one other type of short-term financing: Service provider money advances, or MCAs.
MCAs are a very expensive type of short-term financing. The MCA supplier sends the borrower a lump sum after which deducts the cost instantly from their financial institution.
They’re frequent amongst small firms in want of short-term money however are harmful as a result of they carry rates of interest of 40% to as a lot as 200%. Funds are paid weekly, which might worsen monetary challenges. Use of such financing pushed a Del Taco franchisee into chapter 11 in July, as an example.
Gordon’s lawsuit accuses Fats Manufacturers of taking out as a lot as $15 million value of MCAs.
Once we requested Fats Manufacturers about such financing, the spokesperson famous that, “None of our franchise manufacturers have excellent service provider money advance loans. We use many sorts of financings now and again, like securitizations, time period loans, restaurant gear loans or leases, sale-leasebacks for company actual property, and so forth. A few of the identical lenders and traders are additionally within the service provider money advance enterprise.”
But Smokey Bones, the barbecue chain Fats Manufacturers purchased in 2023, did take out a minimum of three MCA financing preparations totaling $6.15 million. That’s based on a lawsuit that Barbecue Built-in Inc. (BII), the subsidiary that technically operates Smokey Bones, filed towards an MCA firm known as Funders App, also called Fundonatic.
BII took out three such advances between Could and July, based on the lawsuit. Funders App was to obtain $8.91 million from these loans by means of weekly funds over 140- to 160-day intervals. The efficient, annualized rates of interest for these loans was greater than 100% on common. At the least $1.5 million of the $6 million Fats Manufacturers was to obtain was used to repay the primary money advance. And Funders App charged the operator a payment to take action, based on the lawsuit.
BII made $1.8 million in funds to Funders App earlier than it missed a cost in late July. On the identical time, nevertheless, BII’s gross sales had been falling as a result of the corporate was closing Smokey Bones areas. Weekly gross sales fell by almost a 3rd between June and September.
Fats Manufacturers took Funders App to court docket, accusing it of “mortgage sharking,” and received a short lived restraining order towards the supplier. The 2 sides then reached a settlement and the lawsuit was dismissed.
Once we requested in regards to the Smokey Bones MCAs, the Fats Manufacturers spokesperson stated, “That was the one restaurant model of ours that used a small MCA facility” after which referred once more to the Alagna lawsuit.
“If you will say that each restaurant firm in America that borrows cash from somebody apart from a financial institution has liquidity issues you higher make an awfully lengthy checklist,” they stated. “That isn’t what that is about. We had been defrauded in a securities commerce.”
Franchising controversies
Fats Manufacturers’ monetary issues don’t seem like leaving their franchised manufacturers, or their franchisees, unscathed. A lot of the firm’s chains are franchises.
In February, we reported that Fats Manufacturers was sued in a Florida state court docket by some franchisees of the corporate’s Hurricane Grill and Wings model, accusing it of raiding their advertising fund. They stated that the corporate’s advertising employees was “understaffed, underperforming and/or not performing.”
Franchisees of Spherical Desk Pizza accused its franchisor of “intentional mismanagement” of the corporate’s advertising fund. The franchisor missed funds to a advertising vendor that locations the chain’s tv advertisements, leaving the corporate with out that promoting for months. Google search advertisements additionally stopped between late March and late August.
Franchisees advised us that the lack of advertisements led to a drop in gross sales over the summer season.
Spherical Desk franchisees additionally complained that one other Fats Manufacturers subsidiary, an organization known as Enliven, that collected rebates from Pepsi, the pizza chain’s beverage supplier, which can be to paid quarterly to franchisees. Spherical Desk franchisees allege that they haven’t acquired their rebates since 2023.
The place all this in the end goes stays to be seen. Fats Manufacturers is outwardly engaged on its plan to keep away from chapter and renegotiate its debt.
Twin Peaks filed final month to promote as much as 10 million shares of inventory at between $3 and $4 per share, or as much as $40 million. However the firm’s shares closed at $1.63 the day it was filed. Twin Peaks’ shares commerce at lower than 60 cents as of Monday. The casual-dining chain’s shares are down 95% since that IPO spinoff. Fats Manufacturers’ inventory is down 94%.
The primary danger issue within the submitting cites the debt downside and the continuing losses on the firm in noting that, “There’s substantial doubt about our capacity to proceed as a going concern.”
On Fats Manufacturers’ final earnings name, Wiederhorn stated that he hoped to resolve the debt restructuring in the course of the present quarter, which is over in lower than 10 days. If the monetary magician escapes this one, it’s going to be his greatest feat but.
