FAT Brands Inc. Aktie

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the FAT Brands Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, November 5, 2025.

On the call from FAT Brands are Chairman and Chief Executive Officer, Andy Wiederhorn; and Chief Financial Officer, Ken Kuick. This afternoon, the company released its third quarter 2025 financial results. Please refer to the earnings release and earnings supplement, both of which are available in the Investors section of the company's website at www.fatbrands.com.

Each contains additional details about the third quarter, which closed on September 28, 2025. Before we begin, I must remind everyone that part of the discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them.

Actual results may differ materially from those indicated by these forward-looking statements due to a number of risks and uncertainties. The company does not undertake to update these forward-looking statements at a later date. For a more detailed discussion of the risks that could impact future operating results and financial condition, please see today's earnings release and recent SEC filings.

During today's call, the company will also discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance. The presentation of this additional information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in today's earnings release.

I would now like to turn the call over to Andy Wiederhorn, Chairman and Chief Executive Officer. Please go ahead.

Good afternoon, everyone, and thank you all for joining us. I'm pleased to be back as Chief Executive Officer of FAT Brands. With this transition, Ken Kuick is now focusing exclusively on his responsibilities as Chief Financial Officer of both FAT Brands and Twin Hospitality Group, while Taylor Wiederhorn will continue as our Chief Development Officer. I want to thank Ken and Taylor for their leadership as co-CEOs. They played an instrumental role in navigating the company through an arduous few years of legal matters. I'm excited to continue executing against our key priorities, which I will outline shortly.

Before discussing the third quarter results, I'd like to provide an update on the legal matters we discussed during our last earnings call. In late July, the U.S. Department of Justice dismissed all charges against me, FAT Brands, William Amon and Rebecca Hershinger. I'm grateful to the U.S. Jury's office for their thorough review and to all legal counsel involved.

We have also resolved the Delaware derivative cases known as Harris I and Harris II filed in 2021 and 2022 relating to our 2020 merger and 2021 recapitalization, respectively. As announced in early August, our settlement agreement resolves all claims without any admission of liability or wrongdoing. The settlement includes the recognition of previously adopted corporate governance enhancements by the Board, a $10 million insurance payment to the company and a contribution of 200,000 shares of Twin Hospitality Group by Fog Cutter Holdings. We received preliminary approval in September and expect final court approval in December. We are now fully focused on strategic execution and enhancing shareholder value.

Turning to Twin Hospitality Group. The business continues to gain momentum under Kim Boerema's leadership, who has strengthen both brands operationally and bolstered his executive team. During the quarter, he appointed Ken Brendemihl as President of Smokey Bones, hired [ Rob Churn ] as Chief Operating Officer of Smokey Bones promoted Lexi Burns to Chief People Officer, expanding her role across both Twin Peaks and Smokey Bones and hired Melissa Fry as Chief Marketing Officer.

These strategic leadership additions position Twin Hospitality for further growth and operational excellence. In August, I was honored to assume the role of Chairman of Twin Hospitality Group, providing valuable continuity following its successful spinout earlier this year. My deep understanding of the business and direct involvement in structuring the transaction provide a solid foundation for the company.

Finally, I invite you to join Twin Hospitality Group's third quarter earnings discussion at 5:15 Eastern Time today with details available in the earnings release published earlier today. Turning back to the business. We continue to take decisive actions to strengthen our financial position and sharpen our capital structure. We are advancing plans for a $75 million to $100 million equity raise at Twin Peaks to pay down debt and fund new unit development.

Our dividend pause remains in effect, preserving $35 million to $40 million annually in cash flow. The dismissal of the DOJ case and the resolution of the derivative matters provide at least $30 million a year in additional annual savings. We've already executed more than $10 million of SG&A reductions and continue to look for additional savings. And we are actively negotiating a debt restructuring with our noteholders.

Together, these actions put us on track to achieve positive cash flow in the coming quarters, reduce our debt and build a strong foundation for long-term growth. While the restaurant industry continues to face headwinds, we delivered adjusted EBITDA of $13.1 million for the quarter. Most encouraging is the momentum we are building in same-store sales performance. We've narrowed our decline to just 3.5%, down from 4.2% in the second quarter, representing our strongest quarterly performance so far this year. Notably, our casual dining segment demonstrated particularly strong results with same-store sales growth of 3.9%.

Now I would like to provide you with an update on our 3 strategic pillars: organic expansion through strategic market penetration, targeted acquisitions to diversify our brand portfolio and manufacturing scale-up emphasizing cookie dough in dry mix production.

First, organic expansion. We opened 13 new locations during the third quarter and 60 locations year-to-date with a current target of 80 new openings this year. Development remains concentrated within our 7 highest performing brands, Fatburger, Johnny Rockets, Fazoli's, Roundtable Pizza, Twin Peaks, Marble Slab Creamery and Great American Cookies. Looking beyond 2025, our development visibility is strong. We secured over 190 franchise development agreements year-to-date, contributing to approximately 900 committed locations scheduled to open over the next 5 to 7 years. These represent executed contracts with paid franchise fees.

The potential earnings impact is quite substantial. Once operational, these units should generate $50 million to $60 million in incremental earnings through our asset-light model, requiring no acquisition capital or corporate build-out investment. As you know, co-branding remains a key growth driver key growth driver domestically.

In August, we opened our first co-branded roundtable Pizza and Fatburger location in Rancho Cordova, California. We leveraged more than 3,000 square feet of unused space at an existing roundtable location and added a Fatburger enhancing sales across dayparts, particularly lunch. Weekly sales and transactions have doubled. With approximately 50 of these co-branded locations in our development pipeline, we see significant expansion potential across California and beyond.

During the third quarter, we opened new Great American Cookies and Marble Slab Creamery locations in Maryville, Tennessee and Sanford, North Carolina. The Sanford opening marks both brands entry into the Raleigh market. We also opened our first co-branded Fatburger and Buffalo's Express location in Springer, Oklahoma at the high-traffic Arbuckle Travel Center, marking Fatburger's debut in the state.

Beyond co-branding, we expanded our presence with strategic stand-alone openings. Roundtable Pizza expanded in Western U.S. footprint with its first Colorado location in Colorado Springs, a milestone opening that sets the stage for additional growth across the state. The brand also added a third location in the Las Vegas market. Hot Dog on a Stick opened at Downtown Commons in Sacramento, a high-traffic shopping center that reinforces the brand's strong California presence.

On the international front, Johnny Rockets continues its global expansion, opening 7 new locations this year across Iraq, Chile, the UAE, Mexico and Brazil. Highlights include 2 openings in Baghdad and new locations in high-traffic destinations such as Cancun's Grand Outlet Riviera Maya and Dubai's Jumeirah district.

Additionally, we announced Fatburger's return to Japan through a new franchise agreement that will bring 4 locations to Okinawa over the next 5 years. The first restaurant is slated to open before year-end, strategically leveraging Okinawa's robust tourism traffic and U.S. military base presence as a gateway to reestablish Fatburger's footprint in Japan.

Along with new unit development, we plan to complete 100 remodels this year, refreshing our brand's presence and enhancing the customer experience across our portfolio. Also, our portfolio digital mix hit a new record high with year-to-date digital sales increasing 19% from Q2 to Q3.

Additionally, our brands received several notable awards this quarter, underscoring the strength and recognition of our portfolio. Great American Cookies and Marble Slab Creamery were named 2 QSR's Best Franchise Deals 2025 list. Hurricane Grill & Wings earned a spot on USA Today's 10 Best list for sports bars. 12 of our concepts were included in the Franchise Times Top 400.

Twin Peaks, Roundtable Pizza, Johnny Rockets, Fazoli's, Great American Cookies, Fatburger, Marble Slab Creamery, Ponderosa and Bonanza Steakhouses, Pretzelmaker, Native Grill & Wings and Elevation Burger. And finally, Roundtable Pizza was recognized on Yelp's top 25 U.S. pizza chains list.

Now turning to our growth by acquisition strategy. We remain disciplined while preserving flexibility. Strengthening the balance sheet is our near-term priority given current capital costs, but we continue to actively market -- to monitor the market for opportunities at the right valuation. Our focus is on acquisitions that enhance our core brand or add complementary capabilities without compromising our commitment to deleveraging.

Our Georgia production facility continues to perform well, generating $9.6 million in sales and $3.8 million in adjusted EBITDA, a 39.6% margin during the third quarter. Importantly, we are operating at only 45% of capacity with meaningful expansion potential at low incremental cost.

In August, we announced a major strategic initiative supporting our manufacturing scale-up goals, a partnership with virtual dining concepts to make Great American Cookies available for delivery from Chuck E Cheese locations nationwide. The collaboration is already live at over 450 locations with 500 additional locations targeted through the virtual dining concepts network by the end of this year.

In addition to delivery, we are exploring in-venue cookie sales and co-branded menu opportunities. This partnership represents a transformative step in our manufacturing growth strategy, leveraging third-party partnerships to significantly increase production volume and drive our Georgia facility towards greater capacity utilization, all while maintaining an asset-light business model.

Before I turn it over to Ken, I'd like to highlight the meaningful impact of the FAT Brands Foundation, which has awarded 42 grants and provided over $170,000 in funding so far this year. In September, the foundation launched a health and wellness campaign aimed at promoting FAT Brands' employee well-being in addition to driving fundraising efforts, the step-up for FAT Brands Foundation Challenge.

The initiative saw tremendous engagement from employees and reinforced the foundation's role in giving back to the communities we serve. With approximately $12,000 in funds raised from this month -- from the month-long initiative, the foundation was able to help provide 1,000 meals to underprivileged children in Collier County, Florida, equipped 6 schools and 250 students with books and materials to promote fourth grade literacy and assist families impacted by the Eaton fires in Altadena, California through the purchase of essential gift cards.

Looking ahead, our focus is on execution, driving growth across our brands, strengthening our balance sheet and unlocking the full potential of our platform. We believe these efforts will deliver meaningful value for shareholders, franchise partners and team members alike.

With that, let me turn it over to Ken to walk through our financial highlights for the third quarter.

Thanks, Andy. Moving on to our third quarter results. Total revenues were $140 million, a 2.3% decrease from $143.4 million in last year's quarter. This was driven primarily by the closure of 11 underperforming Smokey Bones locations as planned, the temporary closure of 2 Smokey Bones locations for conversion into Twin Peaks lodges and lower same-store sales, partially offset by revenues generated by our new Twin Peaks Lodges.

Turning to costs and expenses. General and administrative expense increased $8.2 million to $42.7 million in the quarter from $34.5 million in the year ago quarter, primarily due to a $6.9 million store closure reserve and a $1.4 million noncash impairment of fixed assets in the third quarter related to the closure of underperforming Smokey Bones locations and higher noncash share-based compensation expense related to the public listing of Twin Hospitality Group earlier this year.

Cost of restaurant and factory revenues decreased to $94.6 million in the quarter compared to $96.8 million, primarily driven by the closure of underperforming Smokey Bones locations, the closure of 2 Smokey Bones locations for conversion and lower same-store sales, partially offset by wage and food cost inflation.

Advertising expense varies in relation to advertising revenues and decreased to $12.2 million in the quarter from $10 million in the year ago period. Total other expense net, which consisted primarily of interest expense was $41 million in the quarter compared to $35.8 million in last year's quarter. Net loss attributable to FAT Brands was $58.2 million or $3.39 per diluted share compared to a net loss of $44.8 million or $2.74 per diluted share in the prior year quarter. And on an as-adjusted basis, our net loss attributable to FAT Brands was $45.4 million or $2.67 per diluted share compared to $38 million or $2.34 per diluted share in the prior year quarter. And lastly, adjusted EBITDA for the quarter was $13.1 million compared to $14.1 million in the year ago quarter. And with that, operator, please open the line for questions.

[Operator Instructions]

And our first question will come from Joe Gomes with NOBLE Capital Markets.

So Andy, just wanted to start off on the debt restructuring that you're negotiating. Can you give us any feel for timing on that?

I'm hopeful that during this quarter, we'll come to a resolution on restructuring. The -- we've publicly stated that we're close to raising equity for Twin Peaks. That is held up only by the government shutdown. As soon as the government opens, Twin Peaks is good to go and the majority of the proceeds from the equity raise go to reduce debt with the noteholders. So we'd like to get that started as quickly as everyone would. We're just waiting for the government to open.

Okay. And on the Twin Peaks, have you closed all the underperforming Smokey Bones -- or is there still more to do there?

Well, for now, we have closed all of them and reserved for them. There are some stores that are not performing well, but they're part of a larger master lease where we have a number of very, very well -- stores are performing very well. And then there's a few that are not performing that well, all in the same master lease. So there's some more to go over the coming couple of quarters, but that will really come to an end once the master lease is sorted out and extended.

Okay. And where do we stand on the effort for refranchising the Fazoli units?

We've made some material progress on the Fazoli's refranchising. We are evaluating some proposals that we've received and deciding if we want to move forward or continue negotiating with additional parties.

All right. Let me see what else do we have here. I'm assuming it's more economic economy related, but the goal was 100 new targeted stores to open in '25, and you said now the target is to 80. I was just wondering if you could give us a little update on that.

Yes, there's definitely a slowdown in the pace of which new stores are getting opened. That's a little bit of foot dragging by franchisees to open their stores, so they'll slip into next year. It's not really many projects getting canceled as much as it is just moving a little bit slower. It's always frustrating because every day, every month that a store is delayed, that's $5,000 in royalties you'll never get. And so if you wait -- if the store is delayed a year at $60,000, you add 10 of those and $600,000. So it really adds up quickly, and we are trying to accelerate the throughput and the opening of those new stores as quickly as we can, but you still got to get them open with the franchisees doing their part.

Right. And you mentioned about $10 million of SG&A reduction. I was wondering if you could kind of maybe give us an idea of where that came from? And what more do you see as potential for additional cost optimization?

Well, there's been -- I mean, it's been across the board. There's staff reductions, there are executive reductions. There's just general G&A. We've closed some offices as we were able to consolidate and consolidate some of the accounting departments and things like that to get further single platform shared services.

So that's been very beneficial. I think going forward, we just have to see how the restaurant economy performs. I don't think any of the major restaurant operators would argue that we're in a restaurant recessionary environment. I think they all agree that we are generally in that environment. There are some outliers where guys are putting up some big numbers. But for the most part, people are off a little bit.

We're fortunate that it's just a little bit, not a lot. 3% or 4% is okay in this environment. It's not what you want, but it's certainly not off 10% or 20% or closing 30% of our units like some other problems that have occurred. So I think that we push through that. There may be -- when you're in that environment, you're looking at costs and you're looking at what am I spending on new business development or things like that, that may just not be realistic in this environment. And so that's probably where there's additional savings.

And next, we'll hear from Roger Lipton with Lipton Financial Services.

As you know, this is Roger. You answered the questions I had about the timing of your -- the restructuring efforts. Let me ask you, you made reference to the same-store sales growth in the casual dining. What -- which were the chains that are in that category these days?

Well, it's quite a few. I mean you have Hurricane Grill & Wings, Buffalo's Cafe, Native Grill & Wings and Ponderosa and Bonanza, or Steakhouse brands.

Okay.

What's interesting is really you see consumers -- you've seen a lot of information in the industry about the QSR end of things, the consumer has felt pinched and has really, really sought out value. And that's a little bit of a bounce back from when they were bringing a turkey sandwich from home and not going out at all. And now you've seen McDonald's put up numbers where they're showing that if they promote value, they're getting customers to come back and traffic to improve. And so I think on the QSR side of things, it's all about value, and I mean value with discounted kind of deal, not guest experience.

As you move into the higher-end brands, it's all about the value of what you're spending for the guest experience, and you've got to justify the price you're charging, which you need to charge with labor and food costs where they are to the guest experience. And so it's kind of 2 different value propositions. And I think on the casual dining side, the consumer is saying if I'm going to spend what it costs to go to a casual dining restaurant, I want the experience to be great, and I'll spend it because I don't want to be -- I can only do so much QSR.

Right. No, no question. What you're saying is exactly consistent with what we're hearing all over the industry. Talking about Twin Peaks for a second. Can you give us any idea what opening program there could be for next year at Twin Peaks?

Yes, there are a number of new stores slated to convert both Smokey Bones conversions into Twin Peaks as corporate and some as franchise. And then there are new franchise locations that have nothing to do with Smokey Bones that are also under development. And so that's a little bit of a moving target as to the timing and the permitting and the franchisees undertaking as to when they start and when they get them open. But there's active development going on.

The brand is -- has a robust pipeline and franchisees who want to get more stores open and build their platforms. So it's a positive.

Right. And I didn't have too much time to look at their numbers with everything coming up over a couple of minutes in your 4:30 call here, but it looks like Twin Peaks is settling down in terms of their day-to-day operations. Their store level margins improved I think, 50 basis points year-to-year, up to 17%. So that's encouraging.

That's a big priority for Kim. The restaurant level margin is a big priority for Kim, and he's very focused on it. And I think we'll see the restaurant level margins go well beyond 17% if you just give it a little time over the next couple of quarters as several initiatives kick into place.

And then with Ken Brendemihl coming on board and helping to take the helm at Smokey Bones, there's just a renewed focus there on streamlining the cost structure, so we don't really have duplicative costs by running 2 different brands inside of Twin Hospitality and then also menu management, streamlining purchasing, operational efficiencies. There's just a bunch of things there that they're focused on, and I think we'll see that brand excel.

There's going to be a number of Smokey Bones that remain Smokey Bones because they're not convertible into Twin Peaks because of the location or landlord restrictions. And those are good profitable stores. They're solid, and we want to keep those and run them properly. And then there's a bunch that are eligible for conversion. And we have to -- the ones that we've converted so far have been something like doubles. So sales have doubled, profits doubled, it's been worth it, but it's also uses of capital. And so we have to pace that with our ability to fund that. And then there's franchisees that are interested in some of them and some -- they've got additional development opportunities that have nothing to do with Smokey Bone. So it's a combination of those things.

All right. Well, that color is helpful. No question for your management group, even more than the analytical group, it will be great to get these major structural efforts behind us so that you can talk about opening stores and running stores and improving margins in stores and more day-to-day operational stuff. That will be a pleasure for everybody. So thanks, everyone.

From your lips to God's ears, you bet. I agree.

And there are no further questions at this time. I would like to turn the floor back to Andy Wiederhorn for closing remarks.

Thank you, operator. I want to thank all of you for attending our earnings call today and feel free to reach out to the company if you have any other questions. Take care.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the FAT Brands Inc. Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, July 30, 2025.

On the call from FAT Brands are Chairman of the Board, Andy Wiederhorn; and Co-Chief Executive Officer and Chief Financial Officer, Ken Kuick.

This afternoon, the company released its second quarter 2025 financial results. Please refer to the earnings release and earnings supplement, both of which are available in the Investors section of the company's website at www.fatbrands.com. Each contain additional details about the quarter, which closed on June 29, 2025.

Before we begin, I must remind everyone that part of the discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. Actual results may differ materially from those indicated by these forward-looking statements due to a number of risks and uncertainties. The company does not undertake to update these forward-looking statements at a later date. For a more detailed discussion of the risks that could impact future operating results and financial condition, please see today's earnings release and recent SEC filings.

During today's call, the company will also discuss non-GAAP financial measures, which we believe can be useful in evaluating its performance. The presentation of this additional information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in today's earnings release.

I would now like to turn the call over to Andy Wiederhorn, Chairman of the Board.

Thank you.

Thank you, operator, and good afternoon, everyone. Before we begin, I want to address major news that came out yesterday. The U.S. Department of Justice has dropped all charges against me, FAT Brands, William Amon and Rebecca Hershinger. I'm grateful to the U.S. attorney's office for taking a fresh look at this case and to the attorneys who worked tirelessly on my behalf and on behalf of the other defendants. I have always maintained my innocence and the innocence of the other defendants.

Additionally, I want to alert you that we have reached a settlement with all of the parties in the Delaware derivative cases named Harris 1 and Harris 2 that were filed in 2021 and 2022. And while the settlement is subject to court approval, I'm optimistic that since all parties have reached an agreement, the court will look favorably on the settlement. We will issue a separate press release on this matter once filed with the court very shortly.

Now with that matter behind us, I would like to acknowledge the outstanding work of our team and franchise partners across the FAT Brands portfolio. Their focus on excellence is driving our momentum, and I couldn't be more optimistic about what lies ahead for FAT Brands.

I am particularly proud to share that we have been recognized on Time and Statista's Best Midsize Company list for the second consecutive year, underscoring the strength of our business model and culture. Additionally, 10 of our brands earned spots on Technomic's prestigious top 500 list with Twin Peaks securing an impressive position in the top 100 largest restaurant chains by annual system sales in the United States.

Our global restaurant portfolio now spans approximately 2,300 locations across 49 states and 35 countries, creating a diversified ecosystem that enables us to capture market share across multiple segments and dining occasions. With 80% of our units in domestic markets and 20% in international markets, we've built a balanced geographic footprint supported by more than 730 franchise partners. Over 250 of these franchise partners operate multiple locations ranging from 2 to 75 units with no single partner representing an outsized portion of our portfolio. Our structure both mitigates concentration risk and positions us for continued expansion.

Within this framework, we continue to invest in brand level leadership that supports long-term growth. In May, Kim Boerema joined as CEO, Twin Hospitality Group and our high-growth polished casual dining sports bar brand. With over 3 decades of restaurant industry experience, Kim brings an exceptional track record of scaling concepts, most recently tripling Parry's Pizzeria & Taphouse from 10 to 30 units in just 2.5 years. His distinguished career includes serving as COO of California Pizza Kitchen and Regional Vice President at Texas Roadhouse, where he oversaw 125 locations across 22 states.

In his first 2 months, Kim has already made significant strides by focusing on 3 strategic priorities: enhancing operations, improving corporate store restaurant level margins and driving unit development. With a robust pipeline of approximately 100 new lodges and Kim's proven expertise, we are confident in Twin Peak's next chapter of growth.

I also want to express our sincere gratitude to Ken Kuick for his exemplary leadership during this transition. Ken continues to serve as Chief Financial Officer of Twin Hospitality Group. Regarding Twin Peaks capital structure, market volatility has extended our original time line, but we continue to move forward with a planned $75 million to $100 million equity raise, and we'll provide further updates as appropriate.

Following today's call, we invite you to join Twin Hospitality Group's Q2 earnings discussion at 5:15 p.m. Eastern Time with details available in their earnings release published earlier today.

We continue to take decisive steps to strengthen our financial position. Our indenture-related dividend pause remains in effect until we reach the $25 million principal reduction threshold, preserving $35 million to $40 million annually in cash flow. Plus we will save at least another $30 million per year with the dismissal of the DOJ cases and the derivative matters.

Additionally, we've implemented over $5 million in annual SG&A reductions while identifying another $5 million or so of further cost optimization opportunities. In parallel, we're actively working towards refinancing our 3 remaining securitization silos well ahead of their July 2026 anticipated repayment date. These combined actions position us to achieve cash flow positive status in the coming quarters while continuing our strategic deleveraging efforts.

Turning to our second quarter performance, which Ken will elaborate on shortly. Our results of $146.8 million in revenue and $592.2 million in system-wide sales reflect the current challenging operating environment. And despite this, we achieved adjusted EBITDA of $15.7 million in the quarter, which is comparable with last year's quarter. We remain focused on the strategic initiatives that will drive long-term value creation. Domestic system-wide sales outperformed international for the quarter; however, we are seeing encouraging signs internationally, particularly with our Fatburger locations in Canada, which represent about 1/3 of the Fatburger system and are benefiting from favorable exchange rate movements.

Our diversified portfolio strategy is paying dividends, particularly in our Snacks segment, where Great American Cookies and Marble Slab Creamery demonstrate consistent strength. Digital innovation is accelerating this success. Great American Cookies digital mix now represents 25% of sales, up 3 percentage points from Q1, with loyalty members spending 40% more than nonmembers. Roundtable Pizzas digital metrics are equally compelling with 21% loyalty sales growth and 18% higher customer engagement.

Looking ahead, our growth strategy remains anchored by 3 strategic pillars: driving organic expansion through strategic market penetration, evaluating targeted acquisitions to further diversify our brand portfolio and increasing our manufacturing capacity with an emphasis on cookie dough production and dry mix capabilities.

Our organic growth strategy is anchored by a robust development pipeline of approximately 1,000 locations that franchisees have already paid for and committed to open over the next 5 to 7 years. This pipeline continues to expand with 120 new development agreements signed year-to-date, demonstrating sustained demand across our portfolio and reinforcing our long-term growth outlook. Once operational, these units are expected to generate $50 million to $60 million in incremental earnings without the capital cost typically associated with acquiring new brands. Momentum remains strong both for our Creamery and Great American Cookies stores as well as 3 stand-alone Marble Slab Creamery units.

We remain on track to meet our goal of opening 100 new locations in 2025, led by 7 high-growth brands, Fatburger, Johnny Rockets, Fazoli's, Round Table Pizza, Twin Peaks, Marble Slab Creamery and Great American Cookies.

In Florida, we've signed a new development deal with an existing franchisee to open 40 additional Fatburger locations over the next decade, including expansion into the Jacksonville market. This will grow our total presence in the state to approximately 50 Fatburger locations. Since reentering Florida 2 years ago after a 20-year absence, Fatburger has seen strong demand, particularly at our Riverview and Celebration locations, which have exceeded expectations.

Additionally, our first restaurant in the Jacksonville area is slated to open later this year, further establishing Fatburger as a key player in Florida's competitive burger market.

Roundtable Pizza continues its Texas expansion, recently opening in San Marcos with a key franchisee targeting 100 locations in Texas across FAT Brands concepts, including Fatburger, Roundtable Pizza and Johnny Rockets within the next 5 years.

Our international expansion also continues to gain momentum. Fazoli's recently achieved a significant milestone with its first international location in Calgary, Alberta, the beginning of a 20-unit expansion across Canada over 9 years with a franchise partner who already successfully operates Fatburger locations.

And we're not just expanding our footprint, we're also enhancing the guest experience through innovation and menu development. At Marble Slab Creamery, what began as a limited test of the Dubai Chocolate Sunday has evolved into a successful rollout across approximately 50 locations with the indulgent flavor now extended through year-end due to the overwhelming customer response.

On the beverage front, Pretzelmaker recently launched Frosted Lemonades, a refreshing twist on their signature beverage that's quickly becoming a customer favorite.

Beyond new store development, we're investing in our existing locations through our newly launched store refresh program, which will revitalize 5% of our portfolio this year with plans to double that pace to 10% in 2026.

I'm particularly proud that our brands continue to receive prestigious industry recognition. Fatburger was recently named by Yelp as one of the top 25 burger chains in the U.S., while Fazoli's earned the #12 spot on the fast casual Movers and Shakers 2025 list, a ranking that evaluates growth, reputation, customer sentiment and sales volume.

Additionally, Marble Slab Creamery was once again named to USA Today's 10Best list for best dessert or treat chain.

We also continue to advance our balance sheet strengthening initiatives. In April, we successfully amended our Fazoli securitization, securing improved terms that enhance our financial flexibility. The revised agreement extends both call repayment dates while easing certain covenant requirements.

The new structure also enables the sale of company-operated locations to franchisees creating an opportunity to refranchise our entire 57-unit corporate Fazoli's portfolio, a move that would substantially reduce our corporate-owned footprint while delivering approximately $2.5 million in annual overhead savings. Should we proceed with this refranchising initiative, we would maintain direct ownership of only about 33 Hot Dog on a Stick corporate locations within our 2,300-unit system, positioning us to return to nearly a 100% franchise operating model, a structure that optimizes capital efficiency and operational focus.

This, of course, excludes Twin Peaks and Smokey Bones, which now operate as a separate public company despite being consolidated into FAT Financials due to our significant ownership percentage.

Now turning to our growth by acquisition strategy. We are prioritizing value creation and deleveraging our balance sheet while navigating the elevated capital cost environment. We remain actively engaged in evaluating strategic opportunities that align with these core objectives, and we'll share updates as appropriate.

Our Georgia production facility represents one of our key strategic advantages, generating impressive financial performance with $10.3 million in second quarter sales and $3.8 million in adjusted EBITDA, resulting in an attractive 37% margin.

Currently operating at just 45% capacity, our cookie dough manufacturing facility represents significant growth opportunity. With modest capital investment to expand mixing equipment, we can nearly double production capacity. The facility sits on 4 acres while currently utilizing only half an acre, providing ample room for future expansion.

We are also continuing to build out a third-party strategic partnership with the national restaurant entertainment chain to launch the Great American Cookies brand virtually. We look forward to sharing further details on this shortly.

Before concluding, I'd like to highlight the meaningful impact of the FAT Brands Foundation, which has awarded 21 grants in 2025. I'm pleased to share that President, Jessica Wiederhorn and Director, Jen Johnston were recently recognized at the Los Angeles Business Journal's Women's Leadership Symposium and Awards for their leadership and commitment to the foundation.

The foundation also recently participated in Twin Peaks Restaurants Annual Conference for the first time, surpassing its fundraising goals through donations and a successful raffle. These funds will support nonprofits helping families and communities thrive.

As we move forward, we remain confident in the resilience of our brands and the momentum we have built. Our efforts are centered on expanding our core business, enhancing efficiencies across our production facility and reinforcing our financial foundation through disciplined debt reduction, all of which support our path towards long-term success.

With that, I would like to hand it over to Ken to discuss our financial highlights from the second quarter of 2025.

Thanks, Andy. Moving on to our second quarter results. Total revenues were $146.8 million, a 3.4% decrease from $152 million in last year's quarter. This was driven by the closure of 5 underperforming Smokey Bones locations. The temporary closure of Smokey Bones location for conversion into a Twin Peaks Lodge and lower same-store sales, partially offset by revenues generated by our new Twin Peaks lodges.

Turning to costs and expenses. General and administrative expense increased $14.8 million to $44.4 million in the quarter from $29.6 million in the year ago quarter, primarily due to $12.6 million of noncash share-based compensation expense related to the public listing of Twin Hospitality Group earlier this year and the recognition of $2.1 million in employee retention tax credits recognized during the second quarter of last year.

Cost of restaurant and factory revenues decreased to $98.1 million in the quarter compared to $100.1 million, primarily driven by the closure of underperforming Smokey Bones locations, the closure of the Smokey Bones location for conversion and lower same-store sales, partially offset by wage and food cost inflation.

Advertising expense varies in relation to advertising revenues and decreased to $11.5 million in the quarter from $14.7 million in the year ago period.

Total other expense net, which consisted primarily of interest expense was $39.4 million in the quarter compared to $34.8 million in last year's quarter.

Net loss attributable to FAT Brands was $54.2 million or $3.17 per diluted share compared to a net loss of $39.4 million or $2.43 per diluted share in the prior year quarter. And on an as-adjusted basis, our net loss attributable to FAT Brands was $49 million or $2.88 per diluted share compared to $30.9 million or $1.93 per diluted share in the prior year quarter.

And lastly, adjusted EBITDA for the quarter remained flat at $15.7 million.

And with that, operator, please open the line for questions.

The first question is from Joe Gomes from NOBLE Capital.

So congrats on last night's announcement with the DOJ. Related, there was an SEC civil action filed at the same time. Any update on whether that goes away also? And then relatedly, Andy, you talked about the elimination of roughly $30 million a year of litigation cost. Are you going to be able to recover any of the past costs from your insurance companies?

So we are hopeful that the SEC investigation or case -- civil case goes away following the DOJ case. But we can't report anything on that or comment anything about that today.

With respect to the legal fees, which in total over the last 5 years or $70-something million. We did file with our insurance company, and there is a settlement that is connected to the derivative case settlement. And so we've recovered or we will recover the policy limits of that as part of that settlement.

Okay. Great. And then one of the big variances in our model was the increase in G&A costs, and you explained that, that was for share-based comp. Is that kind of like a 1 quarter event? Should we expect G&A costs to go back down? I think they've been running roughly around 25% of revenue this...

Yes, it absolutely goes down -- sorry, I'm sorry. It absolutely goes down. It's a onetime event that's tied to the Twin Peaks spin-off.

Okay. Just wanted to make sure that -- I thought so, but I just wanted to just make sure. And you talked about the manufacturing facility, the new contract. You also talked about that, I think, last quarter. Can you give us a little timing of when you think that might be fully rolled out and we can start to see the benefits of it?

Yes. So it's in production now. It's not quite fully rolled out. It will be announced very shortly. Sometime I expect in the next 30 to 60 days, it will be completely out there. And there's sort of different versions of it with different operators, different restaurant companies. And so I think you'll see an announcement in maybe 3 weeks or so about it or maybe 4, but there's 2 different paths we're going down to accelerate the manufacturing business. And one is more virtual and one is with a direct very large operator, 400-unit operator. So it's going to be -- it's really going to be helpful for the factory, for cookie dough production, all of that.

Okay. And one more for me. So Sysco reported, they were talking about improved restaurant industry traffic, improved through the quarter for their foodservice segment. Momentum continued in July. Wingstop reported this morning, and they beat expectations. Just wondering, are you starting to see some of this at your locations across the chains?

So it's different in the brand categories. And so like the snack brands, cookies, ice cream, pretzels, things like that are doing significantly better. You're seeing QSR brands be as beaten up as McDonald's or some of the young brands. So Burger King, where you're seeing like Fazoli's has had a tougher road here with sales in the last couple of quarters.

And then on the polished casual side, it's getting better and better and better. And so we're optimistic, honestly, that we get through this consumer confidence push here as we get over the summer and that things will continue to improve. We are seeing things -- they're off less and less.

The next question is from Roger Lipton from Lipton Financial Services.

First, congratulations on the legal progress understatement, sure. And even though your organization has done an admirable job of not getting too distracted by it, it's got to be a great source of new focus for everybody, I'm sure.

Generally, you indicated that you're going to have working your way to a positive cash flow. It sounds like within 3, 4, 5 quarters from now. That's my estimate, not yours, rough guesstimate. But what's the current liquidity situation? You've generally given us a quarterly update on your financial flexibility in terms of money you can draw upon if necessary, just to bridge this remaining period.

Yes. We continue to sit on a pile of somewhere between $130 million and $150 million of retained notes. Those are bonds that we originally issued that we haven't yet sold. So we've drawn upon those either financing those or selling those from time to time for liquidity. So that's generally our path for liquidity. And we do have things like an ATM in place at that, that we can use.

But given that we think the stock is undervalued, we haven't done much of that at all. Our focus right now is to -- we want to continue to look at G&A and see if there's anywhere else to have savings across all the brands. And we've identified $5 million we put in place. There's another $5 million, I think we can get accomplished here over the -- between now and the end of the year.

And then there is the rapid acceleration of the Smokey Bones portfolio, and that is identifying the stores that are going to be converted and getting them under that conversion process, whether it's with franchise partners or corporate and then also the stores that are not going to be converted and not going to remain open to the Smokey Bones because the leases might mature. We want to accelerate that. We really want that process to be accelerated. It just wasn't moving at the pace it needed to move at with the prior management team, and it's going to -- that's going to change here very rapidly under Kim's leadership, and we're going to help him do whatever we need to do to do that so that that's not dragging down the Twin Peaks business.

And there are some Smokey Bones that are very profitable that we'll keep as Smokey Bones and whether we keep that as a subsidiary of Twin Peaks or not, we'll decide later. But there's plenty of stores that are cash flowing just fine. It's just that the ones that are going to be converted and are not great as Smokey Bones today, we need to deal with now. We can't wait. And I can't really -- I just can't emphasize enough the savings on the legal expense and professional side, that's just significant cash. And if you take that cash and you take the savings from the dividends that we've temporarily paused, then you're already in the $70 million to $75 million a year range. So that's a huge savings. And there's a few other things we're trying to negotiate, but we'll see if we get them, and that's -- but that's...

Okay. And you talked about refreshing 5% of the system. Which brands are the priority in terms of beginning to refresh them?

Well, so these are not company-owned stores, right? These are all franchise locations.

No, I understand. I understand.

It depends -- just by unit count, you have 400 roundtable pizzas and then you have 300 or 400 ice cream and 300 or 400 cookie restaurants and so on. So it's really diverse. It's spread out. It's not just one brand. It's targeted by brand and by market.

And presumably, you've got enough profitable franchisees who have the capital to do that. It obviously takes money. And so I would assume you've got an adequate number of prosperous franchisees who can afford to reinvest and refresh their brands.

Yes. I mean I think it's like someone we all know who says often he'd like to see interest rates lower, so would we. And if interest rates were lower, that's going to accelerate development. It's going to accelerate remodels.

And franchisees are committed. They're continuing to build more stores. They're continuing to buy the rights to build more stores. They're very positive about things in general, but you have different ebbs and flows of the labor market in California or cost of doing business in California and then the cost of -- the actual cost of a remodel and the cost of equipment and supplies.

I'm sure that once the current balance sheet is deleveraged somewhat, you'll have an adequately creative way to step up and give your franchisees some help in terms of financing those renovations because too many brands have ignored that possibility. They bought back billions of dollars' worth of stock to enhance the stock options rather than give their franchisees a little help. But I don't think you -- I think you're doing something more productive for your franchisees. Lastly, which of your brands have the strongest sales trends?

Well, again, you're seeing in the snack brands, very positive sales momentum. And then you're actually seeing things improve. Roundtable Pizza has been very strong, not -- I wouldn't say hitting the ball out of the park, but very strong given its competitor and -- competitive landscape and the competitors it's up against. We don't report brand by brand or by segment. So I'm not going to go into the specific numbers of each brand. But.

Where we've seen the most trauma has really been in the QSR space, which is consistent with most other QSR players. And at the other end of the spectrum in sports bars and stuff, there's just an increased consumer sentiment to want to get back into the restaurants. And the summer, of course, is not the greatest sports time. And so we're looking forward to football starting up in August and the way we go into the fall and expect some really good numbers there.

There are no further questions at this time. I would like to turn the floor back over to Andy Wiederhorn for closing comments.

Thank you, operator. And I want to thank everyone for joining us and invite you to the Twin Peaks call if you are interested. This concludes today's call.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.