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Fat Brands Gobbles Up Investor Interest In Trailblazing IPO

Published 10/24/2017, 10:07 PM
Updated 07/09/2023, 06:31 AM
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Fat Brands Inc., the owner of Fatburger and other restaurants, forayed into the market on Monday as the first restaurant company going public alongside new rules for smaller companies. FAT Brands Inc (NASDAQ:FAT) raised a supersized $24 million from investors on its first day, enjoying a regulation A+ status that helped it sell some 2 million shares for $12 a share.

Fat Brands, which is based in Los Angeles, will walk away from its IPO with a valuation around $120 million, and after five years of positive annual store sales growth, could very well allure more investors in with its promise in the coming weeks. While restaurants are notoriously risky investments, Fat Brands appears wholly confident in its immediate future; the company recently acquiredPonderosa and Bonanza Steakhouses in a $10.5 million deal.

A hungry company

With its pockets heavy from its mini-IPO, Fat Brands may see fit to swallow another one of its competitors if it feels more acquisitions are likely to lure in more investors. The company already has existing locations or locations under development in over 15 nations, according to its website, and is perhaps eyeing the international scene with hunger now that it has more purchasing power.

Fat Brands doesn’t face entirely smooth sailing, however; the company is still reeling from a scandal centered on its CEO’s misdeeds, which landed him in hot water with the law that resulted in a 15 month stint in a federal prison. If the owner of Fatburger and Buffalo’s hopes to remain a hot topic on the market, it will need to increase transparency and assure investors its executive leadership can handle whatever demands a publicly-traded company can throw at them.

Like most restaurant companies, Fat Brands doesn’t have to overly focus on the actions of those at the top; the company relies on its franchisees to be the local faces of its business, and is currently franchising in more than 300 locations around the world. The company’s international outlook is significantly dimmer than its domestic one, however; while its US-based stores have enjoyed a spurt of sales growth in the past few years, its international locations have suffered from declining sales.

Fat Brands has nonetheless kept its eyes on the international market despite its lackluster growth there. Filings made with the SEC show just how eager the company is to break out further into foreign markets; its overall footprint stretches to 32 countries, it claims, and the filing insist that its unique brand has potential with customers abroad.

A future in the marketplace

If Fat Brands hopes to remain a ticket on the marketplace for long, it will need to do more to beef up its international presence to alleviate investor’s fears that it’s untenable outside of the US market. Companies like Fatburger often build close relationships with their customers, and give them extra options to compare motorbike insurance. However, meaning it shouldn’t be too hard to keep the confidence of their consumers; shares sold directly to customers and die-hard fans were among those in its mini-IPO.

Fat Brands’ foray into the marketplace as a small fish in big waters could serve to inspire copycat businesses, too. The company’s CEO explained to Forbes how its trailblazing could very well “open the floodgates” for other small firms to follow suit, and noted there’s a particularly high demand among bankers who have grown cautious of massive IPOs which ultimately prove to be lackluster. For now, at least, one of America’s favorite burger chains isn’t letting the hostility of the restaurant industry get in its way. Fat Brands is likely to continue acquiring other restaurants who stand in the way of their success, and its ability to win customers over with its delicious burgers may yet translate into an ability to woo investors with enticing profits.

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