Tim Stenovec: Hi, everybody. Welcome back to Cheddar.
Tim Stenovec: This morning, FAT Brands,
Tim Stenovec: which is the umbrella company for Fatburger and others,
Tim Stenovec: went public at the Nasdaq.
Tim Stenovec: Joining us now to discuss what's next for the company is Andy Wiederhorn,
Tim Stenovec: founder and CEO of FAT Brands.
Tim Stenovec: Andy, good to see you again. It's been a couple of months since we last chatted.
ANDY: Thanks for having me.
Tim Stenovec: Yeah. So, um, look big day today.
Tim Stenovec: The stock opened at twelve dollars and eighty cents so far trading right about that.
Tim Stenovec: Are you, uh, happy with the IPO and how the public is embracing FAT Brands?
ANDY: So happy, so excited, so,
ANDY: so delighted to be here and to be partnering with Nasdaq.
ANDY: You know, we're a global franchising company and Nasdaq is
ANDY: the global leader in market making and we're just,
ANDY: uh, er, very excited to be listed on the Nasdaq.
Brad Smith: Okay, so, so far, uh,
Brad Smith: the stock opened at twelve- eighty.
Brad Smith: Ah, you're trading above that right now in terms of, you know,
Brad Smith: next steps some of the messaging that you take back to employees,
Brad Smith: investors who are now involved,
Brad Smith: uh, with the FAT Brands, um,
Brad Smith: image going forward, what are some of
Brad Smith: those key elements that you- you take back to them and you say,
Brad Smith: this is where we're planning to use the money.
ANDY: Right. Well, we just completed the acquisition of
ANDY: the Ponderosa and Bonanzas Steakhouse chains,
ANDY: which you remember we talked about before,
ANDY: and that's very important for us now to execute and absorb
ANDY: those brands into our system and our franchisees and help execute really,
ANDY: you know, helping them make money,
ANDY: build more stores, grow those brands internationally.
ANDY: We're in 32 countries around the world and we want to
ANDY: take Ponderosa and Bonanzas to all of those markets.
Tim Stenovec: Yes. So Andy, what are the some of the synergies that Ponderosa and Bonanza bring,
Tim Stenovec: especially to a franchisee who is considering getting into FAT Brands?
ANDY: Well, so as a global franchising company,
ANDY: we already have the marking department,
ANDY: the legal department, the accounting department,
ANDY: and really all the people in the field that support the franchisees,
ANDY: the franchise consultants that are out there,
ANDY: helping them find locations,
ANDY: helping them run the restaurants profitably,
ANDY: working on their supply chains,
ANDY: that's what a franchisor does.
ANDY: And that's how we'll integrate the Ponderosa and Bonanza franchisees into our system.
Brad Smith: And- and so, one of the obvious questions that we cannot
Brad Smith: miss here is the fact that there are a lot of players in the burger space.
Brad Smith: We've seen Shake Shack out there,
Brad Smith: IPO in recent years and- and as well
Brad Smith: you've got some of the other legacy brands that are out there.
Brad Smith: So, in terms of going up against that competition,
Brad Smith: what are some of your differentiating factors in all of this?
ANDY: Really good question. And there's two things to- to understand here.
ANDY: First of all, we are a franchising company all over
ANDY: the world and ninety-nine percent of our restaurants are franchised.
ANDY: So we don't own and operate the restaurants like
ANDY: Shake Shack might or Have-A-Burger might or somebody else like that.
ANDY: So, when we have a margin from our royalties in franchise fees,
ANDY: it's greater than fifty percent to our bottom line.
ANDY: When you're a restaurant operating company,
ANDY: you make somewhere between three and ten percent.
ANDY: So, it's an entirely different business to be the franchise or not be the operator.
ANDY: The second thing is we've been making
ANDY: gourmet Gourmet Fast-Casual Burger for seventy years and we haven't changed anything.
ANDY: So everyone else who's come along after that,
ANDY: is copying us in the space. We are the leader.
Tim Stenovec: Andy, we tal- we talked about this a couple of months ago when you're on Chadder,
Tim Stenovec: but I really wanna hit this hard and and get your thoughts on it.
Tim Stenovec: How do you convince someone now is the right time to become a franchisee?
Tim Stenovec: Minimum wage is going up.
Tim Stenovec: There are a lot of concerns, uh, of course,
Tim Stenovec: of food prices increasing,
Tim Stenovec: real estate prices, especially in popular areas, are going up.
Tim Stenovec: At the same time, there's decreased traffic to malls.
Tim Stenovec: A lot of the anchor stores that attract people to areas
Tim Stenovec: where a Fatburger would work, are going down.
Tim Stenovec: Fast casual, uh, you know,
Tim Stenovec: somewhat more expensive and healthier options are also increasing in popularity.
Tim Stenovec: How do you convince a franchisee now it's the right time?
ANDY: It's- you know, it's pretty easy. We have more than three hundred franchise units in
ANDY: our development pipeline and they're already paid for and planned to be developed.
ANDY: Our domestic same store sales are up eight years in a row,
ANDY: and in California right now we're up more than eleven percent year to date.
ANDY: So, if you're a franchisee wanting to get into our system, you- you know,
ANDY: you could see and look at the numbers for yourself, but they're very compelling.
Brad Smith: And so, what's the difference between FAT Brands and some of
Brad Smith: the- the previous businesses that you've run in the past that you've found?
ANDY: Well, I mean this is- as a franchised company,
ANDY: it's all about our customers.
ANDY: And our customers are the franchisees, right?
ANDY: Of course, the guy eating the burger,
ANDY: we care about him and we want them to have a good experience.
ANDY: But we care about the franchisee being
ANDY: profitable and building more restaurants and paying us more royalties.
ANDY: So, for us, it's just about supporting
ANDY: our customers and helping them execute to the guest.
Tim Stenovec: Andy, I have to ask it's part of your,
Tim Stenovec: your public profile, back in 2004,
Tim Stenovec: you spent more than a year in federal prison after pleading guilty to
Tim Stenovec: filing a false tax return and and charges of paying an illegal gratuity.
Tim Stenovec: What do you say to investors now who maybe hesitant to trust you be given that past?
ANDY: Well, you know, I don't think that that past had
ANDY: anything to do with intentional wrongdoing.
ANDY: I've always been adamant about that.
ANDY: There's nothing that I ever did intentionally to break any laws.
ANDY: And I felt that settling it was the right thing to do and put it behind me.
ANDY: And obviously I've done that.
ANDY: And here I am today with building this business from
ANDY: forty restaurants to now more than three hundred around the world,
ANDY: and you can look at the numbers yourself. I think they're very compelling.
Brad Smith: And in terms of moving, uh,
Brad Smith: the restaurants forward in the FAT Brands' profile forward even more so,
Brad Smith: we've seen some of the major competition roll in
Brad Smith: technology to their overall ordering processes to their experience for customers.
Brad Smith: Where does technology play a role in moving FAT Brands forward even more.
ANDY: Well, technology is really important because it- it- for example,
ANDY: for us delivery is a is a key driver to growth right now.
ANDY: We're seeing, uh, delivery approach
ANDY: twenty or thirty percent of our business in some markets,
ANDY: and that's all technology-driven.
ANDY: So, when you- in the old days,
ANDY: when you build a mobile app for your brand,
ANDY: you might spend fifty or a hundred thousand dollars to build an app,
ANDY: and it was just for your brand,
ANDY: and every other brand has their own app and
ANDY: the consumers flooded on their phone with all the different apps.
ANDY: But, today, you go to the delivery service,
ANDY: whether that's UberEATS or Postmates or Grubhub or DoorDash or whatever,
ANDY: and you have all the restaurant concepts right there under the app.
ANDY: And so the delivery services have taken over technology and
ANDY: they're maintaining it for the restaurant companies instead of the other way around.
ANDY: And as a- as a brand,
ANDY: we are exposed to all of the customers of that particular delivery app.
ANDY: So, if you go to UberEATS or Postmates,
ANDY: you're getting all those customers who log in every day to see
ANDY: your brand and that's different than just your brands customers,
ANDY: it's the delivery service customer.
ANDY: So technology is really driving sales.
ANDY: It's not replacing employees.
ANDY: Because our growth is up so much,
ANDY: our employee count is up.
ANDY: And so, you know, may- maybe less people are taking orders,
ANDY: but more people cooking burgers.
Tim Stenovec: Andy, earlier in the show we talked about HelloFresh going public in Frankfurt.
Tim Stenovec: We talked about Blue Apron a lot.
Tim Stenovec: We talk a lot about Meal Kits,
Tim Stenovec: Amazon getting into it.
Tim Stenovec: Albertsons buying Plated.
Tim Stenovec: How do you think- How do you think about Meal Kits?
Tim Stenovec: Are you concerned at all that the rise in Meal Kits will uh,
Tim Stenovec: will, will affect traffic to your stores?
ANDY: No. I mean lo- look, people are gonna,
ANDY: people eat what they want to eat.
ANDY: Consumers are very, very definite in their choices.
ANDY: They know what they want to have.
ANDY: And when you want a burger or shakes or a fries,
ANDY: you're going to come to Fatburger whenever you can,
ANDY: because we know the quality of our product stands out.
ANDY: And, and I really don't think that's- it's competitional,
ANDY: it's an entirely different business.
Tim Stenovec: All right, Andy. Thanks for- for joining us.
Tim Stenovec: Good to see you, and congrats on the IPO today.
ANDY: Thank you so much. Thanks for having me. See you again soon.
Tim Stenovec: All right. That's Andy Wiederhorn, founder and CEO
Tim Stenovec: of FAT Brands joining us live on Chadder.
Tim Stenovec: He is Live at the Nasdaq market site.
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