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Fat Brands

Fatburger’s CEO on why a mini-IPO

FAT Brands wants to raise $20 million as it plans to buy other concepts

The parent company of Fatburger wants to get fatter.

Los Angeles-based FAT Brands said on Thursday that it is planning to raise $20 million from investors through a Regulation A+ initial public offering, also known as a mini-IPO.

CEO Andy Wiederhorn, meanwhile, said the company is on the verge of acquiring a third brand to go along with Fatburger, its flagship chain, and Buffalo’s Café, which it acquired in 2011.

And that won’t be the last acquisition, either, as Wiederhorn envisions a publicly traded, mostly franchised operator of multiple, global brands.

“It’s just a good, logical step,” Wiederhorn said. “The IPO will give us access to capital to continue to acquire brands.”

Fat Brands will run the mini-IPO through Banq, the online division of TriPoint Global Equities. The company will trade on either the New York Stock Exchange or NASDAQ under the ticker symbol FAT. Wiederhorn said it would be the first Regulation A+ offering that will pay a dividend.

Regulation A+ offerings were made possible by the 2012 JOBS Act and enable small companies to raise funds from their customers or other small investors. Fat Brands’ vow to raise funds in this manner makes it the second such restaurant company in recent weeks to announce a mini-IPO. Fat Brands expects to start selling stock after Labor Day.

Last month, the Bobby Flay-owned burger chain Bobby’s Burger Palace announced plans to raise $15 million through a Regulation A+ offering.

Fat Brands franchises more than 200 restaurants in six states and 18 countries. Its largest is the burger chain Fatburger. The company bought Buffalo’s Café in 2011, a casual dining chicken wing chain. The next year it developed a fast-casual version of the chain, Buffalo’s Express, which now has 70 locations, many of which are cobranded with Fatburgers.

The company has envisioned a multi-brand strategy since the Buffalo’s acquisition. Wiederhorn said the company would aggressively offer franchise rights to its brands to international franchisees.

“When you look at what consumers like in all of these international markets, they love American brands,” Wiederhorn said. “They love American burgers, shakes and fries. But they also love pizza, steak, coffee and dessert. We believe we can market American brands to franchise partners around the world.”

In addition to the stock sale, Fat Brands is planning to borrow $30 million. The combination will give the company $50 million for acquisitions this year and the next year.

“This gives us capital to acquire more brands,” he said. “We don’t want to be highly levered. And we don’t want to have a single investor. We’re only taking a small piece of the company public. We’re still the controlling parent company.”

The Securities and Exchange Commission must qualify Fat Brands’ offering. The company expects to announce its brand acquisition some time in the next two to three weeks when it files its IPO document.

Wiederhorn said he is not afraid of the public company process, its reporting requirements or dealing with a lot of investors. “I’ve run two public companies before,” he said.

And he also believes that selling stock to customers is a better strategy than selling a chunk of the company to a private equity firm or another investor.

“We want our sponsorship base to be amongst the general public,” he said. “We don’t want to be with just institutional investors.”

And Wiederhorn noted that operating under private-equity ownership doesn’t free companies from routine reporting and calls from worried investors.

“If somebody’s telling you that when you’re owned by private equity that you don’t have to report quarterly and answer calls, they’re wrong,” Wiederhorn said. “There may be more questions and more calls.

“We’ve had plenty of private equity knocks at the door. We just think this is a great way to let customers and franchisees participate in our growth.”

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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