Q3 2024 FAT Brands Inc Earnings Call
Good afternoon ladies and gentlemen.
Thank you for standing by. Welcome to the Fad Brands Inc. Third Water 20-24 earnings conference call. At the same, all participants have been placed in the Listen Only mode. Please note that this conference is being recorded today, October 30, 20-24.
On the call from Fartherlands, Chairman of the Board, Andy Wiederhorn and Kuick, Chief Executive Officer and Chief Financial Officer, Ken Kuick.
This afternoon the company made a third quarter 2020 for financial results publicly available. Please refer to the earnings release and earnings supplement. Both of which are available in the investor section of the company's website at www.FadPlan.com.
Each contains additional results about the third quarter.
But before we begin, I must remind everyone that part of the discussion today will look at what we have done.
The forward-looking statements are not guarantees of which performance and therefore, Andrew Lange should not be placed upon them. Actual results may deformatively from those indicated by these forward-looking statements due to a number of risk and uncertainties.
The company does not undertake to update these forward-looking statements at a later date. For more details, discussion of the risks that could improve your operating results and financial conditions, please see today's earnings release and recent SEC filing.
During today's call, the company will also discuss non-gap 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 gap. Reconciliation to comparable gap measures are available in today's earnings release.
I would now like to turn the call over to Andy Wiederhorn, Chairman of the Board. Please go ahead.
Thank you, operator. Let me start by expressing my gratitude to our exceptional team members, French I.D.s and employees.
Their commitment to Fapprends continues to fuel our success and I'm very encouraged by what we are accomplishing together.
Over the last three years, we have expanded our brand portfolio to include 18 distinct concepts while our footprint has increased tenfold now encompassing over 2,300 locations open or under construction, across more than 40 countries and 49 US states or territories.
The results we will discuss today showcase the strength of our multi-concept approach. We are enhancing operational efficiencies through our scale. We are providing a strong backbone for each brand through a shared services model, and we are fueling our expansion through our deep franchising acumen.
By combining these elements, scale advantages, shared resources, and franchise expertise, we've built a robust platform that will continue delivering value as we further grow the company over the long term.
Now let me briefly highlight our financial performance for the third quarter.
Total revenue grew 31.1% to 143.4 million dollars up from $109.4 million in the same quarter last year.
This significant growth was primarily fueled by our strategic acquisition of Smokey Bones in September of 2023. We achieved system-wide sales of $600.7 million in Q3.
Marking a 6.4% increase year over year.
A Justin Ebedo, was 14.1 million compared to 21.9 million in the corresponding quarter last year.
Over the last few years we have been busy executing on our three main strategic pillars, organic growth, growth by acquisition, and increasing cookie dough and dry mix production at our Georgia-based manufacturing facility.
Let me provide brief updates on each strategic pillar.
From an organic growth perspective, we opened 22 units during the quarter, bringing our year-to-date openings through Q3 to 62 units, and in fact, we've already opened 9 units in this quarter, bringing the total to 71 units year-to-date as of today.
Looking to the full fourth quarter, we planned to open approximately 40 units, any in the year with over 100 new units.
Our development pipeline remains healthy with signed agreements to open approximately 1,000 new units in the coming years.
Once fully operational, these additional units are projected to incrementally contribute 50 to 60 million dollars to our annual adjusted EBITDA. This substantial increase in earnings will organically reduce our leverage over time in enhancing our balance sheet.
We continue to see significant traction by emphasizing our focus on digital marketing initiatives, which I'll go into in greater depth in a minute. And also on establishing value perception in terms of delivering and outstanding guest experience for our customers.
Further, we are prioritizing growth within the polished casual dining segment, specifically to impeach our most rapidly expanding concept.
Twin Peak locations continues to perform very well. Company operated lodges continue to achieve average unit volumes of approximately $6 million annually, with select, high-performing markets seen AUVs materially higher in the 9 to $14 million range.
During the quarter, we strengthened 20th President in South Carolina, opening in Fort Mill, our fourth lodge in the state. In August, we opened in Terral, Texas, our tent lodge in the Dallas Fort Work Market. Most recently, in October, we ventured into a new market with our first northern Nevada lodge in Reno.
As you know, our acquisition of Smokey Bones last year was strategically designed to fuel 20's rapid expansion. We see great value in converting approximately 30 Smokey Bones locations into 20 peaks over the next several years.
This conversion process offers significant advantages, notably reducing construction time by about 18 months compared to building from the ground up.
In September, we completed our first Smokey Bones to Twin Peaks conversion in Lakeland, Florida, marking Twin Peaks 15th Lodge in our top performing state. Growing the sales and this location from 3.6 million in 2023 as a Smokey Bones.
to a current annualized run rate of approximately $8.3 million as a twin piece.
7 additional conversions will take place throughout 2025, 5 corporate and 2 franchise with many more converting in 2026.
Today, Twin Peaks has 115 lodges across the U.S. and Mexico, and we plan to open another 19 lodges in 2025, including the seven Smoky Bones conversions that I just mentioned. Five of those 19 units will be corporate stores, and 14 will be franchised.
The expansion represents a 42% growth in unit count since our 2021 acquisition and a 62% total unit growth including the planned 2025 stores. This underscores the brand's strong market performance and our effective growth strategy.
Over the coming years, the Twin Peaks development pipeline calls for more than 100 additional restaurants which could potentially drive system-wide sales to more than $1 billion.
To fuel Twin Peaks sales we continue to invest in menu items that move the needle such as our new game day menu which features old globally inspired twists on classic dishes such as chicken tikka flatbread and a new wing sauce spicy chili crisp.
Twin Peaks also continues to work with the veteran-focused nonprofit Tunnel to Towers highlighting our commitment to our passionate fan base and a cause they care about.
our nation's veterans. Twin Peaks recently raised $65,000 for the cause, increasing its total charitable contribution to over $435,000 to date for Tunnels to Towers.
As you're aware, Twin Peaks and Smokey Bones, as a combined entity, took a significant step towards becoming a stand-alone public company this past May. We confidentially submitted a registration statement to the Securities and Exchange Commission initiating the process to achieve public reporting status.
While the timing and the size of any transaction is subject to market conditions and other factors, we are working diligently to expedite a successful transaction, and we hope to provide you with further updates in the coming weeks.
As previously discussed, we view this potential IPO or alternative transaction as a strategic opportunity to unlock value for fat shareholders.
Our plans for the proceeds remain focused on two key areas, deleveraging our balance sheet and funding the construction of new restaurants.
We are also in the process of refinancing TwinPeak's securitization debt prior to any IPO or other transaction. This move is designed to optimize our financial structure as we prepare for this potential transition. Again, we expect to provide an update soon on this subject.
Another area of growth we've been leveraging is co-branding. We've long recognized the power of co-branding to enhance both growth and customer experience.
A prime example of this strategy's success is our Great American Cookies Marble Slab ice cream co-brand initiative. Since launching the pairing in 2014, there are now over 160 Great American Cookies and Marble Slab creamery locations worldwide.
Most recently, the co-branded concept added to its presence in Texas with openings in Sugar Land and Louisville.
We also just surpassed 55 locations in Georgia with our most recent Atlanta area opening.
Building on this success, we took a significant step in September by introducing an innovative co-branded online ordering platform for Great American Cookies and Marble's Lab Creamery. In collaboration with partners 3OWL and OLO, we set out to create a best-in-class digital experience.
The highlight of this new platform is our groundbreaking customizable 3D cookie cake filter, a first of its kind in the industry.
This digital tool improves the customer's experience by offering real-time design capabilities. Users can now visualize their creations as they experiment with various icing colors, flavors, and personalized messages. The result is not just an improved guest experience, but also enhanced order accuracy for our stores.
While still in the early days, since launching this platform, we are seeing higher average order values and improving online conversions.
Looking ahead, we plan to extend this great American cookie's cookie cake builder to physical locations in the form of self-serve kiosks and select stores by early 2025.
As part of our ongoing digital transformation, we also launched a new loyalty program and app experience for Great American Cookies and Marble Slab Creamery. The app seamlessly integrates ordering and rewards across both brands for guests, driving guests towards higher average check size.
We're also seeing great success with our co-branded Fat Burger and Buffalo's Express locations. Most recently we opened the first co-branded Fat Burger and Buffalo's Express in Puerto Rico located in Plaza Carolina, the island's second largest shopping center.
This is the first of 10 locations set to open in Puerto Rico over the next several years. We have more than 100 co-branded Fat Burger and Buffalo's Express locations open today.
We are building momentum with our tri-branded model of Fatburger, Buffalo's Express, and Hot Dog on a Stick, recently opening our second tri-branded location in the Los Angeles market.
We continue to see growth at Fazoli's. In August, we opened our eighth Fazoli's location in the state of Georgia.
We recently signed a new development agreement to bring Fazoli's back to Utah with five new locations set to open in the next five years.
The first unit is scheduled to open in Saratoga Springs in 2025 and future openings are slated throughout Salt Lake City and Utah counties.
Also worth noting is QSR Magazine's recognition of Fazoli's on their best restaurant franchising deals list for 2024.
In addition to this recognition, 13 of our restaurant brands were recognized on Franchise Time's Top 400 list, which ranks the largest U.S.-based franchise systems by global system-wide sales.
Non-traditional venues and international markets are important growth areas for the company as well.
To help accelerate this expansion, we strengthened our development team with two new hires this quarter. Amy Harrison joins us as Senior Vice President of Non-Traditional Development, bringing a fresh perspective from her experience with Papa John's International and Penn Station East Coast Subs.
And based in Hong Kong, Mayo Hood joins us as Vice President of International Development, leveraging his international knowledge from his previous role as Managing Director at Subway Greater China, where he was key in driving forward the development of over 4,000 locations across the area.
Menu innovation continues to play a part in our growth strategy as we are committed to enhancing menu items for guests across our brands.
Recently, Marble Slab Creamery and Great America Cookies added a fall-inspired Pumpkin Spice Latte Ice Cream and Caramel Churro Cookies LTO to their menus.
To address the growing demand for occasions and catering, Pretzel Maker debuted a new shareable item, Bucket of Bites, which includes approximately 120 pretzel bites served with six different sauces.
Hot Dog on a Stick unveiled an all-new lychee lemonade. Currently, Hot Dog on a Stick's classic hand-stomped lemonade makes up 40% of daily product mix.
We are also committed to creating innovative lemonade offerings to further position the brand as a go-to spot for fresh lemonade.
In terms of acquisitions, we continue to assess brands with growth potential that complement our existing portfolio.
prioritizing franchise brands with strong momentum and proven market traction rather than brands that require a turnaround.
While the market is starting to transition in our favor, we continue to remain selective with acquisitions, ensuring that they align with our business model.
Moving on to our third strategic priority, leveraging our Georgia-based manufacturing facility, which provides pretzel mix and cookie dough for several brands. During the third quarter, our manufacturing facility generated 3.5 million of adjusted EBITDA on 9.5 million in sales.
We maintain that our factory business is in its early stage of growth today, operating at only about 40 to 45 percent of its capacity, compared to 33 percent of acquisition three years ago.
We continue to enter RFP processes and aggressively pursue avenues to utilize our remaining excess capacity.
Now, I'd like to provide you with an update on our Fabranz Foundation. The Foundation continues to make incredible strides with its grant giving.
Through September, the Foundation has awarded over 50 grants, which has surpassed the number of grants that were awarded in 2023.
Additionally, the board has formed a 17-person committee team to help with a variety of tasks including events and amplifying fundraising efforts. This added support will ensure we continue to make a lasting impact in FAT Brands communities.
Further illustrating our commitment to giving back, this quarter FAPRAN has announced a new partnership with DonationScout, an enterprise software solution that streamlines restaurant fundraising efforts for operators and their guests.
The new platform creates a more seamless experience to host additional community events for our franchisee base.
The pilot program, which launched at Fatburger and Roundtable Pizza, far exceeded DonationScout's average pilot donation programs, affirming the community service-focused nature of our brands in addition to the overall benefit of the platform itself.
In conclusion, FAP Brands continues to position itself for growth. We have a strong pipeline of organic growth opportunities, and we also plan to monetize our polished, casual brands through a potential IPO or alternative transaction.
Together, this will enhance our balance sheet and create value for our shareholders.
I look forward to further updating you about this in the near future. If you can't tell, I'm excited about creating value for our shows and for the future of FAPRANs. With that, I'd like to hand this call over to Ken to discuss our financial highlights from the third quarter.
Thanks, Andy. I'd like to now review our total performance.
Total revenues increased 31.1% to $143.4 million driven by the acquisition of Smokey Bones in the fourth quarter of 2023 and revenues from new restaurant openings.
Costs and expenses increased $45.8 million or 44.6% in the third quarter.
included in cost and expenses general and administrative expense increased ten million dollars or 41 percent to thirty four point five million dollars
from $24.5 million in the prior year period, primarily due to the Smoky Bones acquisition and increased professional fees related to penning litigation.
Cost of restaurant and factory revenues increased to $96.8 million.
compared to 59.2 million dollars in the prior quarter, again primarily due to the Smoky Bones acquisition and also a higher company on restaurant sales.
depreciation and amortization expense increased 3.7 million dollars to 10.7 million dollars
in the year-ago quarter, again, primarily due to the Smoky Bones acquisition along with depreciation of new company-owned restaurant property and equipment.
Advertising expense varies in relation to advertising revenues, and decreased to $10 million from $11.7 million in the year-ago period.
Total other expense net for the third quarter of 2024 and 2023.
was $35.8 million and $32.6 million, respectively, which is inclusive of interest expense of $35.5 million and $29.7 million, respectively.
Net loss was $44.8 million or $2.74 per diluted share.
compared to a net loss of twenty four point seven million dollars or one dollar fifty nine cents per diluted share in the prior year quarter.
And on an as-adjusted basis, our net loss was $40 million, or $2.34 per diluted share, compared to $18.9 million, or $1.14 per diluted share in the prior quarter.
And lastly, EBITDA was $5.3 million compared to $10.8 million in the third quarter of 2023, while adjusted EBITDA for the quarter was $14.1 million compared to $21.9 million in the year-ago quarter.
And with that, Operator, please open the line for questions.
Speaker Change: Thank you. We will now be conducting a If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
You may press star 2 if you would like to remove your questions from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please, while we pull for questions.
The first question comes from the line of Alpenstump with Loop Capital. Please go ahead.
Great, thank you. Good evening, Amy, Ken, thanks for taking my question.
I want to ask you about the conversion, obviously, that I think you mentioned, you know, took place in September in Lakewood, obviously, you know, with Smokey Bones, still, obviously, just over six weeks into it, but, you know, how's that gone so far? And, you know, have you learned anything either way as far as, you know, what the potential could be for, you know, obviously, what will, you know,
Find out before the conversion is down the road.
Yep, Alton, thanks. Look, we're extremely optimistic about the conversions of these Smoky Bones into Twin Peaks. This first store has been a huge success. To go from 3.6 million in sales to 8.3 million in sales exceeds our expectations and hopes.
A conversion process was timely. Joe Hummel and his team at Twin Peaks executed beautifully to get it open on time.
So the cost is just a little bit higher, but you know the result is is outstanding
Alton: Got understood, thank you. And then, you know, I thought I'd touch on, you know, the Twin Peaks brand. I think you mentioned 9 to 14 million as far as, you know, some outperformers. I think that number's been 9 to 12 million in the past. You know, with that, you know,
Is it safe to say that that, you know, brand is outperforming your, you know, your overall system as far as a, you know, comp standpoint or the, or, you know, you know, or just overall same store sales versus what you saw, you know, in your other 17 brands during the quarter?
Speaker Change: Well, I mean, you can look at Twin Peaks multiple different ways. You can look at over a two or three year period of time and it's just had outstanding same-source sales.
a year ago and two years ago, because we keep adding units. I mean, we've grown, as you know.
42% in
total units, and our system-wide sales have grown significantly.
Speaker Change: And, you know, the growth for 2025 is already laid out, 19 new stores, and 2026 on top of that.
We're very, very happy with the performance at Twin Peaks, and I just can't wait to get more stores open sooner.
Speaker Change: Great, sounds great. Thanks so much for the help. I will hop back into the queue.
Speaker Change: Thank you.
Thank you. Next question comes from the line of Joe Gomes with Noble Capital Markets. Please go ahead.
Good morning, good afternoon, thanks for taking the questions, Andy.
Joe Gomes: So I kind of want to see if you can maybe kind of square the circle for me here.
You know, if I'm looking at the operations...
restaurant sales were down sequentially even though you know you're talking about you know how good Twin Peaks is doing
You know, nine-month adjusted EBITDA number is at, I think, $48 million versus $64 million last year. And this is with the addition of, you know, Smokey Bones' adjusted EBITDA numbers, which I think you said should add about $10 million.
So, I'm just trying to get a better handle on what's happening on the operating side, that there's a lot of good things, you know, seem to be occurring, but not being reflected in the numbers from where I can see.
Now, I think that's a fair point. It's really attributed to a few things. Remember, Smokey Bones is an entirely corporate-owned system.
Joe Gomes: and sales have been down at Smokey Bones.
Joe Gomes: significantly since the time of our acquisition and even before that and so as we can't convert them fast enough but the faster we convert them we're going to see huge pops and sales and success but Smokey Bones by itself has not performed on a standalone basis.
$10 average check number. There's nowhere for that QSR customer to go when prices are up and gas prices were up and things like that and so they felt it in terms of traffic and that directly relates to you know sales and profitability for company-owned
stores. I think that there'll be some...
It struggled there, and those units need CAPEX.
It makes more sense to convert them faster than to spend capex on the old units that are identified for conversion when it won't work. So we're dealing a little bit with just that tweener time period here as we shift to more of a franchise model and we get those stores converted.
Okay, thank you for that. And on the factory, the manufacturing facility, revenues there have been kind of flat over the past year or so. And I know you've spent a lot of time and effort in looking for third-party customers.
And you mentioned tonight, you know, you've got a lot of RFPs out there, trying to get a, again, you know, a little more detail on, you know, when you think some of these RFPs might start coming in to start increasing the utilization of the factory.
Well, two things are going on there. And again, it's a fair question. It's been a tougher road.
to go down in terms of third-party manufacturing because we've really wanted a high-margin manufacturing business rather than just any manufacturing business if we're going to use up capacity. We know that over time...
Joe Gomes: other brands within FAPRANs will take up some of that capacity or utilization because we've started selling cookies in many of the other brands.
Joe Gomes: We're also now just completing a large national test with a couple of other distribution centers where we think it'll significantly increase the volume of cookie production, cookie dough production that goes through the facility. So hopefully.
by sometime in Q1, we'll be able to announce a big rollout of a third-party program that will have real legs to it. We're at the end of the test period now.
Speaker Change: okay great and then one last one for me and I'll get back to you
So, you mentioned about, you know, refi the debt associated with Twin Peaks. What about the other debt that is on the balance sheet, the preferred stock? Anything new on trying to refi those or...
I'm getting some better rates.
Speaker Change: Well, so sequentially let's address these. So the Twin Peaks deal is in the middle of refinancing now and hopefully we'll announce a completed transaction in the coming weeks. It's just being documented so we hope to announce that soon. It's not done yet but we expect it to be.
You remember that these rates are locked in, for the most part, at 2021 rates with a slight uptick as the bonds went past their anticipated call date and we didn't call them. But they're still far below where current rates are. So
this public listing and we hope to be able to talk more about that in the very near future. Next is Fazoli's which
Speaker Change: also has.
a Q1 pending amortization date and we've already begun discussions with our bondholders about extending or refinancing the Fusoli's debt facility very soon. So I anticipate that that gets done also before sometime in Q1.
then when we look to our next couple of securitizations, they actually don't have rapid amortization dates until July of 2026.
and they're locked in at 2021 rates. That being said, we want to address that sometime in 2025. So I think what that also leads to is it really helps our cashflow because right now we're amortizing the entire $1.2 billion debt portfolio by about 2% a year and not having to do that saves us a significant amount of cash.
which is used to pay down principal, but it still chews up cash.
on the Twin Peaks listing.
Speaker Change: And then we'll focus on Fazoli's next.
And then, you know, we've always indicated that the use of proceeds on the Twin Peaks side will be to delever that business, that means pay down bonds.
and build more company-owned stores, the conversions and some new locations.
and then FAT will look to monetize its investment in Twin Peaks over time and use that to pay down other debt and deleverage.
overall debt at fat brands and so I would expect that to happen beginning later in 2025 and that includes the redemption of some of the preferred stock that's expensive and that we need to redeem it's just taking a long time because of market conditions. So very very much focused on all of those things that you just mentioned over the next 12 months.
Great, let me add one more if I may. Awesome job on the development deals year to date.
Speaker Change: Where are you getting or seeing the most interest from franchisees in terms of signing these development deals? What brands?
It's it is spread out, which is good You know, it's always a healthy sign of a franchise system when existing franchisees
Speaker Change: and new franchisees are coming in and buying the rights to develop more stores. So we've sold, you know, a couple hundred units to date, which is very positive, and we've exceeded already what we did in all of last year. We're about to exceed. So all that's positive. We've sold a lot of roundtable pizzas, a lot of fazolis.
Twin Peaks continues to sign up new brands.
The Cookies and Ice Cream brands and Fatburger Johnny Rockets are all developing new units. We're not seeing a lot of growth in the casual dining space with Hurricane, Buffalos, or Native Grilling Wings. We're not seeing it in Ponderosa and Bonanza. You wouldn't expect us to. Hot Dog and a Stick is sort of popular in some of these non-traditional venues.
Speaker Change: and Roundtable Pizza is just super solid and so you've got a bunch of interesting new development going on with seven or eight of the brands and you know the other brands are sort of just cruising along.
Speaker Change: Great, thanks. I'll get back in queue.
Speaker Change: Thank you.
Thank you. Next question comes from the line of Roger Lipton with Lipton Financial Services. Please go ahead.
Yes, hi Andy, thanks for taking my question. A number of subjects I was going to touch on were touched on by...
Roger Lipton: by Joe and the others, but one general question about comps, of course, over the scope of the portfolio, and then I have a couple of other questions on Twin Peaks. So what can you tell us about, with all of your breadth of brands,
Speaker Change: It's an interesting commentary on the industry as a whole. What's been the sequential trend over the last, say, six months? I think down 2.3 for the quarter, I think you said. But has it improved or what in the course of the quarter?
It has improved. In fact, last week, a week ago, we were down as a system across all 18 brands, down 0.1%.
very much an improvement and that's been sequentially happening week after week where sales are much better. It's just there's only, you know, some ten more weeks.
before the end of the year, and so I don't know that that...
Roger Lipton: In the last week, I can look at my schedule and see like 75% of our 18 brands are positive same-store sales.
And so it's just, can we bring that year-to-date negative? And this is really because Q1 was just so difficult for so many of our brands, given their geography and what happened with weather.
that you're trying to climb out of that, but it's not been the last couple of quarters. It's really just, you know, climbing back from, in total, climbing back from where we were at the beginning of the year. So we're seeing things move in the right direction.
On the QSR side of things, it's all about traffic, given price, and I don't think the consumer is willing to take any more price. They're fatigued by price, so you've really got to make it up with guest experience to keep the traffic flowing and keep that guest coming back for repeat visits.
And I think that's a big focus that everyone in the industry needs to be paying attention to, and I think they are.
Speaker Change: Okay, that's helpful. Relative to Twin Peaks...
Speaker Change: Generally, from what I'm reading in the industry, the sports bar segment is rather troubled. I mean, I'm reading about hooters and bombshells and walk-ons, and they're all closing stores.
Some of them, the chains may go away. Does that give, are you seeing acquisition possibilities?
Speaker Change: We'll end Friday's event.
Speaker Change: and Fridays and some of these others, you know, I think
We've looked at all of them. You know that we see everything and we look at everything and
No, it hasn't been that hard to keep my hand in my pocket.
Speaker Change: as we looked at some of those, because their performances have just been terrible. And we're not in that, we're at the other end of that spectrum.
is killing it. It has come way, way back. We're not seeing those kind of trends. We have the guest experience.
which is off the charts, top in class, best in class for intent to return to the restaurant.
So consumers are happy. There's still, you know, everyone's still price sensitive. You know, we fortunately have that barbell pricing where you can get a $5 beer or a $35 whiskey, depending on how much you want to spend. But you can manage your budget there. It's just, you know, it's traffic. Are we getting that frequency?
three times three times, you know a week instead of you know, two times a week That's really what everyone focuses on and that's you know, that's really guest experience and having that pricing available So we're very fortunate
It doesn't come without hard work, but we have really great results there and we're just not in the same camp as some of the other guys and I feel their pain because I'm not sure there's a lot you can do to turn around some of those other brands.
Conversion process, the construction time savings, and the fact that you've got all these locations in hand rather than having to negotiate through brokers and so forth. But can you save any money from the cost of the construction when all is said and done?
while you're holding it. And so we are saving money that way for sure, and it also costs less money to do a conversion than it does to do a ground-up build, even if you exclude the land. So we save money in both places, and then we, you know, we save time. So...
We're very happy with the conversion results. It has been a little bit more expensive than we hoped it would be. It's not...
We weren't blind to it when we bought the brand, but we were hopeful that wouldn't be quite as much capex when you you know peel back the skin of the building, but You know, there there's definitely some deferred maintenance and it's it's it's a full budget. It's not a you know under budget remodel
Right. And I think you've made reference in the past, and I just wanted to refresh my recollection, that quite a few of the Twin Peaks franchise locations are coming from existing franchisees.
Is that still the case? And with a pretty high number, as I recall.
You know, a couple dozen, somewhere between 20 and 30.
Speaker Change: Twin Peaks franchisee groups. A few of them, you know, half a dozen or so are new and haven't opened stores yet, but many of them are existing franchisees who have development obligations who are building more stores on their schedule.
And some of those existing groups are buying out other groups who are smaller and want a liquidity event for one reason or another. So that's also always a good sign when you see an existing franchisee group step up and take on more territory.
Speaker Change: and want to develop more stores. We've expanded some of our corporate territory to include the West Coast of Florida as we've started to develop some of the smoky bones in the mid-Atlantic area we're looking at as well.
for corporate areas other than, you know, just Texas and Colorado and some of those markets, but it's really It's it's a if you think about all of that where we have
Speaker Change: Group of franchise owners that you have to deal with you It's much easier to move the needle than when you're dealing with 800 So I think the Twin Peaks is really well positioned to grow We know that when you see value created in the restaurant space right now brands that have
committed unit development that can really point their finger at absolute units that are going to be built next year and the year after. Those are brands that are getting the most value, and so we're hoping that we can unlock that value with this development pipeline and with this pending public listing.
Twin Peaks debt and and the adjustment and some of the other debt over the next year or so. Can you give us any
reasonable approximate indication when the company can get to cash flow breakeven.
is the amortization of the debt. If we weren't amortizing the debt, that's about $25 million a year that we save. And so as we refinance all of our asset-backed securities over the next 12 months, that amortization goes away.
The rates aren't going to change much. They might come down a little bit if we wait. We'll probably get into the same rate, so that's a positive.
Speaker Change: second
Speaker Change: in Q1 or Q2 from insurance carriers on legal expense. But ultimately, the legal expense should go away in 12 months or so as we continue to battle this out and hopefully resolve.
the legal issues that we're facing. And that's the only thing. So really by, you know, I would say 12 months from now, by the end of 2025, we should be pretty close to a run rate that is breakeven cash flow wise, and certainly having created a tremendous amount of value with
Speaker Change: Twin Peaks and starting to unlock that.
and when you say
Does that break even? Including dividends.
compared to everything else, so, yes, including Divan.
Speaker Change: Okay, thanks very much. That's all very helpful.
Speaker Change: Thank you.
Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to Andy Wiederhorn for closing comments.
Thank you, operator, and thank you everyone for joining us tonight. Have a good evening.
Speaker Change: Take care.
Speaker Change: Thank you. This concludes our today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
The following film is a work of fiction. Any resemblance to anyone, living or dead, is coincidental and unintentional. Any resemblance to anyone, living or dead, is coincidental and unintentional.
Speaker Change: Thank you for watching!