FAT Brands, the parent company of Los Angeles-based burger chain Fatburger and Buffalo’s Cafe and Buffalo’s Express restaurants, has announced plans to go public. It is gauging the interest of potential shareholders through its website and on the crowdfunding platform Banq.
The kind of deal FAT Brands is pursuing, called a Regulation A+ offering, is nicknamed an “IPO lite.” Created by the JOBS Act, Reg A+ offerings allow private companies to raise up to $50 million annually by selling shares to both accredited investors and the general public. FAT Brands said it plans to raise up to $20 million.
FAT Brands is currently in the “test the waters” phase of the offering, in which it collects names and contact information (and investment size) of potential investors. The indications of interest rare non-binding.
The platform FAT Brands is using, Banq, helped medical robotics firm Myomo raise about $8 million from the public and accredited investors in June. Myomo then listed its shares on the NYSE, in a rare instance of a Reg A+ deal landing on a major stock exchange. FAT Brands says it also plans to list on either the NYSE or NASDAQ.
Companies that use Regulation A+ are not required to list on a stock exchange but really can’t avoid it. The securities sold in the IPO become freely tradable, so even if a company doesn’t list on an exchange an investor could take his or her shares to a broker-dealer to sell.
According to the company’s website, it has confidentially filed an offering statement on Form 1-A with the Securities and Exchange Commission but has not yet become qualified.
As of December 2016, 165 companies had filed with the SEC to conduct a Regulation A+ offering. Sixteen of those filings had been withdrawn, and 94 qualified (or approved) by the SEC.
On its website, FAT Brands provides some initial information for investors, including that it plans to pay a 4% annual dividend. It also says that at the completion of the equity offering it will have more than 300 restaurants open or under construction in more than 20 countries, generating more than $300 millionin sales, and “a growth pipeline of another 300 restaurants to be built.”
The company also says that between 2012 and 2016 it achieved compound annual growth rates in net revenue, net income, and EBITDA of 9.9%, 40.0%, and 35.3%, respectively. In that timeframe Its EBITDA margin expanded from 27.2% to 64.3%.
FAT Brands also notes that as a franchisor it doesn’t generally own or operate restaurant locations, eliminating operating risk such as labor costs, real estate, and capital commitments.
TriPoint Global Equities, which owns Banq, will act as the lead managing selling agent and sole bookrunner for the FAT Brands offering.
Photo: Leoboudv, via Flickr, CC BY 2.0