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Financing

Financial roundup: Acquisitions ahead for Fat Brands, better sales for STK, Kona Grill, US Foods

With vaccinations climbing and restrictions easing, normal conditions--sales levels included--are returning at numerous restaurant chains.
Photograph: Shutterstock

The parent of Fatburger is about to add at least two brands to its portfolio.  The high-end steakhouse brand STK is on track to hit $13.5 million in annual sales per unit. And US Foods, the industry’s second-largest distributor, shipped more food to restaurants for Mother’s Day than it has in five years.

By all accounts, normality is breaking out all over.

The quadruple lift of widespread vaccinations, stimulus checks, rampant cabin fever and the easing of restaurants’ seating limits brought a true spring awakening for smaller-cap public restaurant companies in March and April.

Here’s a look at the just-posted financial results for several.

Fatburger’s parent: 2 acquisitions in the works

Acquisition-minded Fat Brands, the franchisor of 11 brands to date, is about to add two more operations to its fold, one of them with multiple restaurant brands, CEO Andy Wiederhorn revealed to analysts and investors Tuesday evening.

“We have nine or 10 different acquisition targets that we're presently evaluating,” Wiederhorn said. “There are two, hopefully, that we can announce during Q2 and possibly another one or two before the end of the year.”

He would not reveal whose tires he’s kicking, but did say the candidates “range from fast-casual to casual, similar to brands that we own that are performing very well.” In addition to Fatburger, Fat Brands runs Johnny Rockets, Buffalo’s World Famous Wings, Ponderosa Steakhouse, Bonanza Steakhouse, Elevation Burger, Yalla Mediterranean, Hurricane Grill & Wings, and a riff on Hurricane called BTW, for burgers, tacos and wings.

Wiederhorn noted that the marketplace is crowded with private-equity buyers, and sellers may still be adjusting to the new realities of a pandemic.

“I've seen founders be much more emotional during 2021, end of 2020, than I expected, some of them fixated on 2019 prices or valuations and really just not ready to make a deal,” he explained.

He added that some owners looking for an exit are reluctant to sell at the moment because they received Paycheck Protection Program funding and want to ensure the loans are forgiven.

Not all of the brands currently in Wiederhorn’s charge are humming. He revealed that 107 restaurants out of a base of 651 are still closed, primarily within Johnny Rockets, Bonanza and Ponderosa. In contrast, the Hurricane and Buffalo’s wing brands surpassed their 2019 sales levels during Q1, with same-store gains of 10% and 9% respectively.

Overall, Fatburger equaled its 2020 Q1 loss of $2.4 million in the first quarter of the current year on revenues of $4.9 million, an increase of 48%.

Parent of STK and Kona Grill: Experiential dining is back

High-end operator The One Group sums up its main attraction as “vibe dining,” a stylish experience that relies on ambience, culinary craft and standout service. As it discovered when the pandemic hit, it’s difficult to deliver those pluses when customers can’t step into a restaurant’s dining room.

But with seating capacities increased in the markets served by One’s polished brands, STK and Kona Grill, “our teams are effectively delivering on all operational, marketing and culinary strategies,” CEO Manny Hilario told financial analysts this week. In addition, “consumers, more than ever as they become fully vaccinated, are looking for a fun and differentiated social time.”

As a result, he said, STK’s April same-store sales jumped 47.4% over the pre-pandemic level of two years ago, and Kona Grill’s comps surged 18.6%. In terms of dollars, sales hit $261,000 per week during the most recent month, while topping $97,000 per week at Kona.

“At STK, we continue to see momentum building in date nights and social events, which has more than replaced the business traveler and corporate private events, a layer of business that we expect to return and further enhance our unit volumes,” said Hilario. He also noted that the resumption of brunch service has been a key sales booster for both brands.

One Group lost $60,000 during Q1, compared with a year-ago loss of $4.9 million. Revenues increased 24%, to $50.5 million.

Corrections: An earlier version of this story inaccurately said that One Group's revenues decreased 24%, when in fact they increased by that measure.  Also, STK's  comp figure for April was 47.4%, not 47.7%. 

US Foods: Independents are buying again

Independent restaurants ordered more cases of supplies from US Foods in April than they did during the same period of pre-pandemic 2019, signaling a rebound for the industry sector hardest hit by the pandemic.

“In markets where local jurisdictions allow more than 50% seating, volume is well ahead of 2019,” US Foods CEO Pietro Satriano told financial analysts. “The recovery that we have seen over the last few months and our rebound in sales from markets that are mostly open gives us the confidence that the industry will fully recover to, if not exceed 2019 case volume levels.”

Of particular note, he added, “The Mother’s Day week that we just concluded on Saturday had the highest shipments to independent restaurants for legacy business of any Mother’s Day week in five years with a 6% jump over 2019 Mother’s Day week.”

Satriano said that case shipments to chain restaurants also topped the levels of 2019 in March and April of the current year.

The distributor lost $24 million in Q1, compared with a year-ago deficit of $132 million, on revenues of $6.3 billion.

 

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