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Elevation Burger parent, Fat Brands, agrees to purchase Johnny Rockets chain

Deal adds 325 units to Fat Brands’ empire

Fat Brands entered into an agreement to acquire the Johnny Rockets chain from affiliates of Sun Capital Partners, a private equity firm, for about $25M. The deal will be funded through a combination of cash and an amount obtained through a securitization facility. With the addition of Johnny Rockets, Fat Brands will tally more than 700 company and franchise restaurants globally and post revenues in excess of $700M.

Los Angeles-based Fat Brands remains on a buying spree to bulk up its beef-heavy empire. It acquired fast-casual Elevation Burger last June and Yalla Mediterranean in December of 2018. Johnny Rockets, which was founded in 1986 not far from Fat Brands’ corporate offices, built its reputation on diner-quality burgers and ice cream shakes, set in a 1950’s decor.

Sun Capital acquired Johnny Rockets in 2013 for an undisclosed amount. Fat Brands should complete its purchase of the 325-unit Johnny Rockets chain by September of this year.

“Similar to Fatburger, Johnny Rockets got its start in Los Angeles, and we couldn’t be more pleased to add another true staple in our home city to our portfolio,” said Andy Wiederhorn, Fat Brands president and chief executive. “This acquisition is a transformative event for Fat Brands in terms of scale and brand awareness. We see a lot of synergy with Johnny Rockets and our current restaurant concepts and we are eager to take the brand to new heights.”

There’s very little geographic overlap in the footprint of Johnny Rockets and Fat Brands, according to Wiederhorn’s remarks during an investor conference call, paving the way for growth in new markets and increased potential for multi-concept Fat Brands franchisees.

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The restaurant company expects to save on food & paper costs across its corporate and franchisee systems based on a projected $250M spend, leveraging significantly-increased purchasing power.

Not only will the number of units nearly double as a result of the purchase, but so too will Fat Brands’ adjusted EBITDA performance, according to Wiederhorn. Furthermore, as part of the integration of Johnny Rockets, Fat Brands will eliminate corporate redundancies and leverage its operations and marketing teams to create a more profitable 2021.

He anticipates Johnny Rockets will benefit from the in-house marketing prowess of Fat Brands. The diner chain should reap the rewards of a lower marketing expense and more effective promotional strategies.

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And Fat Brands, which has established virtual restaurant brands with third-party providers, expects the acquisition to also benefit franchisees in providing a path to increase both actual and virtual concept growth. In April, the company brokered a deal with Epic Kitchens for ghost-kitchen expansion in Chicago. At the time, Fat Brands’ restaurant concepts operated 20 virtual brands

Duff & Phelps served as financial advisor to Sun Capital Partners, while Morgan, Lewis & Bockius LLP provided legal counsel. Loeb & Loeb LLP acted as legal counsel to Fat Brands and Andersen Tax LLC provided tax advisory services.

Under Fat Brands, Johnny Rockets will join a growing portfolio of brands, including Elevation Burger, Buffalo’s Cafe, Buffalo’s Express, Fatburger, Hurricane Grill & Wings, Yalla Mediterranean and the Ponderosa and Bonanza Steakhouses.

Photo credit: Johnny Rockets (featured preview image)

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