One of the nation's largest restaurant groups has filed for bankruptcy protection with plans to close at least 32 of its restaurants in 14 states.
Fat Brands Inc., Twin Hospitality Group and other affiliates filed for Chapter 11 bankruptcy protection this week in the Southern District of Texas, Houston division, and the group wants to exit some of its real estate leases and eliminate roughly $1.4 billion of debt. In outlining its operations to the court, Chief Restructuring Officer John DiDonato said the business has about 2,200 company-owned and franchised locations open or under construction, making it "one of the largest restaurant companies in the United States by number of locations."
The 18 brands include eateries such as Twin Peaks, Marble Slab Creamery, Great American Cookies and Johnny Rockets. Most of the restaurant leases up for rejection are tied to the Smokey Bones concept under the Twin Hospitality Group flag, of which Fat Brands owns a 95% stake after spinning off the entity a year ago.
Other rejected leases are connected to brands such as Yalla Mediterranean and Johnny Rockets. The lease rejection motion is subject to bankruptcy court approval.
Even though most of the debtors' businesses have posted positive earnings, DiDonato said the business has "experienced a series of challenges," including debt service obligations becoming "increasingly unsustainable due to ratcheting penalties."
Since 2022, the debtors have paid over $72 million in penalty interest and amortization payments, he added, with the businesses also being affected by "inflationary pressures, significant legal fees stemming from various governmental litigations and industry headwinds."
The debtors "exhausted their options for funding the continued operations of the business," he said in a declaration to the bankruptcy court.
As of the petition date, Fat Brands and Twin Hospitality employ about 7,500 workers. Most of the employees, or about 5,600 workers, are employed in Twin Peaks and Smokey Bones restaurants owned by Dallas-based Twin Hospitality.
Twin Peaks Restaurant, which touts itself as a sports lounge, has 114 locations in the United States and Mexico. Smokey Bones, which serves up cocktails, craft beers and barbecue, has 31 locations in 15 states, according to its website.
Prior to the bankruptcy filing, Twin Hospitality had been seeking to convert Smokey Bones restaurants to more profitable Twin Peaks eateries. As of last September, three such conversions had taken place, the company said. But the plan has seemingly ceased with outright closures of at least 18 Smokey Bones restaurants tied to newly revealed lease rejections.
Here's the addresses of the restaurants in which the company is seeking to reject its leased space:
California: 9516 Culver Blvd. in Burbank; 1813-A Ygnacio Valley Road in Walnut Creek; 5246 Dublin Blvd. in Culver City; 20 City Blvd. E in Orange; 55 Crescent Drive in Pleasant Hill; 3141 Mowry Ave. in Seal Beach; 1781 N. Victory Place in Dublin; 1322 Third St. in Santa Monica; 12420-A Seal Beach Blvd. in Fremont.
Florida: 21733 State Road 7 in Boca Raton; 3400 E. Colonial Drive in Orlando; 809 S. University Drive in Plantation; 6500 N. Federal Highway in Fort Lauderdale; 1430 State Road 436 in Casselberry.
Georgia: 3333 Buford Drive, Suite 1000, in Buford.
Illinois: 6690 E. State St. in Rockford.
Indiana: 10143 E. U.S. Highway 36 in Avon.
Kentucky: 2525 Hurstbourne Gem Lane in Louisville; 7848 Mall Road in Florence.
Massachusetts: 301 Technology Center Drive in Stoughton.
Michigan: 4875 28th St. SE in Grand Rapids; 45001 Schoenherr Road in Utica.
New York: 2007 Walden Ave. in Cheektowaga.
Ohio: 3939 Morse Crossing in Columbus; 512 West Dussel Drive in Maumee.
Pennsylvania: 6050 Robinson Center Drive in Pittsburgh; 252 Montgomery Mall in North Wales; 265 Mundy St. in Wilkes-Barre.
South Carolina: 7250 Rivers Ave. in North Charleston.
Tennessee: 2225 Gunbarrel Road in Chattanooga.
Virginia: 12541 Jefferson Ave. in Newport News; 2601 Prince William County Parkway in Woodbridge.
Most of the restaurant group's eateries are expected to remain open and operational throughout the bankruptcy process. Both Fat Brands and Twin Hospitality are expected to continue trading on Nasdaq with a "Q" suffix during this period, officials said.
Fat Brands CEO Andy Wiederhorn said in a statement that the Chapter 11 process will provide an opportunity to strengthen the capital structure of the companies.
"We are confident that the brand remains positioned for meaningful global expansion in the years to come," Wiederhorn said in the statement.
Twin Peaks was founded in a Dallas suburb more than two decades ago as a direct competitor to Hooters. The restaurant offers burgers, brisket and wings served by a so-called Twin Peaks girl. Rival Hooters filed for bankruptcy protection last April with plans to operate under a pure franchise business model. The company exited from Chapter 11 bankruptcy protection in October.
Twin Hospitality, which purchased eight franchised locations in Florida in November, has also been weighing its franchise model. Last month, the firm expanded with the help of a franchisee in Connecticut.
Beyond the United States, the filing said, the debtors have 670 franchise partners with restaurant operations in 30 countries.
"Our focus in this process remains providing quality service to our customers and supporting our franchise partners and the thousands of corporate and franchise employees," CEO Wiederhorn said.
For the record
Twin Hospitality's legal counsel is Latham & Watkins. The company's investment banker is GLC Advisors & Co. Huron Consulting Services is the financial adviser.