FAT Brands Annual Report 2022

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FY2022 Annual Report · FAT Brands

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 25, 2022

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

Commission file number 001-38250

FAT Brands Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

82-1302696
(I.R.S. Employer
Identification No.)

9720 Wilshire Blvd., Suite 500
Beverly Hills, CA 90212
(Address of principal executive offices, including zip code)

(310) 319-1850
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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Title of each class
Class A Common Stock, par value $0.0001 per
share
Class B Common Stock, par value $0.0001 per
share
Series B Cumulative Preferred Stock, par value
$0.0001 per share
Warrants to purchase Class A Common Stock

Trading Symbol(s)
FAT

Name of each exchange on which registered
The Nasdaq Stock Market LLC

FATBB

FATBP

The Nasdaq Stock Market LLC

FATBW

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨

No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer
x
Emerging growth company ¨

Accelerated filer
¨
Smaller reporting company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No x

The aggregate market value of voting common stock held by non-affiliated stockholders as of June 26, 2022 was

approximately $53.7 million.

As of February 17, 2023, there were 15,316,720 shares of Class A common stock and 1,270,805 shares of Class B

common stock outstanding.

FAT BRANDS INC.
FORM 10-K
INDEX

Table of Contents

PART I

Item 1.

Business

Item 1A

Risk Factors

Item 1B

Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Item 6.

[RESERVED]

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.

Controls and Procedures

Item 9B.

Other Information

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Item 14.

Principal Accounting Fees and Services

PART IV

Item 15.

Exhibits, Financial Statement Schedules

Item 16.

Form 10-K Summary

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein and certain statements contained in future filings by the Company with the SEC may not be
based on historical facts and are “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of
historical facts contained in this Form 10-K may be forward-looking statements. Statements regarding our future results of
operations and financial position, business strategy and plans and objectives of management for future operations, including,
among others, statements regarding expected new franchisees, brands, store openings and future capital expenditures are
forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.

Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and
contingencies including, but not limited to, the impact of the current novel coronavirus pandemic (“COVID-19”), many of
which are difficult to predict and beyond our control, which could cause our actual results to differ materially from the results
expressed or implied in such forward-looking statements. These and other risks, uncertainties and contingencies are described
in this Annual Report on Form 10-K, including under “Item 1A. Risk Factors”, and the other reports that we file with the SEC
from time to time.

These forward-looking statements speak only as of the date of this Form 10-K. Except as may be required by law, the Company
does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made
to any Forward-Looking Statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the
date of such statements.

The following discussion and analysis should be read in conjunction with the Financial Statements of FAT Brands Inc. and the
notes thereto included elsewhere in this filing. References in this filing to “the Company,” “we,” “our,” and “us” refer to FAT
Brands Inc. and its subsidiaries unless the context indicates otherwise.

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PART I

ITEM 1. BUSINESS

FAT Brands Inc. is a leading multi-brand restaurant company that develops, markets, acquires and manages quick
service, fast casual, casual dining and polished casual dining restaurant concepts around the world. We operate primarily as a
franchisor of restaurants, where we generally do not own or operate the restaurant locations but rather generate revenue by
charging franchisees an initial franchise fee as well as ongoing royalties. This “asset light” franchisor model provides us with
the opportunity for strong profit margins and an attractive free cash flow profile while minimizing restaurant operating
company risk, such as long-term real estate commitments or capital investments. For some of our brands, we also directly own
and operate restaurant locations, in addition to franchising restaurants.

Our scalable management platform enables us to add new stores and restaurant concepts to our portfolio with minimal
incremental corporate overhead cost, while taking advantage of significant corporate overhead synergies. The expansion of our
existing brands as well as the acquisition of additional brands and restaurant concepts are key elements of our growth strategy.
In addition to our restaurant operations, we own and operate a manufacturing and production facility in Atlanta, Georgia, which
supplies our franchisees with cookie dough, pretzel dry mix and other ancillary products.

As of December 25, 2022, our franchisee base consisted of more than 750 franchisees, who operated an aggregate of
approximately 2,200 restaurants, including restaurants under construction. Additionally, we directly owned and operated
approximately 130 restaurants as of such date. System wide sales of our franchised and owned locations during fiscal 2022
were approximately $2.2 billion.

The FAT Brands Difference – Fresh. Authentic. Tasty.

Our name represents the values that we embrace as a company and the food that we provide to customers – Fresh.
Authentic. Tasty (which we refer to as “FAT”). The success of our franchisor model is tied to consistent delivery by our
restaurant operators of freshly prepared, made-to-order food that our customers desire. With the input of our customers and
franchisees, we continually strive to keep a fresh perspective on our brands by enhancing our existing menu offerings and
introducing appealing new menu items. When enhancing our offerings, we ensure that any changes are consistent with the core
identity and attributes of our brands, although we do not intend to adapt our brands to be all things to all people. In conjunction
with our restaurant operators (which means the individuals who manage and/or own our franchised restaurants), we are
committed to delivering authentic, consistent brand experiences that have strong brand identity with customers. Ultimately, we
understand that we are only as good as the last meal served, and we are dedicated to having our franchisees consistently deliver
tasty, high-quality food and positive guest experiences in their restaurants.

Our Concepts

As of December 25, 2022, we were the owner and franchisor of the following restaurant brands in four main categories –

Quick Service, Fast Casual, Casual Dining and Polished Casual Dining.

Quick Service

●

Round Table Pizza. Round Table Pizza is the franchisor of quick service restaurants located primarily in
California and the western United States. Round Table pizzas are made with fresh dough and offered in a variety
of original flavors and pizza combinations. Customers also have the option to create their own pizzas. Round
Table Pizza includes three restaurant formats – Traditional, Clubhouse and Delivery Only.

Marble Slab Creamery. Marble Slab Creamery is a purveyor of hand-mixed ice cream. Founded in 1983, Marble
Slab was an innovator of the frozen slab technique where customers select a variety of items to be mixed into
their ice cream or frozen yogurt on a chilled marble slab. Marble Slab ice cream is made in small batches in
franchise locations using ingredients from around the world and dairy from local farms. Marble Slab has
locations in the United States, Canada, Bahrain, Bangladesh, Guam, Kuwait, Pakistan, Puerto Rico and Saudi
Arabia.

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●

Great American Cookies. Great American Cookies (which we refer to as “GAC”) was founded in Atlanta,
Georgia in 1977 as a single store which relied upon a single chocolate chip cookie recipe. In 1978, GAC began
its franchise operations and introduced a complete line of cookies and brownies. Over the last 30 years, GAC
further increased its presence in malls throughout the United States and significantly expanded its product
offerings. GAC is known for its signature Cookie Cakes, signature flavors and menu of gourmet products baked
fresh in store. GAC has franchised stores in the United States, Bahrain, Guam and Saudi Arabia.

Hot Dog on a Stick. Hot Dog on a Stick (which we refer to as “HDOS”) is the franchisor of quick service
restaurants primarily located in regional malls in California and the western United States. HDOS founder Dave
Barnham opened his first hot dog stand in Santa Monica, California in 1946. HDOS offers its turkey frank
dipped in batter and cooked in canola oil, along with fresh squeezed lemonade, hot dog in a bun, cheese on a
stick, funnel cake sticks and french fries.

Pretzelmaker. Pretzelmaker and Pretzel Time are franchised concepts that specialize in offering hand-rolled soft
pretzels, innovative soft pretzel products, dipping sauces and beverages. Retail locations are primarily located in
shopping malls and other types of shopping centers. The brands were founded independently of each other in
1991, united under common ownership in 1998, and consolidated in 2008 to become the new Pretzelmaker.

Fazoli’s. Founded in 1988 in Lexington, Kentucky, Fazoli’s is an Italian restaurant chain known for its fast and
fresh premium quality Italian food, including freshly prepared pasta entrees, Submarinos® sandwiches, salads,
pizzas, desserts and unlimited signature breadsticks.

Fast Casual

●

Fatburger. Founded in Los Angeles, California in 1947, Fatburger (The Last Great Hamburger Stand) has,
throughout its history, maintained its reputation as an iconic, all-American, Hollywood favorite hamburger
restaurant serving a variety of freshly made-to-order and customizable Fatburgers, Turkeyburgers, Chicken
Sandwiches, Impossible™ Burgers, Veggieburgers, french fries, onion rings, soft-drinks and milkshakes.

Johnny Rockets. Founded in 1986 on iconic Melrose Avenue in Los Angeles, California, Johnny Rockets is a
world-renowned, international restaurant franchise that offers high quality, innovative menu items including
Certified Angus Beef® cooked-to-order hamburgers, Boca Burger®, chicken sandwiches, crispy fries and rich,
delicious hand-spun shakes and malts. This dynamic lifestyle brand offers friendly service and upbeat music
contributing to the chain’s signature atmosphere of relaxed, casual fun.

Elevation Burger. Established in Northern Virginia in 2002, Elevation Burger is a fast-casual burger, fries and
shakes chain that provides its customers with healthier, “elevated” food options. Serving grass-fed beef, organic
chicken and french fries cooked using a proprietary olive oil-based frying method, Elevation maintains
environmentally friendly operating practices, including responsible sourcing of ingredients, robust recycling
programs intended to reduce its carbon footprint, and store décor constructed of eco-friendly materials.

Yalla Mediterranean. Founded in 2014, Yalla Mediterranean is a Los Angeles, California based restaurant chain
specializing in authentic, healthful, Mediterranean cuisine with an environmentally conscience and focus on
sustainability. The word “yalla”, which means “let’s go”, is embraced in every aspect of Yalla Mediterranean’s
culture and is a key component of our concept. Yalla Mediterranean offers a healthful Mediterranean menu of
wraps, plates and bowls in a fast-casual setting, with cuisine prepared fresh daily using, GMO-free, local
ingredients for a menu that includes vegetarian, vegan, gluten-free and dairy-free options accommodating
customers with a wide variety of dietary needs and preferences. The Yalla Mediterranean brand demonstrates its
commitment to the environment by using responsibly sourced proteins and utensils, bowls and serving trays
made from compostable materials. Due primarily to the COVID-19 pandemic and the emphasis on catering
orders, all Yalla Mediterranean stores were closed during the pandemic. We are currently planning to redesign
and reintroduce the brand with a rollout of new stores.

Casual Dining

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●

Buffalo’s Cafe and Buffalo’s Express. Established in Roswell, Georgia in 1985, Buffalo’s Cafe (Where
Everyone is Family) is a family-themed casual dining concept known for its chicken wings and 13 distinctive
homemade wing sauces, burgers, wraps, steaks, salads and other classic American cuisine. Featuring a full bar
and table service, Buffalo’s Cafe offers a distinctive dining experience affording friends and family the flexibility
to share an intimate dinner together or to casually watch sporting events while enjoying extensive menu
offerings. Beginning in 2011, Buffalo’s Express was developed and launched as a fast-casual, smaller footprint
variant of Buffalo’s Cafe offering a limited version of the full menu with an emphasis on chicken wings, wraps
and salads. Current Buffalo’s Express outlets are co-branded with Fatburger locations, providing our franchisees
with complementary concepts that share kitchen space and result in a higher average unit volume (compared to
stand-alone Fatburger locations).

Hurricane Grill & Wings. Founded in Fort Pierce, Florida in 1995, Hurricane Grill & Wings is a tropical beach
themed casual dining restaurant known for its fresh, jumbo, chicken wings, 35 signature sauces, burgers, bowls,
tacos, salads and sides. Featuring a full bar and table service, Hurricane Grill & Wings’ laid-back, casual,
atmosphere affords family and friends the flexibility to enjoy dining experiences together regardless of the
occasion. The acquisition of Hurricane Grill & Wings has been complementary to FAT Brands’ existing
portfolio chicken wing brands, Buffalo’s Cafe and Buffalo’s Express.

Ponderosa Steakhouse / Bonanza Steakhouse. Ponderosa Steakhouse, founded in 1965, and Bonanza
Steakhouse, founded in 1963, offer the quintessential American steakhouse experience, for which there is strong
and growing demand in international markets, particularly in Asia and the Middle East. Ponderosa and Bonanza
Steakhouses offer guests a high-quality buffet and broad array of great tasting, affordably priced steak, chicken
and seafood entrées. Buffets at Ponderosa and Bonanza Steakhouses feature a large variety of all you can eat
salads, soups, appetizers, vegetables, breads, hot main courses and desserts. An additional variation of the brand,
Bonanza Steak & BBQ, offers a full-service steakhouse with fresh farm-to-table salad bar and a menu
showcasing flame-grilled USDA steaks and house-smoked BBQ, with contemporized interpretations of
traditional American classics.

Native Grill & Wings. Based in Chandler, Arizona, Native Grill & Wings is a family-friendly sports grill with
locations in Arizona, Illinois and Texas. Native Grill & Wings serves over 20 wing flavors that guests can order
by the individual wing, as well as an extensive menu of pizza, burgers, sandwiches and salads.

Polished Casual Dining

Twin Peaks. Founded in 2005 in Dallas, Texas, Twin Peaks is a leading sports lodge-themed restaurant chain
known for its scratch made food, 29-degree cold beer and all-female wait staff. Each Twin Peaks restaurant
features a sports viewing experience in a comfortable mountain lodge atmosphere with a customized sports
programming package provided by DirecTV. Menu items include smashed and seared to order burgers, in-house
smoked ribs, street tacos and hand-breaded chicken wings. We currently franchise, and also directly own and
operate, Twin Peaks restaurants in various states in the United States, and we have two international franchised
Twin Peaks restaurants in Mexico City, Mexico.

Our Competitive Strengths

We believe that our competitive strengths include:

• Management Team Designed to Support Multiple Brands and Categories. As our business has expanded to 17
brands, we have developed a robust and comprehensive management and systems platform designed to support
the expansion of our existing brands while enabling for the accretive and efficient acquisition and integration of
additional restaurant concepts. We have distinct teams of managers focused on four main categories – Quick
Service, Fast Casual, Casual Dining and Polished Casual Dining. Our platform is scalable and adaptable, allowing
us to incorporate growth in existing brands and new concepts into the FAT Brands family with minimal
incremental corporate costs.

•

Strong Brands Aligned with FAT Brands Vision. We have an enviable track record of delivering Fresh,
Authentic, and Tasty meals across our franchise system, with leading brands in four categories. Our Fatburger,

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Round Table Pizza, Twin Peaks, Johnny Rockets, Fazoli's and Buffalo’s concepts have built distinctive brand
identities within their respective categories, providing made-to-order, high-quality food at competitive prices. The
Ponderosa and Bonanza brands deliver an authentic American steakhouse experience. Hurricane Grill & Wings
and Native Grill & Wings offer customers fresh chicken wings with an assortment of sauces and rubs in a casual
dining atmosphere. Yalla Mediterranean offers a healthful Mediterranean menu of wraps, plates, and bowls in a
fast-casual setting. Elevation Burger was the first organic burger chain, serving premium grass-fed beef patties
and heart-healthy olive oil fries in a family and eco-friendly environment. Maintaining alignment with the FAT
Brands vision across an expanding platform, we believe that our concepts appeal to a broad base of domestic and
global consumers.

Ability to Cross-Sell Multiple Brands from the FAT Brands Portfolio. Our ability to easily and efficiently cross-
sell to our existing franchisees new brands from our portfolio affords us the ability to grow more quickly and
satisfy our existing franchisees’ demands to expand their operations. By having the ability to offer our franchisees
a variety of restaurant concepts in multiple categories, our existing franchisees are able to acquire the rights to a
well-rounded portfolio of FAT Brands concept offerings to strategically satisfy their respective market demands
where opportunities are available. We have developed a pipeline of more than 1,000 restaurants under
development driven in part by our diverse and attractive portfolio of brands.

Asset Light Business Model Driving High Free Cash Flow Conversion. We operate primarily as a franchisor of
restaurants, where we generally do not own or operate the restaurant locations but rather generate revenue by
charging franchisees an initial franchise fee as well as ongoing royalties based on their sales. This "asset light"
franchisor model provides us with the opportunity for strong profit margins and an attractive free cash flow profile
while minimizing restaurant operating company risks, such as long-term real estate commitments, capital
investments and increases in employee wage costs. For some of our brands, we also directly own and operate
restaurant locations.

Robust Franchisee Support. Our franchisees are our primary customers and we dedicate considerable resources
and industry knowledge to promote their success. We offer our franchisees multiple support services such as
public relations, supply chain assistance, site selection analysis, staff training and operational oversight and
support. We develop and produce most marketing initiatives for our brands in-house, including advertising
campaigns, product placements and social media / digital marketing. We have developed a diverse and loyal base
of more than 750 franchisees with restaurants located in 40 countries, including 48 states within the United States,
without any excessive market concentration among the franchisees.

•

Our Growth Strategy

The principal elements of our growth strategy include:

•

Organically Grow New Store Pipeline and Attract New Franchisees. We have developed a pipeline of more than
1,000 restaurants under development among our existing and newly acquired franchisees. We also believe that the
worldwide markets for our brands are far from saturated and can support a significant increase in units through new
franchisee relationships. Additionally, we are seeing strong new franchisee activity as well as continued demand from
our existing franchise partners to develop other brands within our portfolio. In many cases, prospective franchisees
have experience in and knowledge of markets where we are not currently active, facilitating a smoother brand
introduction than we or our existing franchisees could achieve independently.

Expand Our Factory Business. We operate a manufacturing facility in Atlanta, Georgia that supplies batter and
pretzel mix to certain of our quick service restaurant brands and operates at approximately 1/3 capacity. We are
executing a strategy to expand the facility's production by offering batter to other brand categories within our portfolio
and by entering into third-party manufacturing contracts.

• Capitalize on Growth Opportunities in our Polished Casual Dining Category. Twin Peaks is a leading sports lodge-
themed restaurant chain known for its scratch made food, 29-degree cold beer and all-female wait staff. Twin Peaks
has grown from 85 units to 95 units since our acquisition of the brand in October 2021. We will pursue the continued
growth of this brand through additional company-owned and franchised units.

•

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•

international customers and that would be accretive to our existing portfolio of brands, including restaurants focused
on salads, sandwiches, health and organic foods, coffee and dessert outlets and sports bars.

Accelerate Same-Store Sales Growth. Same-store sales growth reflects the change in year-over-year sales for the
comparable store base, which we define as the number of stores open for at least one full fiscal year. To optimize
restaurant performance, we have embraced a multi-faceted same-store sales growth strategy. We utilize customer
feedback and closely analyze sales data to introduce, test and improve existing and add new menu items. In addition,
we regularly utilize public relations and experiential marketing, which we leverage via social media and targeted
digital advertising to expand the reach of our brands and to drive traffic to our stores. Furthermore, we have embraced
emerging technology and worked with the "Olo" platform to develop our own brand-specific mobile applications,
allowing guests to find restaurants, order online, earn rewards and join our e-marketing providers. We have also
partnered with third-party delivery service providers, including UberEATS, Grub Hub, DoorDash and Postmates,
which provide online and app-based delivery services and constitute a sales channel for our existing locations. Finally,
many of our franchisees are pursuing a capital expenditure program to remodel legacy restaurants and to
opportunistically co-brand them with our concepts.

Driving Store Growth Through Co-Branding. We franchise co-branded Fatburger / Buffalo’s Express locations,
Johnny Rockets / Hurricane Grill and Wings locations, Great American Cookies / Marble Slab Creamery locations and
Pretzel Maker / Great American Cookie locations. Additionally, we tri-brand Fat Burger / Buffalo's Express / Hot Dog
on a Stick locations and Great American Cookies / Marble Slab Creamery / Pretzel Maker locations. Each co-brand
and tri-brand giving franchisees the flexibility of offering multiple concepts, while sharing kitchen space, resulting in a
higher average check (compared to stand-alone Fatburger locations). Franchisees benefit by serving a broader
customer base, and we estimate that co-branding and tri-branding results in a 20%-30% increase in average unit
volume compared to stand-alone locations with minimal incremental cost to franchisees. Our acquisition strategy
reinforces the importance of co-branding, as we expect to offer each of the complementary brands that we acquire to
our existing franchisees on a co-branded basis.

Optimize Capital Structure. In 2021, we funded our acquisition of restaurant brands primarily through the issuances of
notes under four separate whole-business securitization facilities, which significantly reduced our net cost of capital
compared with acquisitions that we consummated in prior years. In the future, we plan to refinance these notes and
may seek an investment rating on a portion of the notes in order to further reduce our cost of capital.

Continue Expanding FAT Brands Internationally. We have a significant global presence, with franchised stores in
40 countries, including 48 states within the United States. We believe that the appeal of our Fresh, Authentic, and
Tasty concepts is global, and we are targeting further penetration of Middle Eastern and Asian markets, particularly
through expanding and number of units of several of our existing brands.

Acquire New Brands that Enhance Existing Categories. Our management platform was designed and developed to
cost-effectively and seamlessly scale with new restaurant concept acquisitions, particularly those in our existing
restaurant categories. We have identified additional categories of potential acquisitions that appeal to a broad base of
U.S. and international customers and that would be accretive to our existing portfolio of brands, including restaurants
focused on salads, sandwiches, health and organic foods, coffee and dessert outlets and sports bars.

Franchise Program

General. We utilize a franchise development strategy as our primary method for new store growth by leveraging the
interest of our existing franchisees and those potential franchisees with an entrepreneurial spirit looking to launch their own
business. We have a franchisee qualification and selection process to ensure that each franchisee meets our strict brand
standards.

Franchise Agreements. Our current franchise agreements generally provide for an initial franchise fee ranging from
$0 to $50,000 per store, and a typical royalty fee of between 0.75% to 7.0% of net sales. In addition, franchisees typically pay
an advertising fee based on net sales for local marketing and brand marketing.

Development Agreements. For some of our brands, we use development agreements to facilitate the planned
expansion of our restaurants through single and multiple unit development. Each development agreement gives a developer the
exclusive right to construct, own and operate stores within a defined area. In exchange, the franchisee agrees to open a
minimum number of stores in the area in a prescribed time period. Franchisees that enter into development agreements are
required to pay a fee, which is credited against franchise fees due when the store is opened in the future. Franchisees may forfeit
such fees and lose their rights to future development if they do not maintain the required store opening schedule.

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Franchisee Support

Marketing

Our Fresh, Authentic and Tasty values are the anchor that inspires our marketing efforts. Our resolve to maintain our
premium positioning, derived from the FAT Brands’ values, is reinforced by our management platform, capital light business
model, experienced and diverse global franchisee network and seasoned and passionate management team. Although our
marketing and advertising programs are concept-specific, we believe that our restaurant customers appreciate the value of their
experiences visiting our establishments and, thus, the core of our marketing strategy is to engage and dialogue with customers
at our restaurant locations as well as through social media.

Our Fresh, Authentic and Tasty values are an invitation for restaurant customers to align with FAT Brands’
commitment to consistently deliver freshly prepared, made-to-order food that restaurant customers desire. We are dedicated to
keeping a fresh perspective on our concepts, perfecting our existing menu offerings as well as introducing appealing new items.
We ensure that any changes are consistent with the core identity of our brands, and we will not adapt our brands to be all things
to all people.

Our marketing initiatives include a robust mix of local community marketing, in-store campaigns, product placements,
partnerships, promotions, social media, influencer marketing, traditional media and word of mouth advertising. Corresponding
with the evolutionary shift in how restaurant customers receive content and engage with media and brands today, we have also
dramatically increased our focus on mobile, social, and digital advertising to leverage the content we generate from public
relations and experiential marketing to better connect with restaurant customers, sharing information about new menu offerings,
promotions, new store openings and other relevant FAT Brands information. We communicate with restaurant customers in
creative and organic ways that we believe fortifies our connections with them and increase brand awareness.

Site Selection and Development

Our franchisees work alongside our franchise development department during the search, review, leasing and
development process for a new restaurant location. Typically, it takes between 60 and 90 days from the time we sign an
agreement with a franchisee until that franchisee signs a lease. When selecting a location, our team assists franchisees in
seeking locations based on a variety of factors, including but not limited to traffic patterns, access, visibility, building
constraints, competition, activity generators and lease terms.

Supply Chain Assistance

FAT Brands is committed to seeking out and working with best-in-class suppliers and distribution networks on behalf
of our franchisees. Our Fresh, Authentic and Tasty vision guides us in how we source and develop our ingredients, always
looking for the best ways to provide top quality food that is as competitively priced as possible for our franchisees and their
customers. We utilize a third-party purchasing and consulting company that provides distribution, rebate collection, product
negotiations, audits and sourcing services focusing on negotiating distributor, vendor and manufacturer contracts, thereby
ensuring that our brands receive meaningful buying power for our franchisees.

Our team has developed a reliable supply chain and continues to focus on identifying additional back-ups to avoid or
minimize any possible interruption of service and product globally for our franchisees. Domestically, FAT Brands has
distribution agreements with broadline national distributors as well as regional providers. Internationally, our franchisees have
distribution agreements with different providers market-by-market. We utilize distribution centers operated by our distributors.
Our broadline national distributors are the main purchasing link in the United States among many of our suppliers, and
distribute most of our dry, refrigerated and frozen goods, non-alcoholic beverages, paper goods and cleaning supplies.
Internationally, distributors are also used to provide the majority of products to our franchisees.

Food Safety and Quality Assurance. Food safety is one of our top priorities of FAT Brands. As such, we maintain
rigorous safety standards for our menu offerings. We have carefully selected preferred suppliers that adhere to our safety
standards, and our franchisees are required to source their ingredients from these approved suppliers. Furthermore, our
commitment to food safety is strengthened through the direct relationship between our Supply Chain and Field Consultant
Assistance teams.

Management Information Systems

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FAT Brands restaurants utilize a variety of back-office, computerized and manual, point-of-sale systems and tools. We
utilize these systems following a multi-faceted approach to monitor restaurants operational performance, food safety, quality
control, customer feedback and profitability.

The point-of-sale systems are designed specifically for the restaurant industry and we use many customized features to
evaluate operational performance, provide data analysis, marketing promotional tracking, guest and table management, high-
speed credit card and gift card processing, daily transaction data, daily sales information, product mix, average transaction size,
order modes, revenue centers and other key business intelligence data. Utilizing these point-of-sale systems back-end, web-
based, enterprise level, software solution dashboards, our home office and Franchise Operations Consultant Support staff are
provided with real-time access to detailed business data which allows for our home office and Franchise Operations Consultant
Support staff to closely, and remotely, monitor stores performance and assist in providing focused and timely support to our
franchisees. Furthermore, these systems supply sales, bank deposit and variance data to our accounting department on a daily
basis, and we use this data to generate daily sales information and weekly consolidated reports regarding sales and other key
measures for each restaurant with final reports following the end of each period.

In addition to utilizing these point-of-sale systems, FAT Brands utilizes systems which provide detailed, real-time (and
historical) operational data for all locations, allowing our management team to track product inventories, equipment
temperatures, repair and maintenance schedules, intra-shift team communications, consistency in following standard operating
procedures and tracking of tasks. FAT Brands also utilizes a web-based employee scheduling software program providing
franchisees, and their management teams, increased flexibility and awareness of scheduling needs allowing them to efficiently,
and appropriately, manage their labor costs and store staffing requirements/needs. Lastly, FAT Brands utilizes a proprietary
customer feedback system allowing customers to provide feedback in real-time to our entire management team, franchisees and
store managers.

Field Consultant Assistance

In conjunction with utilizing the FAT Brands Management Information Systems, FAT Brands has a team of dedicated
Franchise Operations Consultant Support staff who oversee designated market areas and specific subsets of restaurants. Our
Franchise Operations Consultant Support staff work in the field daily with franchisees, and their management teams, to ensure
that the integrity of all FAT Brands concepts are upheld and that franchisees are utilizing the tools and systems FAT Brands
requires in order to provide input to our franchisees to assist them to optimize and accelerate their profitability. FAT Brands
Franchise Operations Consultant Support staff responsibilities include the following, many of which are performed on a
rotating basis (but are not limited to):

•

Conducting announced and unannounced store visits and evaluations;

Continuous training and re-training of new and existing franchise operations;

Conducting quarterly workshops for franchisees and their management teams;

Development and collection of monthly profit and loss statements for each store;

Store set-up, training, oversight and support for pre- and post- new store openings;

Training, oversight and implementation of in-store marketing initiatives; and

Inspections of equipment, temperatures, food-handling procedures, customer service, products in store,
cleanliness, and team member attitude.

Training, Pre-Opening Assistance and Opening Support

FAT Brands offers Executive level and Operational level training programs to its franchisees, pre-opening assistance
and opening assistance. Once open, FAT Brands continually provides ongoing operational and marketing support to our
franchisees with the intention of offering advice to their management teams that they can use if they choose to more effectively
operate their restaurants and increasing their stores financial profitability.

Competition

Our franchised and company owned restaurants compete in the quick service, fast casual, casual and polished casual
dining categories of the restaurant industry, a highly competitive industry in terms of price, service, location, and food quality.

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The restaurant industry is often affected by changes in consumer trends, economic conditions, demographics, traffic patterns,
and concern about the nutritional content of food. Furthermore, there are many well-established competitors with substantially
greater financial resources than the Company's, including several national, international, regional and local store franchisors and
operators. The restaurant industry also has few barriers to entry and new competitors may emerge at any time.

Seasonality and Effects of Weather

While some of our brands are subject to seasonal fluctuations in their sales and may be affected by inclement weather,
our business overall does not experience significant seasonal variability in its financial performance. Holidays and severe
weather in certain regions, including hurricanes, tornados, thunderstorms, snow and ice storms, prolonged extreme temperatures
and similar conditions, may impact restaurant sales volumes in some of the markets in which we operate. In addition, the risk of
increasingly severe weather due to climate change or the risk that those events happen more frequently could increasingly affect
our operations in the future.

Intellectual Property

We own, domestically and internationally, valuable intellectual property including trademarks, service marks, trade
secrets and other proprietary information related to our restaurant and corporate brands. This intellectual property includes
logos and trademarks which are of material importance to our business. Depending on the jurisdiction, trademarks and service
marks generally are valid as long as they are used and/or registered. We seek to actively protect and defend our intellectual
property from infringement and misuse.

Human Capital Resources

We believe that our employees are critical to our success and seek to provide a working environment which
encourages personal growth and success in our workforce. We believe that we have good relations with our employees and
offer competitive compensation and benefits customary to our industry. Our benefits package for qualified employees includes
employer paid health insurance and opportunities for stock-based incentives. Our restaurant employees receive continuing
training and have the opportunity to advance in responsibility and leadership.

We believe that communication is key to the effectiveness of our workforce and schedule regular weekly conference
calls with all of our corporate employees, updating them on the direction of the business, important developments within our
company and the industry and key milestones to be achieved. We also encourage our employees to be involved in their
communities and directly operate two charities - The Seeds of Compassion Fund, Inc., a charitable foundation that provides
disaster relief to local communities, and FAT Brands Foundation, a charitable foundation that was organized and seeded by
FAT Brands and which seeks additional contributions from our employees, franchise partners and brand partners. From time to
time, we also sponsor meal events for first responders and medical professionals during local disasters.

As of December 25, 2022, we had approximately 5,400 employees, including approximately 1,100 full time
employees. This amount includes approximately 825 full time and 4,300 part time employees at restaurants which we own and
operate. We have a diverse workforce and recently appointed an executive level Diversity, Equity & Inclusion Officer. As an
equal opportunity employer, all qualified applicants receive consideration without regard to race, national origin, gender, gender
identity, sexual orientation, protected veteran status, disability, age or any other legally protected status.

Government Regulation

U.S. Operations. Our U.S. operations are subject to various federal, state and local laws affecting our business,
primarily laws and regulations concerning the franchisor/franchisee relationship, marketing, food labeling, labor and
employment, sanitation and safety and anti-bribery and anti-corruption laws. Various federal and state labor laws, along with
rules and regulations, govern our relationship with our employees, including such matters as minimum wage, overtime, tip
credits, health insurance, working conditions, safety and work eligibility requirements. Each of our franchised and company
owned restaurants in the U.S. must comply with licensing and regulation by a number of governmental authorities, which
include health, sanitation, safety, fire and zoning agencies in the state and/or municipality in which the restaurant is located. In
addition, alcoholic beverage control regulations require each of our restaurants which sells alcohol to apply to a federal and
state authority and, in certain locations, municipal authorities for a license and permit to sell alcoholic beverages on and off-
premises. Typically, licenses must be renewed annually and may be revoked or suspended for cause by such authority at any
time. To date, we have not been materially adversely affected by such licensing and regulation or by any difficulty, delay or
failure to obtain required licenses or approvals.

International Operations. Our restaurants outside the U.S. are subject to national and local laws and regulations which
in general are similar to those affecting U.S. restaurants. The restaurants outside the U.S. are also subject to tariffs and

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regulations on imported commodities and equipment and laws regulating foreign investment, as well as anti-bribery and anti-
corruption laws.

See “Risk Factors” for a discussion of risks relating to federal, state, local and international regulation of our business.

Our Corporate Information

FAT Brands Inc. was formed as a Delaware corporation on March 21, 2017. Our corporate headquarters are located at
9720 Wilshire Blvd., Suite 500, Beverly Hills, California 90212. Our main telephone number is (310) 319-1850. Our principal
Internet website address is www.fatbrands.com. The information on our website is not incorporated by reference into, or a part
of, this Annual Report.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments
to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
are filed with the Securities and Exchange Commission (the “SEC”). We are subject to the informational requirements of the
Exchange Act and file or furnish reports, proxy statements and other information with the SEC. The public may read and copy
any materials filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC
20549, and may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers
that file electronically with the SEC at www.sec.gov. The contents of these websites are not incorporated into this Annual
Report. Further, our references to the URLs for these websites are intended to be inactive textual references only. We also make
the documents listed above available without charge through the Investor Relations Section of our website at
www.fatbrands.com.

ITEM 1A. RISK FACTORS

Except for the historical information contained herein or incorporated by reference, this report and the information
incorporated by reference contain forward-looking statements that involve risks and uncertainties. These statements include
projections about our accounting and finances, plans and objectives for the future, future operating and economic performance
and other statements regarding future performance. These statements are not guarantees of future performance or events. Our
actual results could differ materially from those discussed in this report. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed in the following section, as well as those discussed in Part II, Item 7
entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere throughout
this report and in any documents incorporated in this report by reference.

You should carefully consider the following risk factors and in the other information included or incorporated in this
report. If any of the following risks, either alone or taken together, or other risks not presently known to us or that we currently
believe to not be significant, develop into actual events, then our business, financial condition, results of operations or
prospects could be materially adversely affected. If that happens, the market price of our common stock could decline, and
stockholders may lose all or part of their investment.

Risks Related to Our Franchised Business Model

Our operating and financial results and growth strategies are closely tied to the success of our franchisees.

Most of our restaurants are operated by franchisees, which makes us dependent on the financial success and
cooperation of our franchisees. We have limited control over how our franchisees’ businesses are run, and the inability of
franchisees to operate successfully could adversely affect our operating and financial results through decreased royalty
payments. If our franchisees incur too much debt, if their operating expenses or commodity prices increase or if economic or
sales trends deteriorate such that they are unable to operate profitably or repay existing debt, it could result in their financial
distress, including insolvency or bankruptcy. If a significant franchisee or a significant number of our franchisees become
financially distressed, our operating and financial results could be impacted through reduced or delayed royalty payments. Our
success also depends on the willingness and ability of our franchisees to implement major initiatives, which may include
financial investment. Our franchisees may be unable to successfully implement strategies that we believe are necessary for their
further growth, which in turn may harm the growth prospects and financial condition of the company. Additionally, the failure
of our franchisees to focus on the fundamentals of restaurant operations, such as quality service and cleanliness (even if such
failures do not rise to the level of breaching the related franchise documents), could have a negative impact on our business.

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Our franchisees could take actions that could harm our business and may not accurately report sales.

Our franchisees are contractually obligated to operate their restaurants in accordance with the operations, safety, and
health standards set forth in our agreements with them and applicable laws. However, although we attempt to properly train and
support all our franchisees, they are independent third parties whom we do not control. The franchisees own, operate, and
oversee the daily operations of their restaurants, and their employees are not our employees. Accordingly, their actions are
outside of our control. Although we have developed criteria to evaluate and screen prospective franchisees, we cannot be
certain that our franchisees will have the business acumen or financial resources necessary to operate successful franchises at
their approved locations, and state franchise laws may limit our ability to terminate or not renew these franchise agreements.
Moreover, despite our training, support and monitoring, franchisees may not successfully operate restaurants in a manner
consistent with our standards and requirements or may not hire and adequately train qualified managers and other restaurant
personnel. The failure of our franchisees to operate their franchises in accordance with our standards or applicable law, actions
taken by their employees or a negative publicity event at one of our franchised restaurants or involving one of our franchisees
could have a material adverse effect on our reputation, our brands, our ability to attract prospective franchisees, our company-
owned restaurants, and our business, financial condition or results of operations.

Franchisees typically use a point of sale, or POS, cash register system to record all sales transactions at the restaurant.
We require franchisees to use a specific brand or model of hardware or software components for their restaurant system.
Currently, franchisees report sales manually and electronically, but we do not have the ability to verify all sales data
electronically by accessing their POS cash register systems. We have the right under our franchise agreement to audit
franchisees to verify sales information provided to us, and we have the ability to indirectly verify sales based on purchasing
information but this cannot be done economically across all franchisees. However, franchisees may underreport sales, which
would reduce royalty income otherwise payable to us and adversely affect our operating and financial results.

If we fail to identify, recruit and contract with a sufficient number of qualified franchisees, our ability to open new
franchised restaurants and increase our revenues could be materially adversely affected.

The opening of additional franchised restaurants depends, in part, upon the availability of prospective franchisees who
meet our criteria. Most of our franchisees open and operate multiple restaurants, and our growth strategy requires us to identify,
recruit and contract with a significant number of new franchisees each year. We may not be able to identify, recruit or contract
with suitable franchisees in our target markets on a timely basis or at all. In addition, our franchisees may not have access to the
financial or management resources that they need to open the restaurants contemplated by their agreements with us, or they may
elect to cease restaurant development for other reasons. If we are unable to recruit suitable franchisees or if franchisees are
unable or unwilling to open new restaurants as planned, our growth may be slower than anticipated, which could materially
adversely affect our ability to increase our revenues and materially adversely affect our business, financial condition and results
of operations.

If we fail to open new domestic and international franchisee-owned restaurants on a timely basis, our ability to increase our
revenues could be materially adversely affected.

A significant component of our growth strategy includes the opening of new domestic and international franchised

restaurants. Our franchisees face many challenges associated with opening new restaurants, including:

•

identification and availability of suitable restaurant locations with the appropriate size; visibility; traffic
patterns; local residential neighborhood, retail and business attractions; and infrastructure that will drive high
levels of customer traffic and sales per restaurant;

competition with other restaurants and retail concepts for potential restaurant sites and anticipated
commercial, residential and infrastructure development near new or potential restaurants;

ability to negotiate acceptable lease arrangements;

availability of financing and ability to negotiate acceptable financing terms;

recruiting, hiring and training of qualified personnel;

construction and development cost management;

completing their construction activities on a timely basis;

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•

obtaining all necessary governmental licenses, permits and approvals and complying with local, state and
federal laws and regulations to open, construct or remodel and operate our franchised restaurants;

unforeseen engineering or environmental problems with the leased premises;

avoiding the impact of adverse weather during the construction period; and

other unanticipated increases in costs, delays or cost overruns.

As a result of these challenges, our franchisees may not be able to open new restaurants as quickly as planned or at all.
Our franchisees have experienced, and expect to continue to experience, delays in restaurant openings from time to time and
have abandoned plans to open restaurants in various markets on occasion. Any delays or failures to open new restaurants by our
franchisees could materially and adversely affect our growth strategy and our results of operations.

Negative publicity relating to one of our franchised restaurants could reduce sales at some or all of our other franchised
restaurants.

Our success is dependent in part upon our ability to maintain and enhance the value of our brands, consumers’
connection to our brands and positive relationships with our franchisees. We may, from time to time, be faced with negative
publicity relating to food quality, public health concerns, restaurant facilities, customer complaints or litigation alleging illness
or injury, health inspection scores, integrity of our franchisees or their suppliers’ food processing, employee relationships or
other matters, regardless of whether the allegations are valid or whether or not the Company is held to be responsible. The
negative impact of adverse publicity relating to one franchised restaurant may extend far beyond that restaurant or franchisee
involved to affect some or all our other franchised restaurants. The risk of negative publicity is particularly great with respect to
our franchised restaurants because we are limited in the manner in which we can control a franchisee’s operations and
messaging, especially on a real-time basis. The considerable expansion in the use of social media over recent years can further
amplify any negative publicity that could be generated by such incidents. A similar risk exists with respect to unrelated food
service businesses, if consumers associate those businesses with our own or franchised operations. Additionally, employee
claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination
may also create negative publicity that could adversely affect us and divert our financial and management resources that would
otherwise be used to benefit the future performance of our operations. A significant increase in the number of these claims or an
increase in the number of successful claims would have a material adverse effect on our business, financial condition and
results of operations. Consumer demand for our products and our brands’ value could diminish significantly if any such
incidents or other matters create negative publicity or otherwise erode consumer confidence in us or our products, which would
likely result in lower sales and could have a material adverse effect on our business, financial condition and results of
operations.

Our brands’ value may be limited or diluted through franchisee and third-party activity.

Although we monitor and regulate certain aspects of franchisee activities under the terms of our franchise agreements,
franchisees or other third parties may refer to or make statements about our brands that do not make proper use of our
trademarks or required designations, that improperly alter trademarks or branding, or that are critical of our brands or place our
brands in a context that may tarnish our reputation. This may result in dilution of, or harm to, our intellectual property or the
value of our brands. Franchisee noncompliance with the terms and conditions of our franchise agreements may reduce the
overall goodwill of our brands, whether through the failure to meet health and safety standards, engage in quality control or
maintain product consistency, or through the participation in improper or objectionable business practices. Moreover,
unauthorized third parties may use our intellectual property to trade on the goodwill of our brands, resulting in consumer
confusion or dilution of our brands’ value. Any reduction of our brands’ goodwill, consumer confusion, or reputational dilution
is likely to impact sales, and could materially and adversely impact our business and results of operations.

Risks Relating to Our Business and Operations

We have significant outstanding indebtedness under our whole-business securitization facilities, which require that we
generate sufficient cash flow to satisfy the payment and other obligations under the terms of our debt and exposes us to the
risk of default and lender remedies.

We have financed our acquisitions and operations through the issuance of notes by four special purpose, wholly-
owned financing subsidiaries, which own substantially all of our operations. The Company acts as the manager of each of these
subsidiaries under a Management Agreement and performs management, franchising, distribution, intellectual property and
operational functions on behalf of the subsidiaries for which it receives a management fee. The aggregate principal balance of

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the indebtedness under our whole-business securitization facilities was $1.0 billion as of December 25, 2022. Subject to
contractual restrictions, we and our financing subsidiaries may incur additional indebtedness for various purposes, including to
fund future acquisitions, the construction of company-owned restaurants and operational needs. The terms of our outstanding
indebtedness provide for significant principal and interest payments, and subjects us to certain financial and non-financial
covenants, including a debt service coverage ratio calculation, as defined in the applicable Indentures for these facilities. If
certain covenants are not met, the indebtedness under these facilities may become partially or fully due and payable on an
accelerated schedule. Our ability to meet the payment obligations under our debt depends on our ability to generate significant
cash flow in the future. We cannot assure you that our business will generate cash flow from operations, or that other capital
will be available to us, in amounts sufficient to enable us to meet our payment obligations under our Indentures and to fund our
other liquidity needs. If we are not able to generate sufficient cash flow to service these obligations, we may need to refinance
or restructure our debt, sell unencumbered assets (if any) or seek to raise additional capital. If we are unable to implement one
or more of these options, we may not be able to meet these payment obligations, and the imposition of remedies by the note
holders could materially and adversely affect our business, financial condition and liquidity.

We may pursue opportunistic acquisitions of additional brands, and we may not find suitable acquisition candidates or
successfully operate or integrate any brands that we may acquire.

As part of our growth strategy, we may opportunistically acquire new brands and restaurant concepts. Although we
believe that opportunities for future acquisitions may be available from time to time, competition for acquisition candidates may
exist or increase in the future. Consequently, there may be fewer acquisition opportunities available to us as well as higher
acquisition prices. There can be no assurance that we will be able to identify, acquire, manage or successfully integrate
additional brands or restaurant concepts (including brands and concepts that we have already acquired) without substantial
costs, delays or operational or financial problems.

The difficulties of integration include coordinating and consolidating geographically separated systems and facilities,
integrating the management and personnel of the acquired brands, maintaining employee morale and retaining key employees,
implementing our management information systems and financial accounting and reporting systems, establishing and
maintaining effective internal control over financial reporting, and implementing operational procedures and disciplines to
control costs and increase profitability.

In the event we are able to acquire additional brands or restaurant concepts, the integration and operation of such
acquisitions may place significant demands on our management, which could adversely affect our ability to manage our
existing restaurants. In addition, we may be required to obtain additional financing to fund future acquisitions, but there can be
no assurance that we will be able to obtain additional financing on acceptable terms or at all.

Health concerns arising from outbreaks of diseases, other than COVID-19, may have an adverse effect on our business.

The outbreak of the COVID-19 pandemic in March 2020 had a number of adverse effects on our business and that of
our franchisees, including temporary and permanent closures of restaurant locations, reduced or modified store operating hours,
difficulties in staffing restaurants and supply chain disruptions. While the disruptions to our business from the COVID-19
pandemic have mostly subsided, the resurgence of COVID-19 or its variants, as well as an outbreak of other widespread health
epidemics or pandemics, could cause a closure of restaurants and disrupt our operations and have a material adverse effect on
our business, financial condition and results of operations.

Furthermore, since diseases may be transmitted through human contact, the risk of contracting diseases could cause
employees or guests to avoid gathering in public places, which could adversely affect restaurant guest traffic or the ability to
adequately staff our restaurants. We could also be adversely affected if jurisdictions in which our restaurants operate impose
mandatory closures, seek voluntary closures or impose restrictions on operations of restaurants. Even if such measures are not
implemented and a virus or other disease, the perceived risk of infection or health risk may adversely affect our business.

Food safety and foodborne illness concerns may have an adverse effect on our business.

Foodborne illnesses, such as E. coli, hepatitis A, trichinosis and salmonella, occur or may occur within our system
from time to time. In addition, food safety issues such as food tampering, contamination and adulteration occur or may occur
within our system from time to time. Any report or publicity linking one of our franchisee’s restaurants, or linking our
competitors or our industry generally, to instances of foodborne illness or food safety issues could adversely affect our brands
and reputations as well as our revenues and profits, and possibly lead to product liability claims, litigation and damages. If a
customer of one of our franchisees’ restaurants becomes ill as a result of food safety issues, restaurants in our system may be
temporarily closed, which would decrease our revenues. In addition, instances or allegations of foodborne illness or food safety
issues, real or perceived, involving our franchised restaurants, restaurants of competitors, or suppliers or distributors (regardless

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of whether we use or have used those suppliers or distributors), or otherwise involving the types of food served at our
franchisees’ restaurants, could result in negative publicity that could adversely affect our revenues or the sales of our
franchisees. Additionally, allegations of foodborne illness or food safety issues could result in litigation involving us and our
franchisees. The occurrence of foodborne illnesses or food safety issues could also adversely affect the price and availability of
affected ingredients, which could result in disruptions in our supply chain and/or lower revenues and margins for us and our
franchisees.

The sale of alcoholic beverages at Twin Peaks Restaurants subjects us to additional regulations and potential liability.

The Twin Peaks restaurants that we own and operate sell alcoholic beverages, and we are therefore required to comply
with the alcohol licensing requirements of the federal government, states and municipalities where such restaurants are located.
Alcoholic beverage control regulations require applications to state authorities and, in certain locations, county and municipal
authorities for a license and permit to sell alcoholic beverages on the premises and to provide service for extended hours and on
Sundays. Typically, the licenses are renewed annually and may be revoked or suspended for cause at any time. Alcoholic
beverage control regulations relate to numerous aspects of the daily operations of the restaurants, including minimum age of
guests and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, storage and
dispensing of alcoholic beverages. If we fail to comply with federal, state or local regulations, such licenses may be revoked
and our Twin Peaks restaurants may be forced to terminate the sale of alcoholic beverages. Any termination of the sale of
alcoholic beverages could have a significant negative impact on our revenues. Similarly, any reduction in state blood alcohol
content limits on drivers, or laws relating to vehicle interlocking devices, could also have a significant negative impact on
revenues of the Twin Peaks restaurants.

In certain states in which Twin Peaks restaurants are situated, we may be subject to dram shop statutes. These statutes
generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully
served alcoholic beverages to the intoxicated individual. Recent litigation against restaurant chains has resulted in significant
judgments and settlements under dram shop statutes. Because these cases often seek punitive damages, which may not be
covered by insurance, such litigation could have an adverse impact on our business, results of operations or financial condition.
Regardless of whether any claims against us or our Twin Peaks operations are valid or whether we are liable, claims may be
expensive to defend and may divert time and money away from operations and hurt our financial performance. A judgment
significantly in excess of insurance coverage or not covered by insurance could have a material adverse effect on our business,
results of operations and financial condition. Adverse publicity resulting from these allegations may materially affect us and the
Twin Peaks restaurants. In addition, it may not be possible to obtain adequate levels of insurance coverage in the future for
alcohol related claims, and such coverage may not be available for reasonable insurance premiums.

Our success depends substantially on our corporate reputation and on the value and perception of our brands.

Our success depends in large part upon our and our franchisees’ ability to maintain and enhance the value of our
brands and our customers’ loyalty to our brands. Brand value is based in part on consumer perceptions on a variety of
subjective qualities. Business incidents, whether isolated or recurring, and whether originating from us, franchisees,
competitors, suppliers or distributors, can significantly reduce brand value and consumer trust, particularly if the incidents
receive considerable publicity or result in litigation. For example, our brands could be damaged by claims or perceptions about
the quality or safety of our products or the quality or reputation of our suppliers, distributors or franchisees, regardless of
whether such claims or perceptions are true. Similarly, entities in our supply chain may engage in conduct, including alleged
human rights abuses or environmental wrongdoing, and any such conduct could damage our or our brands’ reputations. Any
such incidents (even if resulting from actions of a competitor or franchisee) could cause a decline directly or indirectly in
consumer confidence in, or the perception of, our brands and/or our products and reduce consumer demand for our products,
which would likely result in lower revenues and profits. Additionally, our corporate reputation could suffer from a real or
perceived failure of corporate governance or misconduct by a company officer, or an employee or representative of us or a
franchisee.

Failure to protect our service marks or other intellectual property could harm our business.

We regard our service marks and trademarks related to our franchise restaurant businesses, as having critical
importance to our future operations and marketing efforts. We rely on a combination of protections provided by contracts,
copyrights, patents, trademarks, service marks and other common law rights, such as trade secret and unfair competition laws,
to protect our franchised restaurants and services from infringement. We have registered certain trademarks and service marks
in the U.S. and foreign jurisdictions. However, from time to time we become aware of names and marks identical or
confusingly similar to our service marks being used by other persons. Although our policy is to oppose any such infringement,
further or unknown unauthorized uses or other misappropriation of our trademarks or service marks could diminish the value of
our brands and adversely affect our business. In addition, effective intellectual property protection may not be available in every

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country in which our franchisees have, or intend to open or franchise, a restaurant. There can be no assurance that these
protections will be adequate and defending or enforcing our service marks and other intellectual property could result in the
expenditure of significant resources. We may also face claims of infringement that could interfere with the use of the
proprietary know how, concepts, recipes, or trade secrets used in our business. Defending against such claims may be costly,
and we may be prohibited from using such proprietary information in the future or forced to pay damages, royalties, or other
fees for using such proprietary information, any of which could negatively affect our business, reputation, financial condition,
and results of operations.

If our franchisees are unable to protect their customers’ credit card data and other personal information, our franchisees
could be exposed to data loss, litigation, and liability, and our reputation could be significantly harmed.

Privacy protection is increasingly demanding, and the use of electronic payment methods and collection of other
personal information expose our franchisees to increased risk of privacy and/or security breaches as well as other risks. The
majority of our franchisees’ restaurant sales are by credit or debit cards. In connection with credit or debit card transactions in-
restaurant, our franchisees collect and transmit confidential information by way of secure private retail networks. Additionally,
our franchisees collect and store personal information from individuals, including their customers and employees.

If a person is able to circumvent our franchisees’ security measures or those of third parties, he or she could destroy or
steal valuable information or disrupt our operations. Our franchisees may become subject to claims for purportedly fraudulent
transactions arising out of the actual or alleged theft of credit or debit card information, and our franchisees may also be subject
to lawsuits or other proceedings relating to these types of incidents. Any such claim or proceeding could cause our franchisees
to incur significant unplanned expenses, which could have an adverse impact on our financial condition, results of operations
and cash flows. Further, adverse publicity resulting from these allegations could significantly harm our reputation and may have
a material adverse effect on us and our franchisees’ business.

We and our franchisees rely on computer systems to process transactions and manage our business, and a disruption or a
failure of such systems or technology could harm our ability to effectively manage our business.

Network and information technology systems are integral to our business. We utilize various computer systems,
including our franchisee reporting system, by which our franchisees report their weekly sales and pay their corresponding
royalty fees and required advertising fund contributions. When sales are reported by a franchisee, a withdrawal for the
authorized amount is initiated from the franchisee’s bank on a set date each week based on gross sales during the week ended
the prior Sunday. This system is critical to our ability to accurately track sales and compute royalties and advertising fund
contributions and receive timely payments due from our franchisees. Our operations depend upon our ability to protect our
computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure or other
catastrophic events, as well as from internal and external security breaches, viruses, worms and other disruptive problems. Any
damage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a
material adverse effect on our business and subject us to litigation or actions by regulatory authorities. Despite the
implementation of protective measures, our systems are subject to damage and/or interruption as a result of power outages,
computer and network failures, computer viruses and other disruptive software, security breaches, catastrophic events, and
improper usage by employees. Such events could result in a material disruption in operations, a need for a costly repair,
upgrade or replacement of systems, or a decrease in, or in the collection of, royalties and advertising fund contributions paid to
us by our franchisees. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or
applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability which could
materially affect our results of operations. It is also critical that we establish and maintain certain licensing and software
agreements for the software we use in our day-to-day operations. A failure to procure or maintain these licenses could have a
material adverse effect on our business operations.

Our business may be adversely affected by cybersecurity incidents, which result in unauthorized access, theft, modification
or destruction of confidential information that is stored in our systems or by third parties on our behalf.

Cybersecurity incidents or other unauthorized access to systems may result in disruption to our operations, corruption
or theft of critical data, confidential information or intellectual property. As reliance on technology continues to grow and more
business activities have shifted online, the risk associated with any cybersecurity incidents have grown. While we and our third-
party vendors have implemented security systems and infrastructure to prevent, detect and/or mitigate the risk of unauthorized
access to technology systems or platforms, there can be no assurance that these measures will be effective. Any cybersecurity or
similar incident involving confidential information of our business, our franchisees or our restaurant customers could result in
negative publicity, damage to our reputation, a loss of revenues, disruption of our business, litigation and regulatory actions.
Additional capital investments might be required to remediate any problems, infringements, misappropriations or other third-
party claims.

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The retail food industry in which we operate is highly competitive.

The retail food industry in which we operate is highly competitive with respect to price and quality of food products,
new product development, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and
attractiveness and maintenance of properties. If consumer or dietary preferences change, if our marketing efforts are
unsuccessful, or if our franchisees’ restaurants are unable to compete successfully with other retail food outlets in new and
existing markets, our business could be adversely affected. We also face growing competition as a result of convergence in
grocery, convenience, deli and restaurant services, including the offering by the grocery industry of convenient meals, including
pizzas and entrees with side dishes. Competition from delivery aggregators and other food delivery services has also increased
in recent years, particularly in urbanized areas. Increased competition could have an adverse effect on our sales, profitability or
development plans, which could harm our financial condition and operating results.

Supply chain shortages or interruptions in the availability and delivery of food and other supplies may increase costs or
reduce revenues.

The food products sold by our franchisees and in our company-owned restaurants, and the raw materials used in their
these restaurants, are sourced from a variety of domestic and international vendors, suppliers and distributors. We, along with
our franchisees, are also dependent upon third parties to make frequent deliveries of food products and supplies that meet our
specifications at competitive prices. Shortages or interruptions in the supply of food items, raw materials and other supplies to
our franchisees’ restaurants could adversely affect the availability, quality and cost of items we use and the operations of our
franchisees’ and company-owned restaurants. If such shortages result in increased cost of food items and supplies, we and our
franchisees may not be able to pass along all of such increased costs to restaurant customers.

Such shortages or disruptions could be caused by inclement weather, natural disasters, increased demand, problems in
production or distribution, restrictions on imports or exports, the inability of vendors to obtain credit, political instability in the
countries in which suppliers and distributors are located, the financial instability of suppliers and distributors, suppliers’ or
distributors’ failure to meet our standards, product quality issues, inflation, the price of gasoline, other factors relating to the
suppliers and distributors and the countries in which they are located, food safety warnings or advisories or the prospect of such
pronouncements, the cancellation of supply or distribution agreements or an inability to renew such arrangements or to find
replacements on commercially reasonable terms, or other conditions beyond our control or the control of our franchisees or us.
Increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with
global climate change, could have a significant impact on the price, availability and timing of delivery of some of our
ingredients. If inflation in food ingredients or supplies persists, our financial condition and business operations could be
adversely impacted.

A shortage or interruption in the availability of certain food products, raw materials or supplies could increase costs
and limit the availability of products critical to our franchisees’ and company-owned restaurant operations, which in turn could
lead to restaurant closures and/or a decrease in sales and therefore , and a reduction in our revenues and royalty fees paid to us.
In addition, failure by a key supplier or distributor to our franchisees to meet its service requirements could lead to a disruption
of service or supply until a new supplier or distributor is engaged, and any disruption could have an adverse effect on our
franchisees and therefore our business. See “Business—Supply Chain Assistance.”

Climate change and the shift to more sustainable business practices could negatively affect our business or damage our
reputation.

Climate change may increase the risk of severe weather or the risk that those events happen more frequently, which
could cause negatively affect restaurant sales volumes in some of the markets in which we operate and may result in decreased
availability or less favorable pricing for certain commodities used in our products, such as beef, chicken and dairy. In addition,
climate change may increase the frequency or severity of natural disasters and other extreme weather conditions, which could
disrupt our supply chain generally or otherwise impact demand for our products. Also, concern over climate change and other
sustainable business practices may result in new or increased legal and regulatory requirements or generally accepted business
practices, which could significantly increase our costs. Legislative, regulatory or other efforts to combat climate change or other
environmental concerns could result in future increases in the cost of raw materials, taxes, transportation and utilities, which
could affect our results of operations and necessitate future investments in facilities and equipment. In addition, a failure to
reduce our greenhouse gas emissions or adopt other sustainable business practices or the perception of a failure to act
responsibly with respect to the environment or to effectively respond to regulatory requirements concerning climate change or

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other sustainable business practices can lead to adverse publicity, diminish the value of our brands and result in an adverse
effect on our business.

Our business may be adversely impacted by changes in consumer discretionary spending, general economic conditions, or
consumer behavior.

Purchases at our franchisees’ restaurants are generally discretionary for consumers and, therefore, our results of
operations are susceptible to economic slowdowns and recessions. Our results of operations are dependent upon discretionary
spending by customers of our franchisees’ restaurants, which may be affected by general economic conditions globally or in
one or more of the markets we serve. Some of the factors that impact discretionary consumer spending include unemployment
rates, fluctuations in the level of disposable income, the price of gasoline, stock market performance, changes in the level of
consumer confidence, and long-term changes in consumer behavior related to social distancing behaviors resulting from
COVID-19 or other widespread health events. These and other macroeconomic factors could have an adverse effect on sales at
our franchisees’ restaurants, which could lead to an adverse effect on our profitability or development plans and harm our
financial condition and operating results.

Our expansion into international markets exposes us to a number of risks that may differ in each country where we have
franchised restaurants.

We currently have franchised restaurants in 40 countries, including 48 states within the United States, and we plan to
continue to grow internationally. Expansion in international markets may be affected by local economic and market as well as
geopolitical conditions. Therefore, as we expand internationally, our franchisees may not experience the operating margins we
expect, and our growth and our results of operations and growth may be materially and adversely affected. Our financial
condition and results of operations may be adversely affected if global markets in which our franchised restaurants compete are
affected by changes in political, economic or other factors. These factors, over which neither our franchisees nor we have
control, may include such issues as (but not limited to):

•

recessionary or expansive trends in international markets;

changing labor conditions and difficulties in staffing and managing our foreign operations;

increases in the taxes we pay and other changes in applicable tax laws;

legal and regulatory changes, and the burdens and costs of our compliance with a variety of foreign laws;

changes in inflation rates;

changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds;

difficulty in protecting our brand, reputation and intellectual property;

difficulty in collecting our royalties and longer payment cycles;

expropriation of private enterprises;

increases in anti-American sentiment and the identification of our brands as American brands;

political and economic instability; and

other external factors.

We depend on key executive management.

We depend on the leadership and experience of our relatively small number of key executive management personnel.
The loss of the services of any of our executive management members could have a material adverse effect on our business and
prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring
increased costs, or at all. We do not maintain key person life insurance policies on any of our executive officers other than
Andrew Wiederhorn. We believe that our future success will depend on our continued ability to attract and retain highly skilled
and qualified personnel. There is a high level of competition for experienced, successful personnel in our industry. Our inability
to meet our executive staffing requirements in the future could impair our growth and harm our business.

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Labor shortages or difficulty finding qualified employees could slow our growth, harm our business and reduce our
profitability.

Restaurant operations are highly service oriented, and our success depends in part upon our franchisees’ and our ability
to attract, retain and motivate a sufficient number of qualified employees, including restaurant managers and other crew
members. The market for qualified employees in our industry is very competitive. Any future inability to recruit and retain
qualified individuals may delay the planned openings of new restaurants by us and our franchisees and could adversely impact
our existing franchised and company owned restaurants. Any such delays, material increases in employee turnover rate or
widespread employee dissatisfaction could have a material adverse effect on our and our franchisees’ business and results of
operations.

In addition, strikes, work slowdowns or other job actions may become more common in the United States. Although
none of the employees employed by our franchisees or by us are represented by a labor union or are covered by a collective
bargaining agreement, in the event of a strike, work slowdown or other labor unrest, the ability to adequately staff our
restaurants could be impaired, which could result in reduced revenue and customer claims, and may distract our management
from focusing on our business and strategic priorities.

Changes in labor and other operating costs could adversely affect our results of operations.

An increase in the costs of employee wages, benefits and insurance (including workers’ compensation, general
liability, property and health) could result from government imposition of higher minimum wages or from general economic or
competitive conditions. In addition, competition for qualified employees could compel our franchisees to pay higher wages to
attract or retain key crew members, which could result in higher labor costs and decreased profitability. Any increase in labor
expenses, as well as increases in general operating costs such as rent and energy, could adversely affect our franchisees’ profit
margins, their sales volumes and their ability to remain in business, which would adversely affect our results of operations.

Risks Related to Government Regulation and Litigation

The Company faces risks related to pending government investigations.

The government investigations mentioned below in Item 3, Legal Proceedings present certain risks. At this stage, we
are not able to reasonably estimate the outcome or duration of these investigations, nor can we predict what consequences any
investigation may have on us, including significant legal and accounting expenses. Moreover, there could be developments of
which we are not aware, which could result in further proceedings against our Company, Mr. Wiederhorn and our other
directors, officers and employees. These matters may also divert management's attention from other business concerns, or result
in the loss of the services of Mr. Wiederhorn or our other directors, officers or employees, which could harm the business and
could result in reputational damage. Any proceedings commenced against us or Mr. Wiederhorn by a regulatory agency could
result in administrative orders, the imposition of penalties and/or fines, and the imposition of sanctions against us, Mr.
Wiederhorn and other of our current or former officers, directors and employees.

These investigations, the results of the investigations or remedial actions that we have taken or may take as a result of
such investigations may materially adversely affect our business, financial condition and reputation. If we are subject to adverse
findings resulting from the U.S. Attorney or SEC investigations, or from our own independent investigations, we could be
required to pay damages and/or penalties or have other remedies imposed on us, and the Company or our officers, directors or
employees may be subject to additional civil litigation against the Company or our officers and directors regarding such
matters.

We maintain director and officer liability insurance for losses or advancement of defense costs in the event legal
actions are brought against the Company's directors, officers or employees for alleged wrongful acts in their capacity as
directors, officers or employees. Such insurance contains certain customary exclusions that may make it unavailable to the
Company or our directors and officers in the event it is needed; and, in any case, such insurance may not be adequate to fully
protect the Company against liability for the conduct of its directors, officers or employees or the Company's indemnification
obligations to its directors and officers.

We are a party to stockholder litigation which could negatively impact our business, operating results and financial
condition.

We may incur additional costs in connection with the defense or settlement of existing and any future stockholder
litigation, including the stockholder litigation that has been brought against us and certain of our directors. See "Part I, Item 3.
Legal Proceedings" below. Subject to certain limitations, we are obligated to indemnify our directors in connection with the

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litigation and any related litigation or settlement amounts, which may be time-consuming, result in significant expense and
divert the attention and resources of our management away from our operating business matters. An unfavorable financial
outcome that exceeds coverage provided under our insurance policies, could have an adverse effect on our financial condition
and results of operations and could harm our reputation.

We could be party to litigation that could adversely affect us by increasing our expenses, diverting management attention or
subjecting us to significant monetary damages and other remedies.

We may become involved in legal proceedings involving consumer, employment, real estate related, tort, intellectual
property, breach of contract, securities, derivative and other litigation. Plaintiffs in these types of lawsuits often seek recovery
of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may not be accurately
estimated. Regardless of whether any such claims have merit, or whether we are ultimately held liable or settle, such litigation
may be expensive to defend and may divert resources and management attention away from our operations and negatively
impact reported earnings. With respect to insured claims, a judgment for monetary damages in excess of any insurance
coverage could adversely affect our financial condition or results of operations. Any adverse publicity resulting from these
allegations may also adversely affect our reputation, which in turn could adversely affect our results of operations.

Our subsidiary Fog Cutter Acquisition, LLC is a party to environmental litigation which could result in significant legal
expenses whether or not it is resolved favorably.

As described in this Annual Report under “Item 3. Legal Proceedings”, our subsidiary Fog Cutter Capital Group Inc.
(now known as Fog Cutter Acquisition, LLC), is a party to litigation entitled Stratford Holding LLC v. Foot Locker Retail Inc.
for alleged environmental contamination stemming from dry cleaning operations on a property which was included in a lease
portfolio managed by a former subsidiary of Fog Cutter. The property owners seek damages in the range of $12 million to $22
million in the aggregate from all defendants. The Company is unable to predict the ultimate outcome of this matter, and
reserves have been recorded on the balance sheet relating to this litigation. There can be no assurance that Fog Cutter
Acquisition, LLC will be successful in defending against this action, and an unfavorable outcome in excess of the reserves
could have a material adverse effect on our financial condition and results of operations.

Changes in, or noncompliance with, governmental regulations may adversely affect our business operations, growth
prospects or financial condition.

We and our franchisees are subject to numerous laws and regulations around the world. These laws change regularly
and are increasingly complex. For example, we and our franchisees are subject to laws and regulations such as (but not limited
to):

•

Government orders regarding the response to health and other public safety concerns such as the various
restrictions on business operations relating to the COVID-19 pandemic being experienced in 2020;

The Americans with Disabilities Act in the U.S. and similar state laws that give civil rights protections to
individuals with disabilities in the context of employment, public accommodations and other areas;

The U.S. Fair Labor Standards Act, which governs matters such as minimum wages, overtime and other
working conditions, as well as family leave mandates and a variety of similar state laws that govern these and
other employment law matters;

Laws and regulations in government mandated health care benefits such as the Patient Protection and
Affordable Care Act;

Laws and regulations relating to nutritional content, nutritional labeling, product safety, product marketing
and menu labeling;

Laws relating to state and local licensing;

Laws relating to the relationship between franchisors and franchisees;

Laws and regulations relating to health, sanitation, food, workplace safety, child labor, including laws
prohibiting the use of certain “hazardous equipment” by employees younger than the age of 18 years of age,
and fire safety and prevention;

Laws and regulations relating to union organizing rights and activities;

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•

Laws relating to information security, privacy, cashless payments, and consumer protection;

Laws relating to currency conversion or exchange;

Laws relating to international trade and sanctions;

Tax laws and regulations;

Antibribery and anticorruption laws;

Environmental laws and regulations; and

Federal and state immigration laws and regulations in the U.S.

Compliance with new or existing laws and regulations could impact our operations. The compliance costs associated
with these laws and regulations could be substantial. Any failure or alleged failure to comply with these laws or regulations by
our franchisees or indirectly by us could adversely affect our reputation, international expansion efforts, growth prospects and
financial results or result in, among other things, litigation, revocation of required licenses, internal investigations,
governmental investigations or proceedings, administrative enforcement actions, fines and civil and criminal liability. Publicity
relating to any such noncompliance could also harm our reputation and adversely affect our revenues.

In addition, if any governmental authority were to adopt and implement a broader standard for determining when two
or more otherwise unrelated employers may be found to be a joint employer of the same employees under laws such as the
National Labor Relations Act in a manner that is applied generally to franchise relationships (which broader standards in the
past have been adopted by U.S. governmental agencies such as the National Labor Relations Board), this could cause us to be
liable or held responsible for unfair labor practices and other violations of our franchisees. Further, a California law enacted in
2019 adopted an employment classification test to be used when determining employee or independent contractor status which
establishes a high threshold to obtain independent contractor status. These laws and any similar laws enacted at the federal, state
or local level, could increase our and our franchisees’ labor costs and decrease profitability or could cause employees of our
franchisees to be deemed to be our employees.

In January 2022, the California State Assembly passed Assembly Bill (AB) No. 257, the Fast Food Accountability and
Standards Recovery Act (FAST Recovery Act), and Governor Gavin Newsom signed the bill into law on September 5, 2022.
The FAST Recovery Act provides increased rights to the state’s fast-food workers. The FAST Recovery Act is poised to create
the Fast Food Sector Council within the California Department of Industrial Relations (DIR). Under the law, the Fast Food
Sector Council will establish specific new minimum standards on wages, maximum working hours, and working conditions
related to the health, safety, and welfare of fast-food restaurant workers at restaurants with at least 100 establishments
nationwide. The FAST Recovery Act will also, among other things, institute statutory requirements aimed at expanding fast-
food franchisors’ liability for certain acts of its franchisees. In January 2023, the implementation of the FAST Recovery Act
was enjoined by a court pending the results of a statewide effort to overturn the FAST Recovery Act through a referendum on
the California ballot in November 2024. If and when the referendum challenging AB 257 qualifies for the ballot, the law will be
put on hold until the vote in November 2024. If an when it is sustained and implemented in its current form, the FAST
Recovery Act is likely to increase our franchisees’ labor and compliance costs and decrease profitability at our California
restaurants.

Failure to comply with antibribery or anticorruption laws could adversely affect our business operations.

The U.S. Foreign Corrupt Practices Act and other similar applicable laws prohibiting bribery of government officials
and other corrupt practices are the subject of increasing emphasis and enforcement around the world. Although we have
implemented policies and procedures designed to promote compliance with these laws, there can be no assurance that our
employees, contractors, agents, franchisees or other third parties will not take actions in violation of our policies or applicable
law, particularly as we expand our operations in emerging markets and elsewhere. Any such violations or suspected violations
could subject us to civil or criminal penalties, including substantial fines and significant investigation costs, and could also
materially damage our reputation, brands, international expansion efforts and growth prospects, business and operating results.
Publicity relating to any noncompliance or alleged noncompliance could also harm our reputation and adversely affect our
revenues and results of operations.

Risks Related to Our Class A Common Stock and Organizational Structure

We are controlled by Fog Cutter Holdings LLC, whose interests may differ from those of our public stockholders.

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Fog Cutter Holdings LLC controls approximately 55.2% of the voting power of our Common Stock and has significant
influence over our corporate management and affairs and is able to control virtually all matters requiring stockholder approval,
including election of directors and significant corporate transactions. It is possible that the interests of Fog Cutter Holdings LLC
may, in some circumstances, conflict with our interests and the interests of our other stockholders.

The dual class structure of our Common Stock concentrates voting control with current holders of Class B Common Stock,
and limits the ability of holders of our Class A Common Stock to influence corporate matters.

Our Class B Common Stock has 2,000 votes per share, and our Class A Common Stock has one vote per share. The
holders of Class B Common Stock collectively will likely be able to control all matters submitted to our stockholders for
approval even if additional shares of Class A Common Stock are issued. This concentrated control will limit the ability of
holders of our Class A Common Stock to influence corporate matters for the foreseeable future, and, as a result, the market
price of our Class A Common Stock could be adversely affected.

We have not elected to take advantage of the “controlled company” exemption to the corporate governance rules for

companies listed on The Nasdaq Capital Market.

Our anti-takeover provisions could prevent or delay a change in control of our company, even if such change in control
would be beneficial to our stockholders.

Provisions of our amended and restated certificate of incorporation and bylaws as well as provisions of Delaware law
could discourage, delay or prevent a merger, acquisition or other change in control of our company, even if such change in
control would be beneficial to our stockholders. These provisions include:

•

dual class structure of our Common Stock, which concentrates voting control with the current holders of Class B
Common Stock;

net operating loss protective provisions, which require that any person wishing to become a “5% shareholder” (as
defined in our certificate of incorporation) must first obtain a waiver from our Board of Directors, and any person
that is already a “5% shareholder” of ours cannot make any additional purchases of our stock without a waiver
from our board of directors;

authorizing the issuance of “blank check” preferred stock that could be issued by our Board of Directors to
increase the number of outstanding shares and thwart a takeover attempt;

limiting the ability of stockholders to call special meetings or amend our bylaws;

requiring all stockholder actions to be taken at a meeting of our stockholders; and

establishing advance notice and duration of ownership requirements for nominations for election to the board of
directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These provisions could also discourage proxy contests and make it more difficult for minority stockholders to elect
directors of their choosing and cause us to take other corporate actions they desire. In addition, because our Board of Directors
is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our
stockholders to replace current members of our management team.

In addition, the Delaware General Corporation Law, or the DGCL, to which we are subject, prohibits us, except under
specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with any
stockholder or group of stockholders who owns at least 15% of our common stock.

We may continue to issue shares of preferred stock in the future, which could make it difficult for another company to
acquire us or could otherwise adversely affect holders of our Common Stock, which could depress the price of our Common
Stock.

Our amended and restated certificate of incorporation authorizes us to issue one or more series of preferred stock. Our
board of directors has the authority to determine the preferences, limitations and relative rights of the shares of preferred stock
and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by
our stockholders. We may authorize or issue shares of preferred stock with voting, liquidation, dividend and other rights
superior to the rights of our Common Stock. To date we have authorized and outstanding shares of Series B Preferred Stock,

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which have liquidation and dividend rights superior to the rights of our Common Stock. The potential issuance of preferred
stock may also delay or prevent a change in control of us, discourage bids for our Common Stock at a premium to the market
price, and materially and adversely affect the market price and the voting and other rights of the holders of our Common Stock.

The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of
Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.

Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any
derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by
any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising
pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or the bylaws or (iv) any action
asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery in
the State of Delaware. Although we believe this provision benefits us by providing increased consistency in the application of
Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our
directors and officers.

If our operating and financial performance in any given period does not meet the guidance that we provide to the public, our
stock price may decline.

We may provide public guidance on our expected operating and financial results for future periods. Any such guidance
will be comprised of forward-looking statements subject to the risks and uncertainties described in our public filings and public
statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of
economic uncertainty. If our operating or financial results for a particular period do not meet any guidance we provide or the
expectations of investment analysts or if we reduce our guidance for future periods, the market price of our Class A Common
Stock or Class B Common Stock may decline as well.

Our ability to pay regular dividends to our stockholders is subject to the discretion of our Board of Directors and may be
limited by our holding company structure and applicable provisions of Delaware law.

While we have paid cash or stock dividends to holders of our Common Stock in each fiscal year since 2018 and our
Series B Preferred Stock since it was first issued, our board of directors may, in its sole discretion, decrease the amount or
frequency of cash or stock dividends or discontinue the payment of dividends entirely. In addition, as a holding company, we
will be dependent upon the ability of our operating subsidiaries to generate earnings and positive cash flows and distribute them
to us so that we may pay cash dividends to our stockholders. Our ability to pay cash dividends will be subject to our
consolidated operating results, cash assets and requirements and financial condition, the applicable provisions of Delaware law
which may limit the amount of funds available for distribution to our stockholders, our compliance with covenants and financial
ratios related to existing or future indebtedness, and our other agreements with third parties. In addition, each of the companies
in the corporate chain must manage its assets, liabilities and working capital in order to meet all of its cash obligations,
including the payment of dividends or distributions.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters, including our principal administrative, sales and marketing, customer support, and
research and development operations, are located in Beverly Hills, California, comprising approximately 13,000 square feet of
space, pursuant to a lease that expires on September 29, 2025, as well as an additional approximately 3,000 square feet of
additional space pursuant to a lease amendment that expires on February 29, 2024.

Our subsidiary, GFG Management, LLC, leases an approximately 16,000 square foot warehouse location in Atlanta,

GA under a lease expiring on May 31, 2024.

Our subsidiary, GAC Supply, LLC, owns and operates an approximately 40,000 square foot manufacturing and
production facility in Atlanta, Georgia and the underlying real property, which supplies our franchisees with cookie dough,
pretzel dry mix and other ancillary products.

Our subsidiary, Twin Restaurant Holding, LLC, leases offices in Dallas, TX comprising approximately 8,300 square

feet under a lease expiring on April 30, 2025.

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Our subsidiary, Fazoli's Holdings, LLC, leases offices located in Lexington, KY comprising approximately 19,200

square feet under a lease expiring on April 30, 2027.

Our subsidiary, Native Grill & Wings Franchising, LLC, leases offices located in Chandler, AZ comprising 5,825
square feet under a lease expiring on October 31, 2024. Such offices have been sub-leased for the duration of the remaining
lease term.

In addition to the above locations, certain of our subsidiaries directly own and operate restaurant locations,
substantially all of which are located in leased premises. As of December 25, 2022, we owned and operated 126 restaurant
locations. The leases have remaining terms ranging from 1 month to 23.9 years.

We believe that our existing facilities are in good operating condition and adequate to meet our current and foreseeable

needs.

ITEM 3. LEGAL PROCEEDINGS

James Harris and Adam Vignola, derivatively on behalf of FAT Brands, Inc. v. Squire Junger, James Neuhauser, Edward
Rensi, Andrew Wiederhorn, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc., and FAT Brands Inc., nominal
defendant (Delaware Chancery Court, Case No. 2021-0511)

On June 10, 2021, plaintiffs James Harris and Adam Vignola (“Plaintiffs”), putative stockholders of the Company,
filed a shareholder derivative action in the Delaware Court of Chancery nominally on behalf of the Company against the
Company’s directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn (the “Individual Defendants”)),
and the Company’s majority stockholders, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc. (collectively with the
Individual Defendants, “Defendants”). Plaintiffs assert claims of breach of fiduciary duty, unjust enrichment and waste of
corporate assets arising out of the Company’s December 2020 merger with Fog Cutter Capital Group, Inc. Defendants filed a
motion to dismiss Plaintiffs’ complaint, which the Court denied in an oral ruling on February 11, 2022 and subsequent written
order on May 25, 2022. On April 7, 2022, the Court entered a Scheduling Order setting forth the key dates and deadlines that
will govern the litigation, including a discovery cutoff of March 24, 2023 and trial date of February 5-9, 2024. To date, the
parties have engaged in substantial written discovery, though no depositions have been taken. On February 3, 2023, the
Company’s board of directors appointed a Special Litigation Committee ("SLC"), which retained independent counsel and
moved for a six-month stay of the action pending resolution of the SLC's investigation. On February 17, 2023, the Court
granted the SLC’s motion to stay. Defendants dispute the allegations of the lawsuit and intend to vigorously defend against the
claims. We cannot predict the outcome of this lawsuit. This lawsuit does not assert any claims against the Company. However,
subject to certain limitations, we are obligated to indemnify our directors in connection with defense costs for the lawsuit and
any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect
on our financial condition and results of operations. The lawsuit and any related litigation also may be time-consuming and
divert the attention and resources of our management.

James Harris and Adam Vignola, derivatively on behalf of FAT Brands, Inc. v. Squire Junger, James Neuhauser, Edward
Rensi, Andrew Wiederhorn and Fog Cutter Holdings, LLC, and FAT Brands Inc., nominal defendant (Delaware Chancery
Court, Case No. 2022-0254)

On March 17, 2022, plaintiffs James Harris and Adam Vignola (“Plaintiffs”), putative stockholders of the Company,
filed a shareholder derivative action in the Delaware Court of Chancery nominally on behalf of the Company against the
Company’s directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn (the “Individual Defendants”)),
and the Company’s majority stockholder, Fog Cutter Holdings, LLC (collectively with the Individual Defendants,
“Defendants”). Plaintiffs assert claims of breach of fiduciary duty in connection with the Company’s June 2021 recapitalization
transaction. On May 27, 2022, Defendants filed a motion to dismiss Plaintiff's complaint (the "Motion"). Argument on the
Motion was heard on November 17, 2022 and again on February 23, 2023, and the Court took its decision under advisement.
To date, the Court has not issued a ruling on the Motion, nor has the Court issued a scheduling order in this matter. Defendants
dispute the allegations of the lawsuit and intend to vigorously defend against the claims. As this matter is still in the early
stages, we cannot predict the outcome of this lawsuit. This lawsuit does not assert any claims against the Company. However,
subject to certain limitations, we are obligated to indemnify our directors in connection with defense costs for the lawsuit and
any related litigation, which may exceed coverage provided under our insurance policies, and thus could have an adverse effect
on our financial condition and results of operations. The lawsuit and any related litigation also may be time-consuming and
divert the attention and resources of our management.

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Robert J. Matthews, et al., v. FAT Brands, Inc., Andrew Wiederhorn, Ron Roe, Rebecca Hershinger and Ken Kuick (United
States District Court for the Central District of California, Case No. 2:22-cv-01820)

On March 18, 2022, plaintiff Robert J. Matthews, a putative investor in the Company, filed a putative class action
lawsuit against the Company, Andrew Wiederhorn, Ron Roe, Rebecca Hershinger and Ken Kuick, asserting claims under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), alleging that the defendants are
responsible for false and misleading statements and omitted material facts in the Company’s reports filed with the SEC under
the 1934 Act related to the LA Times story published on February 19, 2022 about the company and its management. The
plaintiff alleges that the Company’s public statements wrongfully inflated the trading price of the Company’s common stock,
preferred stock and warrants. On April 25, 2022, Kerry Chipman, a putative investor in the Company, filed a putative class
action lawsuit against the Company, Andrew Wiederhorn, Ron Roe, Rebecca Hershinger and Ken Kuick in the United States
District Court for the Central Division of California, asserting substantially the same claims as those made by Matthews in the
above-referenced lawsuit. On May 2, 2022, the Court entered an order consolidating the actions filed by Matthews and
Chipman under the caption In re FAT Brands Inc. Securities Litigation. On June 13, 2022, the Court appointed plaintiff Robert
Matthews as lead plaintiff and The Rosen Law Firm, P.A., as lead counsel in the consolidated action. Plaintiffs filed their
Consolidated Amended Complaint on June 27, 2022. On July 19, 2022, the parties entered into a stipulation to stay the
litigation so that they could engage in voluntary mediation. In August 2022, after mediation, the Company reached an
agreement in principle to settle this matter for a cash payment by the Company of $2.5 million and issuance of $0.5 million in
Class A common stock. The Stipulation of Settlement and other documents pertinent to the settlement, along with a motion for
preliminary approval thereof, were filed with the court on September 23, 2022. The Court granted the motion for preliminary
approval on November 8, 2022, and on January 31, 2023, plaintiffs moved for final approval of the settlement and certification
of the settlement class. The hearing on the motion for final approval is set for February 28, 2023, at 9:00 am PT. Upon final
approval by the court, the settlement will provide a full release of all claims by the settlement class members against all
defendants, including the Company and the named officers and directors, will expressly deny any liability, wrongdoing or
responsibility by any of the defendants, and will result in the dismissal of the litigation with prejudice.

Government Investigations

In December 2021, the U.S. Attorney’s Office for the Central District of California (the “U.S. Attorney”) and the U.S.
Securities and Exchange Commission (the “SEC”) informed the Company that they had opened investigations relating to the
Company and our Chief Executive Officer, Andrew Wiederhorn, and were formally seeking documents and materials
concerning, among other things, the Company’s December 2020 merger with Fog Cutter Capital Group Inc., transactions
between those entities and Mr. Wiederhorn, as well as compensation, extensions of credit and other benefits or payments
received by Mr. Wiederhorn or his family from those entities. Our Board of Directors has formed a Special Review Committee
(the “SRC”) comprised of directors other than Mr. Wiederhorn to oversee a review of the issues raised by the U.S. Attorney and
SEC investigations, reach findings and make a recommendation to the Board with respect to these matters. The SRC is
authorized to review such documents and interview such persons, and retain legal counsel and other consultants on behalf of the
Company, as the SRC deems necessary or appropriate to complete its review. The Company intends to cooperate with the U.S.
Attorney and the SEC regarding these matters and is continuing to actively respond to inquiries and requests from the U.S.
Attorney and the SEC. We believe that the Company is not currently a target of the U.S. Attorney’s investigation. At this stage,
we are not able to reasonably estimate or predict the outcome or duration of either of the U.S. Attorney’s or the SEC’s
investigations.

Stratford Holding LLC v. Foot Locker Retail Inc. (U.S. District Court for the Western District of Oklahoma, Case No. 5:12-
cv-00772-HE)

In 2012 and 2013, two property owners in Oklahoma City, Oklahoma sued numerous parties, including Foot Locker
Retail Inc. and our subsidiary Fog Cutter Capital Group Inc. (now known as Fog Cutter Acquisition, LLC), for alleged
environmental contamination on their properties, stemming from dry cleaning operations on one of the properties. The property
owners seek damages in the range of $12 million to $22 million. From 2002 to 2008, a former Fog Cutter subsidiary managed a
lease portfolio, which included the subject property. Fog Cutter denies any liability, although it did not timely respond to one of
the property owners’ complaints and several of the defendants’ cross-complaints and thus is in default. The parties are currently
conducting discovery, and the matter is scheduled for trial for October 2023. The Company is unable to predict the ultimate
outcome of this matter, however, reserves have been recorded on the balance sheet relating to this litigation. There can be no
assurance that the defendants will be successful in defending against these actions.

SBN FCCG LLC v FCCGI (Los Angeles Superior Court, Case No. BS172606)

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a final judgment in the NY case for a total of $0.7 million, which included $0.2 million in interest dating back to March 2012.
SBN then obtained a sister state judgment in Los Angeles Superior Court, Case No. BS172606 (the “California case”), which
included the $0.7 million judgment from the NY case, plus additional statutory interest and fees, for a total judgment of $0.7
million. In May 2018, SBN filed a cost memo, requesting an additional $12,411 in interest to be added to the judgment in the
California case, for a total of $0.7 million. In May 2019, the parties agreed to settle the matter for $0.6 million, which required
the immediate payment of $0.1 million, and the balance to be paid in August 2019. FCCG wired $0.1 million to SBN in May
2019, but has not yet paid the remaining balance of $0.5 million. The parties have not entered into a formal settlement
agreement, and they have not yet discussed the terms for the payment of the remaining balance.

SBN FCCG LLC v FCCGI (Supreme Court of the State of New York, County of New York, Index No. 650197/2023)

On January 13, 2023, SBN filed another complaint against FCCG in New York state court for an indemnification
claim stemming from a lawsuit in Oklahoma City regarding the same lease portfolio formerly managed by Fog Cap, and a
bankruptcy proceedings involving Fog Cap. SBN alleges that under a February 2008 stock purchase agreement, Fog Cutter is
required to indemnify SBN and its affiliates. According to the complaint, SBN has, at the time of filing the complaint, incurred
costs subject to indemnification of approximately $12 million. SBN has not yet served the complaint on FCCG. We are unable
at this time to express any opinion as to the outcome of this matter or as to the possible range of loss, if any.

The Company is involved in other claims and legal proceedings from time-to-time that arise in the ordinary course of
business, including those involving the Company’s franchisees. The Company does not believe that the ultimate resolution of
these actions will have a material adverse effect on its business, financial condition, results of operations, liquidity or capital
resources. As of December 25, 2022 and December 26, 2021, the Company had accrued an aggregate of $5.1 million for the
specific matters mentioned above and claims and legal proceedings involving franchisees as of that date.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our Class A Common Stock, par value $0.0001 per share, is traded on the NASDAQ Capital Market under the ticker
symbols “FAT” and our Class B Common Stock, par value $0.0001 per share, is traded on the NASDAQ Capital Market under
the ticker symbol "FATBB."

As of February 17, 2023, there were 45 stockholders of record for our Class A Common Stock and 42 stockholders of
record for our Class B Common Stock. The number of record holders does not include persons who held such shares in
nominee or “street name” accounts through brokers.

Dividends

The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our
Board of Directors. The amount and size of any future dividends will depend upon our future results of operations, financial
condition, capital levels, cash requirements and other factors. There can be no assurance that we will declare and pay dividends
in future periods.

Equity Compensation Plan Information

Effective September 30, 2017, we adopted the 2017 Omnibus Equity Incentive Plan (the “Plan”). The Plan was
amended in September 2021 to increase the maximum shares issuable under the Plan to 4,000,000 shares and amended in
December 2022 to increase the maximum shares issuable under the Plan to 5,000,000 shares. The Plan is a comprehensive
incentive compensation plan under which we can grant equity-based and other incentive awards to officers, employees and
directors of, and consultants and advisers to, FAT Brands Inc. and its subsidiaries. The purpose of the Plan is to help attract,
motivate and retain qualified personnel and thereby enhance stockholder value. Awards which lapse or are forfeited become
available again for grant.

As of December 25, 2022, we have granted options to purchase 2,166,822 shares of Class A Common Stock to
employees, 536,130 shares of Class A Common Stock to non-employee directors, and 45,954 shares of Class A Common Stock
to non-employee consultants. Each grant is subject to a three-year vesting requirement, with one-third of the options vesting
each year.

During the year ended December 25, 2022, the Company also granted an aggregate of 150,000 shares of its Class A
Common Stock to five Board members (the “Grant Shares”). The Grant Shares vest one-third each year on the anniversary date
of the grant. The grantees are entitled to any common dividends relating to the Grant Shares during the vesting period.

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The information presented in the table below is as of December 25, 2022:

Number of
Securities to be
Issued
upon Exercise of
Outstanding
Options, Warrants
and Rights

Weighted-
Average Exercise
Price of
Outstanding
Options,
Warrants and
Rights

(a)

(b)

Plan Category

Equity compensation plans approved by security holders

2,748,906 $

Equity compensation plans not approved by security holders

Total

—

2,748,906 $

10.06

—

10.06

Issuer Purchases of Equity Securities

Number of
Securities
Remaining
Available for
Future Issuance
under Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column
(a))

(c)

2,101,094

—

2,101,094

We do not have a program in place to repurchase our own Common Stock or preferred stock and as of December 25,
2022, we have not repurchased any of these securities except for the cancellation of shares issued under the Plan, and as set
forth in the following paragraph.

On October 21, 2022, the Company entered into an Exchange Agreement with the sellers of Twin Peaks and redeemed
1,821,831 shares of the Company's 8.25% Series B Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and
unpaid dividends to the date of redemption, in exchange for $46.5 million aggregate principal amount of secured debt ($43.2
million net of original issue discount). Prior to the redemption, the Twin Peaks sellers held 2,847,393 shares of Series B
Cumulative Preferred Stock, which shares were issued to it on October 1, 2021 as partial consideration for the Company's
acquisition of the Twin Peaks restaurant chain.

Recent Sales of Unregistered Securities

During the fiscal year ended December 25, 2022, we issued 4,761 shares of Class A Common Stock in a transaction
that was not registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the exemption for
transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 thereunder,
and in reliance on similar exemptions under applicable state securities laws. Such shares were issued to a director who elected
to receive cash compensation in the form of Class A Common Stock at market value at the time the election was made at a
weighted average price per share of $6.30.

ITEM 6. [RESERVED].

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

COVID-19

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Executive Overview

Business overview

FAT Brands Inc. is a leading multi-brand restaurant franchising company that develops, markets, and acquires
primarily quick-service, fast casual, casual dining and polished casual restaurant concepts around the world. As of
December 25, 2022, the Company owned seventeen restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery,
Johnny Rockets, Fazoli's, Twin Peaks, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill
& Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza
Steakhouses. At December 25, 2022, the Company had approximately 2,300 locations open or under construction, of which
approximately 95% were franchised.

We generally do not own or operate restaurant locations, but rather generate revenue by charging franchisees an initial
franchise fee as well as ongoing royalties. This asset light franchisor model provides the opportunity for strong profit margins
and an attractive free cash flow profile while minimizing restaurant operating company risk, such as long-term real estate
commitments or capital investments. Our scalable management platform enables us to add new stores and restaurant concepts to
our portfolio with minimal incremental corporate overhead cost, while taking advantage of significant corporate overhead
synergies. The acquisition of additional brands and restaurant concepts as well as expansion of our existing brands are key
elements of our growth strategy.

Our revenues are derived primarily from two sales channels, franchised restaurants and company owned restaurants,
which we operate as one segment. The primary sources of revenues are the sale of food and beverages at our company
restaurants and the collection of royalties, franchise fees and advertising revenue from sales of food and beverages at our
franchised restaurants.

Results of Operations

We operate on a 52-week or 53-week fiscal year ending on the last Sunday of the calendar year. In a 52-week fiscal
year, each quarter contains 13 weeks of operations. In a 53-week fiscal year, each of the first, second and third quarters includes
13 weeks of operations and the fourth quarter includes 14 weeks of operations, which may cause our revenue, expenses and
other results of operations to be higher due to an additional week of operations. The 2022 and 2021 fiscal years were each 52-
week years.

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Results of Operations of FAT Brands Inc.

The following table summarizes key components of our consolidated results of operations for the fiscal years ended
December 25, 2022 and December 26, 2021. Certain account balances from the prior period have been reclassified to conform
to current period presentation.

(In Thousands)
For the Fiscal Years Ended

Consolidated statement of operations data:

Revenues

Royalties
Franchise fees
Advertising fees
Restaurant sales
Factory revenue
Management fees and other income

Total revenues

Costs and expenses

General and administrative expense
Cost of restaurant and factory revenues
Depreciation and amortization
Impairment of goodwill and other intangible assets
Refranchising loss
Acquisition fees
Advertising expense

Total costs and expenses

(Loss) income from operations

Total other expense, net

Loss before income tax

Income tax provision (benefit)

Net loss

December 25,
2022

December 26,
2021

87,921 $
3,706
37,997
241,001
33,504
3,095
407,224

113,313
221,627
27,015
14,000
4,178
383
44,612
425,128

42,658
4,023
16,728
41,563
13,470
439
118,881

41,775
44,242
8,474
1,037
314
4,242
17,973
118,057

(17,904)

824

(89,474)

(35,944)

(107,378)

(35,120)

18,810

(3,537)

(126,188) $

(31,583)

Net Loss - Net loss for the fiscal year ended December 25, 2022, totaled $126.2 million consisting of revenues of
$407.2 million less costs and expenses of $425.1 million, other expense of $89.5 million, and income tax provision of $18.8
million. Net loss for the fiscal year ended December 26, 2021, totaled $31.6 million consisting of revenues of $118.9 million
less costs and expenses of $118.1 million, other expense of $35.9 million plus an income tax benefit of $3.5 million.

Revenues - Revenues consist of royalties, franchise fees, advertising fees, restaurant sales, factory revenues, and other
income. We earned revenues of $407.2 million for the fiscal year ended December 25, 2022 compared to $118.9 million for the
fiscal year ended December 26, 2021. The increase of $288.3 million reflects revenue from the 2021 Acquisitions and the
continuing recovery from the negative effects of the COVID-19 pandemic on royalties from restaurant sales.

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Costs and Expenses – Costs and expenses consist primarily of general and administrative costs and franchisee support,
cost of restaurant and factory revenues, impairment of goodwill and other intangible assets, net refranchising (gains) losses,
acquisition costs and advertising expense. Our costs and expenses increased from $118.1 million in the 2021 fiscal year to
$425.1 million in the comparable period of 2022, primarily due to the 2021 Acquisitions.

General and administrative expenses increased $71.5 million for the fiscal year ended December 25, 2022, compared
to the prior year, primarily due to the 2021 Acquisitions, increased compensation costs reflecting the significant expansion of
the organization and professional fees related to pending litigation and government investigations.

Cost of restaurant and factory revenues totaled $221.6 million for the year ended December 25, 2022 and was related
to the operations of the company-owned restaurant locations and the dough factory operated by GFG associated with the 2021
Acquisitions.

Depreciation and amortization increased $18.5 million in fiscal year 2022 compared to fiscal year 2021, primarily due
to depreciation of company-owned restaurant property and equipment and amortizing intangible assets related to the 2021
Acquisitions.

We recorded non-cash impairment charges for goodwill and other intangible assets of $14.0 million and $1.0 million

during the fiscal years ended December 25, 2022 and December 26, 2021, respectively.

Refranchising net loss for the fiscal year ended December 25, 2022, was comprised of restaurant operating costs, net of
food sales, of $4.2 million. Refranchising net loss for the fiscal year ended December 26, 2021, was comprised of restaurant
operating costs, net of food sales, of $3.0 million, partially offset by $2.7 million in net gains related to the sale or closure of
refranchised restaurants.

Acquisition costs during the 2022 fiscal year totaled $0.4 million. For the 2021 fiscal year acquisition costs totaled

$4.2 million and were related primarily to the 2021 acquisitions.

Advertising expense increased $26.6 million for the fiscal year ended December 25, 2022, compared to the prior year.
These expenses vary in relation to advertising revenues and reflect increases related to the 2021 Acquisitions and the increase in
customer activity as the recovery from COVID continues.

Total other expense, net for the fiscal year ended December 25, 2022 was $89.5 million and consisted primarily of net
interest expense of $94.8 million. Total other expense, net for the fiscal year ended December 26, 2021 was $35.9 million and
consisted primarily of net interest expense of $29.1 million and net losses on extinguishment of debt in the amount of $7.6
million.

Income tax provision (benefit) – We recorded an income tax provision of $18.8 million for the year ended
December 25, 2022, compared to an income tax benefit of $3.5 million for the fiscal year ended December 26, 2021. These tax
results were based on a net loss before taxes of $107.4 million for fiscal year 2022 and $35.1 million for fiscal year 2021.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to
repay borrowings, fund business operations, acquisitions, and expansion of franchised restaurant locations and for other general
business purposes. Our primary sources of funds for liquidity during the fiscal year ended December 25, 2022 consisted of cash
provided by borrowings and cash on hand at the beginning of the period.

We are involved in a world-wide expansion of franchise locations, which will require significant liquidity, primarily
from our franchisees. If real estate locations of sufficient quality cannot be located and either leased or purchased, the timing of
restaurant openings may be delayed. Additionally, if we or our franchisees cannot obtain capital sufficient to fund this
expansion, the extent of or timing of restaurant openings may be reduced or delayed.

We also may acquire additional restaurant concepts. These acquisitions typically require capital investments in excess
of our normal cash on hand. We would expect that future acquisitions will necessitate financing with additional debt or equity
transactions. If we are unable to obtain acceptable financing, our ability to acquire additional restaurant concepts likely would
be negatively impacted.

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We have liabilities of $91.8 million relating to put options exercised by others on our Series B Cumulative Preferred
Stock. The Company has contractual options pursuant to the put/call agreements to extend this repayment via incremental
interest payments and there are capital market options that the Company may consider. We believe that we have sufficient
liquidity to meet our liquidity needs and capital resource requirements for at least the next twelve months primarily through
currently available cash and cash equivalents, cash flows from operations and access to the capital markets.

As of December 25, 2022, we had cash and restricted cash totaling $68.8 million.

Debt Issuances (Whole-Business Securitizations)

We financed our acquisitions and operations through the issuance of notes by four special purpose, wholly-owned
financing subsidiaries identified below, which own substantially all of our operations. The Company acts as the manager of
each of these subsidiaries under a Management Agreement and performs management, franchising, distribution, intellectual
property and operational functions on behalf of the subsidiaries and receives a management fee.

FAT Brands Royalty I, LLC

On April 26, 2021, FAT Brands Royalty I, LLC (“FB Royalty”), our special purpose, wholly-owned subsidiary,
completed the Offering of three tranches of fixed rate senior secured notes (collectively, the “2021 FB Royalty Securitization
Notes”). Net proceeds from the issuance of the 2021 FB Royalty Securitization Notes totaled $140.8 million, which consisted
of the combined face amount of $144.5 million, net of debt offering costs of $3.0 million and original issue discount of $0.7
million. A portion of the proceeds of the 2021 FB Royalty Securitization Notes were used to repay and retire similar notes
issued in 2020 under the Base Indenture (the "2020 Securitization Notes"). The payoff amount totaled $83.7 million, which
included principal of $80.0 million, accrued interest of $2.2 million and prepayment premiums of $1.5 million. The remaining
proceeds were available for working capital. FB Royalty owns the following brands: Fatburger, Johnny Rockets, Buffalo's Cafe
and Buffalo's Express, Ponderosa Steakhouse, Bonanza Steakhouse, Hurricane Grill & Wings and Yalla Mediterranean.

On July 6, 2022, FB Royalty issued an additional $76.5 million aggregate principal amount of three tranches of fixed

rate senior secured notes as follows:

Closing Date
7/6/2022
7/6/2022
7/6/2022

Class
A-2
B-2
M-2

Seniority
Senior
Senior Subordinated
Subordinated

Principal
Balance
$42.7
$14.2
$19.6

Coupon
4.75%
8.00%
9.00%

Final Legal
Maturity
Date
4/25/2051
4/25/2051
4/25/2051

The remaining $46.5 million in aggregate principal amount was sold privately on October 21, 2022 when the
Company entered into an Exchange Agreement with the Twin Peaks sellers and redeemed 1,821,831 shares of the Company’s
8.25% Series B Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and unpaid dividends to the date of
redemption, in exchange for $46.5 million aggregate principal amount of secured debt ($43.2 million net of original issue
discount). Prior to the redemption, the Twin Peaks sellers held 2,847,393 shares of Series B Cumulative Preferred Stock, which
shares were issued to it on October 1, 2021 as partial consideration for the Company’s acquisition of Twin Peaks.

Pursuant to the Exchange Agreement, (i) at any time prior to July 25, 2023, the Company may call from the Twin
Peaks sellers all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.86, plus any accrued
plus unpaid interest thereon; (ii) at any time on or after the date of the Exchange Agreement, the Company may call from the
Twin Peaks sellers, and at any time on or after July 25, 2023, the Twin Peaks sellers may put to the Company, all or a portion of
the Class A-2 Notes and/or Class B-2 Notes at the outstanding principal balance multiplied by 0.94, plus any accrued plus
unpaid interest thereon; and (iii) at any time on or after July 25, 2023, the Company may call from the Twin Peaks sellers, and
the Twin Peaks sellers may put to the Company, all or a portion of the Class M-2 Notes at the outstanding principal balance
multiplied by 0.91, plus any accrued plus unpaid interest thereon. If the Company does not remit the applicable call price or put

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price upon a duly exercised call or put, as applicable, the amount owed by the Company will accrue interest at 10% per annum,
which interest is due and payable in cash monthly by the Company.

FAT Brands GFG Royalty I, LLC

In connection with the acquisition of GFG, on July 22, 2021, FAT Brands GFG Royalty I, LLC (“GFG Royalty”), our
special purpose, wholly-owned subsidiary, completed the issuance and sale in a private offering (the “GFG Offering”) of three
tranches of fixed rate senior secured notes (the "GFG Securitization Notes"). Net proceeds from the issuance of the GFG
Securitization Notes totaled $338.9 million, which consisted of the combined face amount of $350.0 million, net of debt
offering costs of $6.0 million and original issue discount of $5.1 million. Substantially all of the proceeds were used to acquire
GFG. GFG Royalty owns our factory operations in Atlanta, GA and the following restaurant brands: Round Table Pizza,
Marble Slab Creamery, Great American Cookies, Hot Dog on a Stick and Pretzelmaker.

On December 15, 2022, GFG Royalty authorized the issuance of an additional $113.5 million aggregate principal

amount of three tranches of fixed rate senior secured notes as follows:

Closing Date
12/13/2022
12/13/2022
12/13/2022

Class
A-2
B-2
M-2

Seniority
Senior
Senior Subordinated
Subordinated

Principal
Balance
$67.8
$20.2
$25.5

Coupon
6.00%
7.00%
9.50%

Final Legal
Maturity
Date
7/25/2051
7/25/2051
7/25/2051

Of the $113.5 million aggregate principal amount, $25.0 million was sold privately during the fourth quarter of 2022,
resulting in net proceeds of $22.3 million (net of debt offering costs of $0.4 million and original issue discount of $2.3 million).
The remaining $88.5 million in aggregate principal was issued to FAT Brands Inc., pending sale to third party investors, and
has been eliminated in consolidation as of December 25, 2022. In January 2023, an additional $40.0 million aggregate principal
amount was sold privately, resulting in net proceeds of $34.8 million net of debt offering costs and original issue discount.

FAT Brands Twin Peaks I, LLC

In connection with the acquisition of Twin Peaks, on October 1, 2021, we completed the issuance and sale in a private
offering through our special purpose, wholly-owned subsidiary, FAT Brands Twin Peaks I, LLC, of an aggregate principal
amount of $250.0 million of Series 2021-1 Fixed Rate Secured Notes (the "Twin Peaks Securitization Notes"). Net proceeds
from the issuance of the Twin Peaks Securitization Notes totaled $236.9 million, which consisted of the combined face amount
of $250.0 million, net of debt offering costs of $5.6 million and original issue discount of $7.5 million. The proceeds were used
to finance the cash portion of the purchase price for the acquisition of Twin Peaks Buyer, LLC and its direct and indirect
subsidiaries. FAT Brands Twin Peaks I, LLC owns the Twin Peaks restaurant brand.

FAT Brands Fazoli's Native I, LLC

In connection with the acquisition of Fazoli's and Native Grill & Wings, on December 15, 2021, we completed the
issuance and sale in a private offering through our special purpose, wholly-owned subsidiary, FAT Brands Fazoli's Native I,
LLC, of an aggregate principal amount of $193.8 million of Series 2021-1 Fixed Rate Secured Notes (the "Fazoli's-Native
Securitization Notes"). Net proceeds from the issuance of the Fazoli's-Native Securitization Notes totaled $180.6 million, which
consisted of the combined face amount of $193.8 million, net of debt offering costs of $3.8 million and original issue discount

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of $9.4 million. The proceeds were used to close the acquisitions of Fazoli's and Native, and to provide working capital for the
Company. FAT Brands Fazoli's Native I, LLC owns the Fazoli's and Native Grill & Wings restaurant brands.

We believe that we will be in compliance with our debt covenants and have sufficient sources of cash to meet our

liquidity needs for the next twelve months.

Equity Issuances

On June 22, 2021, we completed an underwritten public offering of 460,000 shares of our 8.25% Series B Cumulative
Preferred Stock at a price of $20.00 per share. The net proceeds of the offering totaled $8.3 million (net of $0.9 million in
underwriting discounts and other offering expenses).

On November 1, 2021, we closed an additional underwritten public offering of 1,000,000 shares of our 8.25% Series B
Cumulative Preferred Stock at a price of $18.00 per share. The net proceeds of this offering totaled $16.8 million (net of $1.2
million in underwriting discounts and other offering expenses).

On November 14, 2022, we entered into an ATM Sales Agreement (the "Sales Agreement") with ThinkEquity LLC
(the "Agent"), pursuant to which we may offer and sell from time to time through the Agent up to $21,435,000 maximum
aggregate offering price of shares of our Class A Common Stock and/or 8.25% Series B Cumulative Preferred Stock. During
the fourth quarter and fiscal year 2022, pursuant to the Sales Agreement, (i) we sold and issued 1,648 shares of Class A
Common Stock, at a weighted average share price of $7.04, paid the Agent commissions of $348 and received net proceeds of
$11,260 (net of fees and commissions) for such sales and (ii) we sold and issued 30,683 shares of Series B Cumulative
Preferred Stock, at a weighted average share price of $18.13, paid the Agent commissions of $16,692 for such sales and
received net proceeds of $539,698 (net of fees and commissions) for such sales.

Comparison of Cash Flows

Our cash and restricted cash balance was $68.8 million as of December 25, 2022, compared to $99.9 million as of

December 26, 2021.

The following table summarizes key components of our audited consolidated cash flows for the fiscal years ended

December 25, 2022, and December 26, 2021:

(In thousands)
For the Fiscal Years Ended

Net cash (used in) provided by operating activities
Net cash used in investing activities

Net cash provided by financing activities
Net (decrease) increase in cash and restricted cash

Operating Activities

December 25,
2022

December 26,
2021

(47.4) $
(12.5)

28.7
(31.2) $

0.7
(723.2)

815.2
92.7

Net cash used in operating activities increased by $48.1 million in 2022 compared to 2021, primarily due to higher

debt service costs associated with our securitizations and changes in working capital.

Investing Activities

Net cash used in investing activities was $12.5 million in fiscal year 2022, primarily related to purchases of property
and equipment in connection with company-owned restaurants. Net cash used in investing activities was $723.2 million in
2021, primarily related to the acquisition of GFG, Twin Peaks, Fazoli's and Native Grill & Wings.

Financing Activities

Net cash provided by financing activities was $28.7 million in 2022, primarily as a result of proceeds from
borrowings, offset by dividends paid on our Class A and Class B Common Stock and our Series B Cumulative Preferred Stock.
Net cash provided by financing activities was $815.2 million in 2021, primarily as a result of the whole business securitization

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transaction, the three securitization transactions relating to the acquisitions of GFG, Twin Peaks, Fazoli's and Native Grill &
Wings and the issuance of Series B Cumulative Preferred Stock, net of repayments of borrowings of $93.3 million.

Dividends

The dividends declared on the Company's common stock by the Board of Directors during the fiscal year ended

December 25, 2022 are as follows (in millions):

Declaration Date

January 11, 2022

April 12, 2022

July 12, 2022

October 25, 2022

Dividend Per
Share

Record Date

Payment Date

(in millions)

Total Dividend

0.13

0.14

February 15, 2022

March 1, 2022

May 16, 2022

June 1, 2022

August 16, 2022

September 1, 2022

0.14 November 15, 2022

December 1, 2022

2.2

2.1

2.3

Capital Expenditures

As of December 25, 2022, we do not have any material commitments for capital expenditures.

Critical Accounting Policies and Estimates

Franchise Fees: The franchise arrangement is documented in the form of a franchise agreement. The franchise
arrangement requires us to perform various activities to support the brand that do not directly transfer goods and services to the
franchisee, but instead represent a single performance obligation, which includes the transfer of the franchise license. The
services provided by us are highly interrelated with the franchise license and are considered a single performance obligation.
Franchise fee revenue from the sale of individual franchises is recognized over the term of the individual franchise agreement
on a straight-line basis. Unamortized non-refundable deposits collected in relation to the sale of franchises are recorded as
deferred franchise fees.

The franchise fee may be adjusted at management’s discretion or in a situation involving store transfers between
franchisees. Deposits are non-refundable upon acceptance of the franchise application. In the event a franchisee does not
comply with their development timeline for opening franchise stores, the franchise rights may be terminated, at which point the
franchise fee revenue is recognized in the amount of the non-refundable deposits.

Royalties: In addition to franchise fee revenue, we collect a royalty calculated as a percentage of net sales from our
franchisees. Royalties range from 0.75% to 7.0% and are recognized as revenue when the related sales are made by the
franchisees. Royalties collected in advance of sales are classified as deferred income until earned.

Advertising: We require advertising payments from franchisees based on a percent of their net sales. We also receive,
from time to time, payments from vendors that are to be used for advertising. Advertising funds collected are required to be
spent for specific advertising purposes. Advertising revenue and associated expense is recorded on the consolidated statement
of operations. Assets and liabilities associated with the related advertising fees are reflected in the Company’s consolidated
balance sheets.

Goodwill and other intangible assets: Goodwill and other intangible assets with indefinite lives, such as trademarks,
are not amortized but are reviewed for impairment annually, or more frequently if indicators arise, as was done in 2022 and
2021. The Company recorded impairment charges of $14.0 million and $1.0 million relating to goodwill and other intangible
assets during the fiscal years ended December 25, 2022 and December 26, 2021, respectively.

Assets classified as held-for-sale: Assets are classified as held-for-sale when we commit to a plan to sell the asset, the
asset is available for immediate sale in its present condition and an active program to locate a buyer at a reasonable price has
been initiated. The sale of these assets is generally expected to be completed within one year. The combined assets are valued at
the lower of their carrying amount or fair value, net of costs to sell and included as current assets on the Company’s

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consolidated balance sheet. Assets classified as held-for-sale are not depreciated. However, interest attributable to the liabilities
associated with assets classified as held-for-sale and other expenses continue to be recorded as expenses in the Company’s
consolidated statements of operations.

Income taxes: We account for income taxes under the asset and liability method. Under this method, deferred tax
assets and liabilities are determined based on the differences between financial reporting and tax reporting bases of assets and
liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected
to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.

We utilize a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the
position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any.
The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon the
ultimate settlement.

Share-based compensation: We have a stock option plan which provides for options to purchase shares of our
common stock. For grants to employees and directors, we recognize an expense for the value of options granted at their fair
value at the date of grant over the vesting period in which the options are earned. Cancellations or forfeitures are accounted for
as they occur. Fair values are estimated using the Black-Scholes option-pricing model. (See Note 14 in our consolidated
financial statements for more details on our share-based compensation.)

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of
Credit Losses on Financial Instruments, and later amended the ASU in 2019, as described below. This guidance replaces the
current incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an
entity is required to recognize an allowance that reflects its current estimate of credit losses expected to be incurred over the life
of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts.

In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives
and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). The purpose of this amendment is to
create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities.
This granted certain classes of companies, including Smaller Reporting Companies (“SRCs”), additional time to implement
major FASB standards, including ASU 2016-13. Larger public companies will have an effective date for fiscal years beginning
after December 15, 2019, including interim periods within those fiscal years. All other entities are permitted to defer adoption
of ASU 2016-13, and its related amendments, until fiscal years beginning after December 15, 2022, including interim periods
within those fiscal years. Under the current SEC definitions, the Company meets the definition of an SRC and is adopting the
deferral period for ASU 2016-13. The guidance requires a modified retrospective transition approach through a cumulative-
effect adjustment to retained earnings as of the beginning of the period of adoption. The Company does not expect the adoption
of this standard will have a material impact on its condensed consolidated financial statements.

In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2022-02, Financial
Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The purpose of this amendment
is to enhance disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is
experiencing financial difficulty. It requires that an entity disclose current-period gross writeoffs by year of origination for
financing receivables and net investments in leases. The amendments should be applied prospectively and are effective for
fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the
amendments is permitted if an entity has adopted the amendments in ASU 2016-13 described above, including adoption in an
interim period. The Company will evaluate ASC No. 2022-02 and does not expect the adoption of this standard will have a
material impact on its condensed consolidated financial statements.

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Off-Balance Sheet Arrangements

As of December 25, 2022, we did not have any off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15 of Part IV of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

There has been no change of accountants or any disagreements with accountants on any matter of accounting

principles or practices, or financial statement disclosure required to be reported under this item.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form
10-K. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed
to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the
company’s management, including its principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and
management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our
disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as

such term is defined in Rule 13a-15(f) under the Exchange Act.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting also includes those policies and
procedures that:

(a)

(b)

(c)

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting using the criteria established in Internal Control Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria,
our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was
effective as of December 25, 2022.

Because we are a non-accelerated filer, we are not required to include an attestation report by our independent
registered public accounting firm regarding the effectiveness of our internal control over financial reporting in this annual report
as of December 25, 2022.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation
required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 25, 2022, that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

On February 21, 2023, the Board of Directors approved an amendment to Section 3.05 of the Company's Bylaws to
replace the words "next election of the class for which such director shall have been chosen" with the words "next annual
meeting of stockholders." This was a technical amendment to the language describing the term of directors elected to fill
vacancies or newly created directorships, in order to properly reflect the declassification of the Board of Directors which
occurred in December 2022. The foregoing description of the Bylaws amendment is qualified in its entirety by reference to the
complete text of the Amended and Restated Bylaws, which is filed herewith as Exhibit 3.6 and incorporated herein by this
reference.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Directors

Below is a list of the names and ages, as of December 25, 2022, of our directors and executive officers, and a

description of the business experience of each of them.

Name
Andrew A. Wiederhorn
James Neuhauser
Kenneth J. Anderson
Lynne L. Collier
Amy V. Forrestal
Edward H. Rensi
Kenneth J. Kuick
Thayer D. Wiederhorn
Taylor A. Wiederhorn
Robert G. Rosen
Allen Z. Sussman
Ron Roe

Age
56
64
68
55
57
78
54
34
34
56
58
45

Position

President and Chief Executive Officer, Director
Executive Chairman of the Board of Directors
Director
Director
Director
Director
Chief Financial Officer
Chief Operating Officer
Chief Development Officer
Executive Vice President of Capital Markets
Executive Vice President and General Counsel, Secretary
Senior Vice President of Finance

Andrew A. Wiederhorn has served as the President and Chief Executive Officer of FAT Brands Inc. and our principal
operating subsidiaries since our inception in March 2017. He also served as the Chairman and Chief Executive Officer of our
former parent company, Fog Cutter Capital Group Inc., since its formation in 1997. Mr. Wiederhorn previously founded and
served as the Chairman Chief Executive Officer of Wilshire Financial Services Group Inc. and Wilshire Credit Corporation.
Mr. Wiederhorn received his B.S. degree in Business Administration from the University of Southern California in 1987, with
an emphasis in Finance and Entrepreneurship. He previously served on the Board of Directors of Fabricated Metals, Inc., The
Boy Scouts of America Cascade Pacific Council, The Boys and Girls Aid Society of Oregon, University of Southern California
Associates, Citizens Crime Commission of Oregon, and Economic Development Council for the City of Beverly Hills Chamber
of Commerce. Mr. Wiederhorn was also featured as the Fatburger CEO on the CBS television program “Undercover Boss” in
2013.

James Neuhauser has served on our Board of Directors since our inception in 2017, and became Executive Chairman
of the Board in July 2022. He previously served as a Senior Managing Director in the Private Capital Markets Group of Stifel
Nicolas & Company from May 2017 until July 2022. Mr. Neuhauser also serves as a managing member of Turtlerock Capital,
LLC, a private company that finances and invests in real estate development projects. Mr. Neuhauser previously held senior
positions at FBR & Co. over 24 years, including Chief Investment Officer, Head of Investment Banking, Head of the
Commitment Committee and a member of the firm's Executive Committee. Prior to joining FBR, Mr. Neuhauser was a Senior
Vice President of Trident Financial Corporation for seven years, where he specialized in managing stock offerings for mutual to
stock conversions of thrift institutions. Before joining Trident, he worked in commercial banking with The Bank of New
England. Mr. Neuhauser is a CFA charter holder and a member of the Society of Financial Analysts. He received a Bachelor of
Arts from Brown University and an M.B.A. from the University of Michigan.

Kenneth J. Anderson has served on our Board of Directors since October 2021, and was a director of our former parent
company, Fog Cutter Capital Group Inc., until December 2020. Mr. Anderson has more than 35 years of experience in advising
families, corporate executives and business owners, providing financial strategies related to taxes, estate planning, investments,
insurance and philanthropy. Mr. Anderson currently serves as the CEO of the investment firm, Cedar Tree Capital, where he
provides strategic planning to high-net-worth family groups with a focus on public equities and alternative investments. Prior to
Cedar Tree Capital, was a founder and client service director at a leading independent wealth management firm, Aspiriant,
where he also was a member of the Board of Directors. Mr. Anderson was a client service director at myCFO until its sale in
2002 and prior to that a Tax Partner at Arthur Andersen LLP for 20 years. In addition to his decades of professional experience,
Mr. Anderson is a certified public accountant and licensed attorney.

Lynne L. Collier has served on our Board of Directors since July 2022. Ms. Collier is an experienced capital markets
professional, with nearly 30 years of experience in public capital markets and a focus on the restaurant industry. Ms. Collier

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currently serves as Head of Consumer Discretionary for Water Tower Research, LLC, and previously served as a Managing
Director in the Investor Relations Division of ICR Inc. from April 2021 to June 2022. Prior to that, Ms. Collier had a 25-year
career in equity research as a sell-side Consumer Analyst, including for Loop Capital, Canaccord Genuity and Sterne Agee. Ms.
Collier received a bachelor's degree in finance from Baylor University and an M.B.A. in finance from Texas Christian
University.

Amy V. Forrestal has served on our Board of Directors since October 2021. Ms. Forrestal is a seasoned executive and
investment banker for companies in the restaurant and franchising industries. Ms. Forrestal serves as Managing Director of
Brookwood Associates, an investment banking firm based in Atlanta, GA. Ms. Forrestal established Brookwood’s Restaurant
and Hospitality Group and spearheaded noteworthy deals for brands such as Beef O’ Brady’s, Fuddruckers, Rita’s Italian Ice,
Quiznos, Zoes Kitchen and The Habit Burger Grill. Prior to joining Brookwood, Ms. Forrestal was a Managing Director in
Banc of America Securities’ Mergers and Acquisitions group. Over her 15 years at Banc of America Securities and its
predecessor organizations, including NationsBanc Montgomery Securities, Ms. Forrestal advised senior management teams,
boards of directors and business owners in a variety of strategic and financial transactions, including acquisitions, leveraged
buyouts, exclusive sales, divestitures, ESOPs, public equity and debt offerings and private equity and debt placements. Ms.
Forrestal received a Bachelor of Arts degree in math and economics from Duke University.

Edward H. Rensi has served on the Board of Directors since our inception in March 2017, and became Chairman of
the Board in October 2017. In July 2022, Mr. Rensi transitioned to the role of Vice-Chairman of the Board and Lead
Independent Director. Mr. Rensi is the retired president and chief executive officer of McDonald’s USA. Prior to his retirement
in 1997, Mr. Rensi devoted his entire professional career to McDonald’s, joining the company in 1966 as a “grill man” and
part-time manager trainee in Columbus, Ohio. Mr. Rensi became president and chief operating officer of McDonald's USA in
1984, and was named chief executive officer in 1991, overseeing all domestic company-owned and franchisee operations, in
addition to providing direction relative to sales, profits, operations and service standards, customer satisfaction, product
development, personnel and training. During his 13-year term as president, McDonald's U.S. sales doubled to more than $16
billion, the number of U.S. restaurants grew from nearly 6,600 to more than 12,000, and the number of U.S. franchisees grew
from 1,600 to more than 2,700. Since his retirement, Mr. Rensi has held consulting positions. From January 2014 to July 2015,
Mr. Rensi served as director and interim CEO of Famous Dave's of America, Inc. Mr. Rensi received his B.S. in Business
Education from The Ohio State University in Columbus, Ohio.

Kenneth J. Kuick has served as the Chief Financial Officer since May 31, 2021. Prior to joining the Company, Mr.
Kuick served as Chief Financial Officer of Noodles & Company, a national fast-casual restaurant concept, from November
2018 to August 2020, where he was responsible for leading the Company’s finance, accounting and supply chain operations.
Prior to that, Mr. Kuick served as Chief Accounting Officer of VICI Properties Inc., a real estate investment trust specializing in
casino properties, from October 2017 to August 2018, where he was responsible for accounting, consolidated financial
operations, capital markets transactions, treasury, internal audit, tax, information technology and external reporting. Prior to
that, Mr. Kuick served as Chief Accounting Officer of Caesars Entertainment Operating Company, a subsidiary of Caesars
Entertainment Corporation, and as Vice President, Assistant Controller for Caesars Entertainment Corporation. Mr. Kuick is a
Certified Public Accountant and earned his Bachelor of Science degree in Accounting and Business Systems from Taylor
University.

Thayer D. Wiederhorn has served as the Chief Operating Officer since November 2021 where he is responsible for
day-to-day business operations and providing leadership to management to ensure short-term and long-term business strategies
are implemented and executed and that the organization's capabilities are optimized. Prior to that, Mr. Wiederhorn served as
Chief Marketing Officer since March 2017 where he oversaw global branding and marketing for over 2,000 franchise-owned
restaurants. Mr. Wiederhorn served as Vice President - Marketing of Fatburger North America Inc. and Buffalo’s Franchise
Concepts Inc. From June 2012 through March 2017 and as Director of Marketing of Fatburger North America Inc. from July
2011 through June 2012. Additionally, he served as Marketing Coordinator from April 2011 through June 2011 and Brand
Development Agent from October 2010 through April 2011. Mr. Wiederhorn started his career working in Fatburger restaurants
and food-trucks. Mr. Wiederhorn received his Bachelor of Science degree in Business Administration, with an emphasis in
Finance Business Economics, from the University of Southern California.

Taylor A. Wiederhorn has served as the Chief Development Officer since October 2017. Previously, Mr. Wiederhorn
served as Vice President - Franchise Marketing and Development for Fatburger North America from September 2011 until
October 2017. Mr. Wiederhorn graduated from the USC Marshall School of Business with a Bachelor of Science degree in
Business Administration with a concentration in corporate Finance.

Robert G. Rosen has served as the Executive Vice President of Capital Markets since April 2021. Prior to joining the
company, he had been the Managing Member of Kodiak Financial Group LLC since 2004. Kodiak invests in credit classes of

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ABS and MBS securities, purchases individual real estate loans and portfolios, purchases and manages real estate developments
and invests in private equity transactions as well as venture capital transactions. Mr. Rosen began his career in commercial
banking, focusing on direct lending for Fleet Bank (then Fleet Norstar Bank) in Albany NY after completing their extensive
management training program. This was followed in 1990 by a career on Wall Street, working for Bankers Trust (now
Deutsche Bank) and Kidder Peabody in structured finance and investment banking focusing primarily on credit derivatives
including securitizations, asset-based lending as well as financing and banking commercial banks and other originators of
securitizable assets. After Kidder, Mr. Rosen joined Black Diamond Advisors and Black Diamond Securities (and ultimately
Black Diamond Capital Management). He served as a Director and FINOP of the Black Diamond entities, with a continued
focus on structured finance transactions and credit as well as portfolio management (banking, sales and trading) and servicing.
Mr. Rosen continued his career at Bank of Tokyo Mitsubishi and several buy side firms. He continues to be a long-term
consultant to Black Diamond Capital Management and serves on multiple advisory boards and committees of Black Diamond.
Mr. Rosen holds an MBA and a BA degree from Union College in Managerial Economics.

Allen Z. Sussman has served as the General Counsel and Executive Vice President for Corporate Development and our
Corporate Secretary since March 2021. Prior to that time, Mr. Sussman was a partner at the law firm of Loeb & Loeb LLP in
Los Angeles, California, specializing in corporate and securities law, and served as the primary outside corporate and securities
counsel of FAT Brands. Prior to private practice, in the early 1990s Mr. Sussman served as an attorney with the Division of
Enforcement of the U.S. Securities and Exchange Commission in Washington, DC. Mr. Sussman holds a B.S. degree in
Industrial and Labor Relations from Cornell University and a J.D. degree from Boston University School of Law.

Ron Roe currently serves as the Senior Vice President of Finance. Prior to August 16, 2018, Mr. Roe served as the
Chief Financial Officer since 2009 and served as the Vice President of Finance from 2007 to 2009. Prior to 2007, Mr. Roe was
an acquisitions associate for Fog Cutter Capital Group Inc. He began his career as an investment banking analyst with Piper
Jaffray. Mr. Roe attended the University of California, Berkeley, where he earned a Bachelor of Arts degree in Economics.

Family Relationships

The following family members of Andrew Wiederhorn are employed by the Company in the capacities indicated

below:

•

Thayer Wiederhorn, son of Andrew Wiederhorn, serves as Chief Operating Officer of the Company. During fiscal
2022, Thayer Wiederhorn received total cash compensation from the Company of approximately $1,600,000,
participated in the general welfare and benefit plans of the Company and vested in stock options to purchase 33,334
shares of the Company’s common stock granted in previous years. Andrew Wiederhorn does not have a material
interest in Thayer Wiederhorn’s employment, nor do they share a household.
Taylor Wiederhorn, son of Andrew Wiederhorn, serves as Chief Development Officer of the Company. During fiscal
2022, Taylor Wiederhorn received total cash compensation from the Company of approximately $1,660,000,
participated in the general welfare and benefit plans of the Company and vested in stock options to purchase 33,334
shares of the Company’s common stock granted in previous years. Andrew Wiederhorn does not have a material
interest in Taylor Wiederhorn’s employment, nor do they share a household.

• Mason Wiederhorn, son of Andrew Wiederhorn, serves as Creative Director of the Company. During fiscal 2021,
Mason Wiederhorn received total cash compensation from the Company of approximately $1,275,000, participated in
the general welfare and benefit plans of the Company and vested in stock options to purchase 25,000 shares of the
Company’s common stock granted in previous years. Andrew Wiederhorn does not have a material interest in Mason
Wiederhorn’s employment, nor do they share a household.

Delinquent Section 16(a) Reports

Based solely on a review of Forms 3, 4 and 5 and amendments thereto furnished to us for the year ended December 25,
2022, our directors, officers, or beneficial owners of more than 10% of our common stock timely furnished reports on all Forms
3, 4 and 5, except that (i) Squire Junger filed one late Form 4 for two transactions, (ii) Taylor Wiederhorn filed one late Form 4
for one transaction, (iii) Kenneth Anderson filed one late Form 4 for one transaction and (iv) Lynne Collier filed one late Form
3.

Code of Ethics

We have adopted a written code of business ethics that applies to our directors, officers and employees, including our
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar
functions. We have posted a current copy of the code under the Corporate Governance section of our website at https://

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ir.fatbrands.com. In addition, we intend to post on our website all disclosures that are required by law or the NASDAQ listing
standards concerning any amendments to, or waivers from, any provision of the code.

Board Committees

During fiscal 2022, our Board of Directors held 43 meetings. Each director attended at least 75% of the aggregate
number of meetings of the Board of Directors and meetings of the committees of the Board of Directors on which he or she
serves.

The following table sets forth the three standing committees of our Board and the members of each committee as of

December 25, 2022 and the number of meetings held by our Board of Directors and the committees during 2022:

Director
James Neuhauser

Edward Rensi

Kenneth J. Anderson

Lynne L. Collier

Amy V. Forrestal

Andrew Wiederhorn

Meetings in 2022:

Board of
Directors
Executive Chairman
Vice-Chairman/Lead
Independent Director

Audit
Committee

Compensation
Committee

Nominating
and Corporate
Governance
Committee

Chair

To assist it in carrying out its duties, the Board of Directors has delegated certain authority to an Audit Committee, a

Compensation Committee and a Nominating and Governance Committee, the functions of which are described below.

Audit Committee

The Audit Committee is responsible for, among other matters:

•

•
•
•

•

appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public
accounting firm;
discussing with our independent registered public accounting firm their independence from management;
reviewing with our independent registered public accounting firm the scope and results of their audit;
approving all audit and permissible non-audit services to be performed by our independent registered public
accounting firm;
overseeing the financial reporting process and discussing with management and our independent registered public
accounting firm the interim and annual financial statements that we file with the SEC;
reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and
compliance with legal and regulatory requirements; and
establishing procedures for the confidential anonymous submission of concerns regarding questionable
accounting, internal controls or auditing matters.

Our Board of Directors has determined that each member of the Audit Committee meets the definition of “independent
director” for purposes of serving on an audit committee under Rule 10A-3 and NASDAQ rules. In addition, our Board of
Directors has determined that each of Mr. Anderson, Ms. Collier and Ms. Forrestal qualifies as an “audit committee financial
expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.

The Board of Directors adopted a charter for the Audit Committee on October 19, 2017. A copy of the Audit
Committee charter is available in the Corporate Governance section of our website at https://ir.fatbrands.com. The Audit
Committee reviews and reassesses the adequacy of the charter on an annual basis.

Compensation Committee

The Compensation Committee is responsible for assisting our Board of Directors in discharging its responsibilities
relating to the compensation of our Chief Executive Officer, other executive officers and outside directors, as well as

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administering stock incentive plans. During the fiscal year ended December 25, 2022, there were no employee directors on the
Compensation Committee and no Compensation Committee interlocks.

The Compensation Committee is responsible for the following, among other matters, as required from time to time:

•

•
•

•

•
•

reviewing and recommending to our board of directors the compensation of our Chief Executive Officer and other
executive officers and the outside directors;
conducting a performance review of our Chief Executive Officer;
administering the Company’s incentive-compensation plans and equity-based plans as in effect or as adopted from
time to time by the Board of Directors;
approving any new equity compensation plan or material change to an existing plan where stockholder approval
has not been obtained;
reviewing our compensation policies; and
if required, preparing the report of the Compensation Committee for inclusion in our annual proxy statement.

The Board of Directors has adopted a charter for the Compensation Committee on October 19, 2017. A copy of the
Compensation Committee charter is available in the Corporate Governance section of our website at https://ir.fatbrands.com.
The Compensation Committee reviews and reassesses the adequacy of the charter on an annual basis.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for the following, among other matters, as

required from time to time:

•
•
•

•

identify qualified individuals to serve as members of the Company’s board of directors;
review the qualifications and performance of incumbent directors;
review and consider director candidates who may be suggested by any director or executive officer or by any
stockholder of the Company; and
review considerations relating to board composition, including size of the board, term, and the criteria for
membership on the board.

The Board of Directors has adopted a charter for the Nominating and Corporate Governance Committee on October
19, 2017. A copy of the Compensation Committee charter is available in the Corporate Governance section of our website at
https://ir.fatbrands.com. The Nominating and Corporate Governance Committee reviews and reassesses the adequacy of the
charter on an annual basis.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation for the fiscal years ended December 25, 2022 and December 26, 2021
awarded to, earned by, or paid to our principal executive officer and our other two most highly compensated executive officers.
We refer to the individuals included in the Summary Compensation Table as our “named executive officers.”

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SUMMARY COMPENSATION TABLE

Name and
Principal
Position

Fiscal
Year

Salary
($)

Bonus
($)

Stock
Awards (1)
($)

Option
Awards (1)
($)

All other
Compensation (2)
($)

Total ($)

Andrew A. Wiederhorn

2022

750,000

2,250,000

Chief Executive Officer

2021

546,615

1,500,000

—

551,040

3,551,040

607,000

221,294

2,874,909

Robert G. Rosen

EVP, Capital Markets

2022

550,000

1,650,000

—

2021

395,866

480,000

857,000

607,000

Taylor A. Wiederhorn

2022

550,000

1,110,000

Chief Development Officer

2021

480,000

—

607,000

Explanatory Notes:

—

2,200,000

—

2,339,866

—

1,660,000

—

1,567,000

—

(1) Amounts shown represent the aggregate grant date fair value computed in accordance with Accounting Standards
Codification 718. Assumptions used in the calculation of this amount for fiscal year ended December 25, 2022 are included
in footnote 13 to the Company’s audited consolidated financial statements for the fiscal year ended December 25, 2022,
included in Part IV of this Annual Report on Form 10-K.

(2) The amount disclosed for Mr. Andrew Wiederhorn reflects the aggregate incremental cost to the Company of providing
him with certain personal use of leased aircraft pursuant to his employment agreement. This cost is calculated based on the
applicable hourly rate charged to the Company for leased aircraft.

Executive Employment Agreements

There are no written employment agreements between the Company and any of its employees, other than Andrew A.

Wiederhorn.

On November 18, 2021, the Company entered into an Employment Agreement (the “Employment Agreement”) with
Andrew A. Wiederhorn, who has served as the Company’s Chief Executive Officer since its inception. Pursuant to the
Employment Agreement, Mr. Wiederhorn’s term as Chief Executive Officer will continue for a period of three years from July
1, 2021, the effective date of the Employment Agreement, unless earlier terminated as provided in the Employment Agreement,
and will be automatically extended for additional terms of successive two year periods unless the Company or Mr. Wiederhorn
gives written notice of the termination of his employment at least 180 days prior to the expiration of the then current
termination date.

Pursuant to the Employment Agreement, Mr. Wiederhorn’s annual base salary is $750,000, subject to an annual merit-
based increases in the sole discretion of the Board of Directors of the Company (the “Board”). Mr. Wiederhorn will also be
eligible for an annual discretionary bonus in the sole discretion of the Board, with a target annual discretionary Bonus of up to
100% of base salary and a maximum of 300% of base salary for exceptional performance in the sole discretion of the Board.
Mr. Wiederhorn’s eligibility to receive a bonus for any particular calendar year is subject to the achievement by him and the
Company, as applicable, of personal and Company-wide targets to be established by the Company in the discretion of the
Board.

Pursuant to the Employment Agreement, Mr. Wiederhorn will be eligible to receive awards of equity from time to time
in the form of stock options, stock purchase rights and/or restricted stock awards. Such awards will be subject to the
achievement by Mr. Wiederhorn and the Company, as applicable, of personal and Company-wide targets to be established by
the Company, on such terms and subject to such conditions as the Board shall determine as of the date of any such grant. In the
event of a change in control (as defined in the Employment Agreement), Mr. Wiederhorn’s continuous employment is
involuntarily terminated without “cause” (as defined in the Employment Agreement), or Mr. Wiederhorn resigns from
continuous employment for “good reason” (as defined in the Employment Agreement), and in any case other than as a result of
his death or disability, then 100% of the equity awards that are then unvested will become fully vested. In addition, in the event
that Mr. Wiederhorn’s employment is terminated by the Company without “cause” or by Mr. Wiederhorn for “good reason”,
Mr. Wiederhorn will be entitled to receive severance of 12 months of base salary payable on the Company’s regular payroll
schedule.

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The Employment Agreement also entitles Mr. Wiederhorn to participate in the benefit plans or programs that the
Company may make available to employees and their families from time to time. The Employment Agreement also provides for
certain other ancillary benefits, including the reimbursement of all reasonable business expenses and, for security purposes, use
at the Company’s expense of private aircraft transportation for all business-related travel. The Company will also bear expenses
for Mr. Wiederhorn’s personal use of private aircraft transportation that does not exceed 100 hours of flight time in any
calendar year. In addition, Mr. Wiederhorn is entitled to 25 days of paid time off during each twelve-month period of
employment.

OUTSTANDING EQUITY AWARDS AT FISCAL 2022 YEAR END

The following table summarizes the outstanding equity award holdings of our named executive officers as of

December 25, 2022.

Option Awards

Stock Awards

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

Option
Exercise
Price
($)

Option
Expiration
Date

Number of
Shares or
Units of
Stock That
Have Not
Vested (#)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)

15,318

33,334

15,318

33,334

—

10.68

10/20/2027

4.80

12/10/2028

66,666

11.43

11/16/2031

—

66,666

11.43

11/16/2031

100,000

552,000

—

10.68

10/20/2027

—

4.80

12/10/2028

66,666

11.43

11/16/2031

—
—

—

—
—

—

Name

Andrew A. Wiederhorn

Chief Executive Officer

Robert G. Rosen

EVP, Capital Markets
Taylor A. Wiederhorn
Chief Development
Officer

Option Exercises and Stock Vested

None of the named executives acquired shares of the Company’s stock through exercise of options during the year

ended December 25, 2022.

DIRECTOR COMPENSATION

The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified
candidates to serve on the Board of Directors. In setting director compensation, the Company considers the significant amount
of time that our directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of
members of the Board of Directors.

We pay each non-employee director serving on our Board of Directors $80,000 in annual cash compensation, an
additional $40,000 in annual cash compensation for service on Board committees and an annual equity award of stock options
to acquire 30,636 shares of common stock. The stock options issued to directors are awarded under our 2017 Omnibus Equity
Incentive Plan. During fiscal 2022, we also issued our directors a one-time award of 10,000 restricted shares of Class A
Common Stock vesting over two years in equal annual installments on the anniversary date of the grant.. The non-employee
director compensation policy may be amended, modified or terminated at any time by our Board of Directors or Compensation
Committee.

At various times upon the quarterly payment dates of the cash component of director compensation, the Board has
allowed each independent director to elect to receive his or her cash compensation in the form of Class A common stock of the
Company at market value at the time the election is made. Under such arrangement, during fiscal 2022, the independent

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directors elected to acquire an aggregate of 4,761 shares of Class A common stock in 2022 at a weighted average price per
share of $6.30.

The terms of the equity award described above are set forth in the 2017 Omnibus Equity Incentive Plan (the “Plan”).
The Plan is a comprehensive incentive compensation plan under which we can grant equity-based and other incentive awards to
officers, employees and directors of, and consultants and advisers to, FAT Brands and its subsidiaries. The Plan, as amended,
provides for a maximum of 5,000,000 shares available for grant and is administered by the Compensation Committee of the
Board of Directors.

The following table sets forth a summary of the compensation we paid or accrued to our non-employee directors and

our executive chairman for the fiscal year ended December 25, 2022:

Name

Edward H. Rensi

Kenneth A. Anderson
Lynne L. Collier (2)
Amy V. Forrestal

Squire Junger (3)

James Neuhauser (4)

Explanatory Notes:

Fees
Earned
or Paid
in Cash
($)

120,000

90,000
60,000
120,000

120,000

807,500

Stock
Awards
($)

Option
Awards
($) (1)

Total
($)

88,500

88,500
88,500
88,500

88,500

88,982

88,982
88,982
88,982

88,982

297,482

267,482
237,482
297,482

297,482

853,500

—

1,661,000

(1) Amounts shown represent the grant date fair value calculated in accordance with Accounting Standards Codification 718.
Assumptions used in the calculation of this amount are included in footnote 14 to the Company’s audited consolidated
financial statements included in Part IV of this Annual Report on Form 10-K. During 2022, the directors were each granted
options to purchase 30,636 shares of common stock.

(2) Ms. Collier was appointed to the Board of Directors effective as of July 12, 2022.
(3) Mr. Junger was removed from the Board of Directors effective as of December 20, 2022.
(4) Mr. Neuhauser was appointed Executive Chairman effective as of July 13, 2022. This table includes Mr. Neuhauser's
compensation as a non-executive Director prior to July 13, 2022 and as Executive Chairman beginning on July 13, 2022.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Common Stock

PRINCIPAL STOCKHOLDERS

The following table sets forth information, as of February 23, 2023, with respect to the beneficial ownership of our Class A

common stock and our Class B common stock by:

● each person known by us to beneficially own more than 5% of our Class A common stock or Class B common

stock;

● each of our directors;
● each of our named executive officers; and
● all of our executive officers and directors as a group.

The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC and includes
voting power (if applicable) or investment power with respect to securities. Under these rules, beneficial ownership includes
any shares as to which the individual or entity has sole or shared voting power (if applicable) or investment power. In
computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person,
shares subject to options, or other rights held by such person that are currently exercisable or will become exercisable within 60
days of the effective date of the disclosure, are considered outstanding, although these shares are not considered outstanding for

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purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the address of all listed
stockholders is c/o FAT Brands Inc., 9720 Wilshire Blvd., Suite 500, Beverly Hills, California 90212. Each of the stockholders
listed below has sole voting power (if applicable) and sole investment power with respect to the shares beneficially owned by
such stockholder unless noted otherwise, subject to community property laws where applicable.

As of February 23, 2023, there were issued and outstanding 15,316,920 shares of Class A common stock and 1,270,805

shares of Class B common stock.

Name of beneficial owner
Greater than 5% Stockholders
Fog Cutter Holdings LLC
HOT GFG LLC
Geode Capital Holdings LLC
Gregory Fortunoff and certain persons

Named Executive Officers and Directors
Andrew A. Wiederhorn

Robert G. Rosen
Taylor A. Wiederhorn
Kenneth J. Anderson
Lynne L. Collier
Amy V. Forrestal
James Neuhauser

Edward Rensi
All directors and executive officers as a
group (12 persons)

Class A Common Stock
Beneficially Owned

Class B Common Stock
Beneficially Owned

Number

Percent of
Total Voting
Power †

7,033,397 (1)
2,259,594 (2)

—

1,024,939 (4)

45.9 %
14.8 %
*
6.6 %

706,514
—
77,586
—

55.6 %
*
6.1 % (3)
*

226,449 (5)
133,333 (6)
220,678 (7)
176,620 (8)
10,000 (9)
24,113 (8)
294,627 (10)
120,132 (11)
(12)

1.5 %
*
1.4 %
1.2 %
*
*
1.9 %
*

5,333
10,000
14,989
16,353
—
—
8,803
3,354

*
*
1.2 %
1.3 %
0.0 %
*
*
*

1,901,878

16.2 %

111,136

8.7 %

55.5 %
*
6.1 %
*

*
*
1.2 %
1.3 %
*
*
*
*

8.8 %

†

Represents the voting power with respect to all shares of our Class A Common Stock and Class B Common Stock,
voting as a single class, beneficially owned by the holder. Each share of Class A Common Stock is entitled to one vote
per share and each share of Class B Common Stock is entitled to 2,000 votes per share.
Represents beneficial ownership of less than 1% of the class.

*
(1) Based on a Schedule 13D filed by Fog Cutter Holdings LLC, a limited liability company controlled by a board of
managers comprised of Andrew A. Wiederhorn, Taylor A. Wiederhorn, Thayer D. Wiederhorn and Mason A.
Wiederhorn. Includes warrants to purchase 19,148 shares of Class A Common Stock. The address of Fog Cutter
Holdings, LLC is 9720 Wilshire Blvd., Suite 500, Beverly Hills, CA 90212.

(2) Based on a Schedule 13G filed on March 8, 2022 jointly by HOT GFG LLC and Ms. Rachel Serruya. Ms. Serruya is the
sole Director and President of HOT GFG LLC, and may be deemed to have voting and investment power over these
shares. Ms. Serruya disclaims beneficial ownership of such securities except to the extent of her indirect pecuniary
interest therein, if any. The address provided by HOT GFG LLC is 210 Shields Court, Markham, Ontario, Canada
L3R8V2.

(3) Based on a Schedule 13G filed on February 9, 2022 jointly by Geode Capital Holdings LLC and Geode Capital

(4)

(5)

Management, LLC. The address provided by Geode is 100 Summer Street, 12th Floor, Boston, MA 02110.
Includes warrants to purchase 158,000 shares of Class A Common Stock. Based in part on a Schedule 13D/A filed
jointly on August 25, 2022 by Gregory Fortunoff with an address at 49 West 37th Street, New York, NY 10018. Mr.
Fortunoff expressly disclaims beneficial ownership for all purposes of the shares beneficially owned by other persons.
Includes 23,332 shares of Class A Common Stock, options to purchase an additional 63,969 shares of Class A Common
Stock that have vested or will vest within 60 days of the effective date of the disclosure, and warrants that are
exercisable for an additional 120,000 shares of Class A Common Stock, including warrants for 100,000 shares owned
by Mr. Wiederhorn’s spouse, to which he disclaims beneficial ownership except to the extent of his pecuniary interest
therein. Does not include unvested options to purchase an additional 66,667 shares of Class A Common Stock.

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(6)

(7)

(8)

Includes options to purchase 33,333 shares of Class A Common Stock that have vested or will vest within 60 days of the
effective date of the disclosure. Does not include unvested options to purchase an additional 66,667 shares of Class A
Common Stock.
Includes options to purchase 63,969 shares of Class A Common Stock that have vested or will vest within 60 days of the
effective date of the disclosure. Does not include unvested options to purchase an additional 66,667 shares of Class A
Common Stock.
Includes options to purchase 10,212 shares of Class A Common Stock that have vested or will vest within 60 days of the
effective date of the disclosure. Does not include unvested options to purchase an additional 51,060 shares of Class A
Common Stock.

(9) Does not include unvested options to purchase an additional 30,636 shares of Class A Common Stock.
(10)

Includes options to purchase 76,590 shares of Class A Common Stock that have vested or will vest within 60 days of the
effective date of the disclosure. Does not include unvested options to purchase an additional 30,636 shares of Class A
Common Stock.
Includes options to purchase 76,590 shares of Class A Common Stock that have vested or will vest within 60 days of the
effective date of the disclosure. Does not include unvested options to purchase an additional 61,272 shares of Class A
Common Stock.
Includes aggregate options to purchase 526,782 shares of Class A Common Stock that have vested or will vest within 60
days of the effective date of the disclosure. Does not include aggregate unvested options to purchase an additional
624,666 shares of Class A Common Stock. Includes warrants to purchase 140,000 shares of Class A Common Stock,
100,000 of which are owned by Mr. Wiederhorn’s spouse, to which he disclaims beneficial ownership except to the
extent of his pecuniary interest therein.

(11)

(12)

Preferred Stock

The following table sets forth information, as of February 23, 2023, with respect to the beneficial ownership of our non-
voting Series B Cumulative Preferred Stock (the “Series B Preferred Stock”) by each of our directors, each of our named
executive officers, and all of our executive officers and directors as a group. As of February 23, 2023, were 7,380,229 issued
and outstanding shares of Series B Preferred Stock.

Name of beneficial owner

Named Executive Officers and Directors

Andrew A. Wiederhorn
Robert G. Rosen
Taylor A. Wiederhorn
Kenneth J. Anderson
Lynne L. Collier
Amy V. Forrestal
James Neuhauser
Edward Rensi
All directors and executive officers as a
group (12 persons)

Series B Preferred Stock
Beneficially Owned

—
232
—
11,681 (1)
—
—
—
7,781

25,189

*
*
*
*
*
*
*
*

* Represents beneficial ownership of less than 1% of the class.
(1) Mr. Anderson also has voting and investment authority over 478,199 shares of Series B Preferred
Stock and a warrant to acquire 100,000 shares of Class A Common Stock held by Trojan
Investments, LLC.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Parent Company

As disclosed above under "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters," Fog Cutter Holdings, LLC beneficially holds approximately 55.5% of the voting power with respect to
all shares of our common stock.

Family Relationships

The information set forth above under "Item 10. Directors, Executive Officers and Corporate Governance - Family

Relationships" is incorporated by reference herein.

Director Independence

The Board has determined that each of the current directors, except Mr. Wiederhorn and Mr. Neuhauser, is
independent within the meaning of the applicable rules and regulations of the SEC and the director independence standards of
The NASDAQ Stock Market, Inc. (“NASDAQ”), as currently in effect. Furthermore, the Board has determined that each of the
members of each of the committees of the Board is “independent” under the applicable rules and regulations of the SEC and the
director independence standards of NASDAQ applicable to each such committee, as currently in effect.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Baker Tilly US, LLP, Los Angeles, California, currently serves as our independent registered public accounting firm.
The aggregate accounting fees for the years ended December 25, 2022 and December 26, 2021 are as follows (dollars in
thousands):

Audit fees
Audit related fees
Other fees

December 25,
2022

December 26,
2021

$
$
$

1,068 $
215 $
— $

1,128
418
—

Audit Committee Pre-Approval Policies and Procedures. The Audit Committee reviews the independence of our
independent registered public accounting firm on an annual basis and has determined that Baker Tilly US, LLP is independent.
In addition, the Audit Committee pre-approves all work (and the related estimated fees) that is to be performed by our
independent registered public accounting firm.

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ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

PART IV

(a) Financial Statements

FAT Brands Inc.

Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 32)
Consolidated Balance Sheets as of December 25, 2022 and December 26, 2021

Consolidated Statements of Operations for the Fiscal Years Ended December 25, 2022 and December 26, 2021

Consolidated Statements of Changes in Stockholders’ Deficit for the Fiscal Years Ended December 25, 2022 and
December 26, 2021
Consolidated Statements of Cash Flows for the Fiscal Years Ended December 25, 2022 and December 26, 2021
Notes to Consolidated Financial Statements

F-1
F-3

F-5

F-6
F-8
F-10

(b) Exhibits – See Exhibit Index immediately following the signature pages.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of FAT Brands Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of FAT Brands Inc. and its subsidiaries (the "Company") as of
December 25, 2022 and December 26, 2021, the related consolidated statements of operations, stockholders’ deficit, and cash
flows for the years then ended, and the related notes and Schedule II to the consolidated financial statements (collectively
referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 25, 2022 and December 26, 2021, and the results of its
operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United
States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) ("PCAOB)" and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.

Goodwill and Intangible Asset Impairment Assessment

Critical Audit Matter Description

As discussed in Note 2 of the consolidated financial statements, goodwill and intangible assets are tested for impairment at least
annually on the reporting unit level, and more frequently if the Company believes indicators of impairment exist. The Company
determined that three of the reporting units' (Great American Cookie, Pretzel Maker and Marble Slab Company) intangible
assets were impaired and the Company recorded related impairment losses of approximately $14 million for the year ended
December 25, 2022. The determination of the fair value of the reporting units and related intangibles requires significant
estimates and assumptions. Changes in these assumptions could have a significant impact on either the fair value of the
reporting units and intangibles, the amount of any goodwill impairment charge, or both.

We identified the impairment assessment of goodwill and intangibles as a critical audit matter. Auditing management's
judgements regarding forecasts of future revenue and operating margin, and the discount rate to be applied involved a high
degree of subjectivity.

How the Critical Audit Matter Was Addressed in Our Audit

The primary procedures we performed to address this critical audit matter included:

F-1

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•

Obtaining an understanding of management's process for determining goodwill and intangible asset impairment;

Obtaining and reviewing management's goodwill and intangibles impairment analysis including the fair value of
reporting units and intangible balances tested;

Comparing the actual sales to those forecasted by the Company in previous years in order to assess the historical
accuracy of management's forecasting;

Utilizing a valuation specialist to assist in evaluating the valuation methodologies utilized by the Company for
goodwill and intangibles by comparing the methodologies to those utilized by other companies holding similar assets,
compared management's assumption inputs to information from external sources and available economic forecasts and
data;

Evaluating the estimated fair value of the reporting units to the Company's market capitalization and evaluating
whether any variances from the projections or changes in market capitalization were indicative of potential impairment
of the goodwill and identifiable intangible assets; and

Evaluating whether the assumptions used in the goodwill and intangibles impairment analysis were reasonable by
considering the past performance of reporting units and third-party market data, and whether such assumptions were
consistent with evidence obtained in other areas of the audit.

/s/ Baker Tilly US, LLP

We have served as the Company’s auditor since 2019.

Los Angeles, California
February 24, 2023

F-2

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FAT BRANDS INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)

December 25, 2022

December 26, 2021

Assets

Current assets

Cash
Restricted cash
Accounts receivable, net
Inventory
Assets classified as held-for-sale
Other current assets

Total current assets

Non-current restricted cash
Operating lease right-of-use assets
Goodwill
Other intangible assets, net
Property and equipment, net
Other assets

Total assets

Liabilities and Stockholders’ Deficit
Liabilities

Current liabilities

Accounts payable
Accrued expenses and other liabilities
Deferred income, current portion
Accrued advertising
Accrued interest payable
Dividend payable on preferred shares
Liabilities related to assets classified as held- for-sale
Current portion of operating lease liability
Current portion of redeemable preferred stock
Current portion of long-term debt
Current portion of acquisition purchase price payable
Other current liabilities

Total current liabilities

Deferred income, net of current portion
Deferred income tax liabilities, net
Operating lease liability, net of current portion
Long-term debt, net of current portion
Other liabilities

28,668
25,375
23,880
6,925
4,767
6,086
95,701

14,720
101,114
293,282
625,294
79,189
4,003
1,213,303

18,328
52,800
2,019
14,819
13,241
1,467
4,084
14,815
91,836
49,611
4,000
—
267,020

21,698
27,181
95,620
958,630
2,332

56,656
24,740
20,084
5,927
5,476
6,156
119,039

18,525
98,552
295,128
652,788
80,501
5,499
1,270,032

27,527
46,295
2,636
10,853
10,678
1,574
4,780
14,341
67,500
631
4,173
7,500
198,488

17,662
12,921
92,920
904,265
976

Total liabilities

1,372,481

1,227,232

F-3

Table of Contents

Commitments and contingencies (Note 16)
Redeemable preferred stock

—

64,455

Stockholders’ deficit

Preferred stock: $0.0001 par value; 15,000,000 shares
authorized; 3,252,154 shares issued and outstanding at
December 25, 2022 and 3,221,471 shares issued and
outstanding at December 26, 2021; liquidation preference
$25 per share

Class A and Class B common stock and additional paid-in
capital as of December 25, 2022: $0.0001 par value per
share; 51,600,000 shares authorized (Class A 50,000,000,
Class B 1,600,000); 16,571,675 shares issued and
outstanding (Class A 15,300,870, Class B 1,270,805).
Common stock and additional paid-in capital as of
December 26, 2021: $0.0001 par value; 51,600,000 shares
authorized (Class A 50,000,000, Class B 1,600,000);
16,380,552 shares issued and outstanding (Class A
15,109,747, Class B 1,270,805)
Accumulated deficit

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

45,504

55,661

(26,015)
(178,667)

(159,178)
1,213,303

(24,837)
(52,479)

(21,655)
1,270,032

The accompanying notes are an integral part of these audited consolidated financial statements.

F-4

FAT BRANDS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)

For the Fiscal Years Ended December 25, 2022 and December 26, 2021

Table of Contents

Revenue

Royalties

Restaurant sales

Advertising fees

Factory revenues

Franchise fees

Management fees and other income

Total revenue

Costs and expenses

General and administrative expense

Cost of restaurant and factory revenues

Depreciation and amortization

Impairment of goodwill and other intangible assets

Refranchising loss

Acquisition costs

Advertising fees

Total costs and expenses

2022

2021

87,921 $

241,001

37,997

33,504

3,706

3,095

42,658

41,563

16,728

13,470

4,023

439

407,224

118,881

113,313

221,627

27,015

14,000

4,178

383

44,612

425,128

41,775

44,242

8,474

1,037

314

4,242

17,973

118,057

(Loss) income from operations

(17,904)

824

Other (expense) income, net
Interest expense, net

Interest expense related to preferred shares
Loss on extinguishment of debt

Other income, net

Total other expense, net

Loss before income tax

Income tax provision (benefit)

Net loss

Basic and diluted loss per common share

Basic and diluted weighted average shares outstanding

Cash dividends declared per common share

(78,477)

(16,372)

—

5,375
(89,474)

(26,864)

(2,193)
(7,637)

750
(35,944)

(107,378)

(35,120)

18,810

(3,537)

(126,188)

(31,583)

(7.66) $

(2.15)

16,476,090

14,656,880

0.54 $

0.52

The accompanying notes are an integral part of these audited consolidated financial statements.

F-5

Table of Contents

FAT BRANDS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(dollars in thousands, except share data)

For the Fiscal Year Ended December 25, 2022

Common Stock

Preferred Stock

Class A
Shares

Class B
Shares

Class A
Par
Value

Class B
Par
Value

Additional
Paid-In
Capital

Total
Common
Stock

Par
Value

Additional
Paid-In
Capital

Total
Preferred
Stock

Accumulated
Deficit

Total

Balance at December 26, 2021

15,109,747

1,270,805

$ —

(24,839) $ (24,837)

3,221,471

$ —

$ 55,661

$ 55,661 $

(52,479) $ (21,655)

Net loss

Issuance of common and
preferred stock

Share-based compensation

Dividends paid on common
stock

Issuance of common stock in
lieu of cash - director fees

Dividends paid on Series B
preferred stock

Exercise of Series B
preferred stock put option

—

36,362

150,000

—

4,761

—

(8,905)

—

108

7,619

108

30,683

—

(126,188)

586

—

586

—

694

—

7,619

—

(8,905)

—

(6,636)

—

(6,636)

(4,107)

—

(4,107)

—

Balance at December 25, 2022

15,300,870

1,270,805

$ —

(26,017) $ (26,015)

3,252,154

$ —

$ 45,504

$ 45,504 $

(178,667) $ (159,178)

F-6

Table of Contents

For the Fiscal Year Ended December 26, 2021

Common Stock

Preferred Stock

Class A
Shares

Class B
Shares

Class A
Par
Value

Class B
Par
Value

Additional
Paid-In
Capital

Total
Common
Stock

Par
Value

Additional
Paid-In
Capital

Total
Preferred
Stock

Accumulated
Deficit

Total

Balance at December 27, 2020

11,926,264

— $

1 $

— $

(42,776) $ (42,775)

1,183,272 $ — $

21,788 $ 21,788 $

(20,896) $ (41,883)

Net loss

Issuance of common stock
through exercise of warrants

Issuance of preferred stock

Share-based compensation
Measurement period
adjustment in accordance with
ASU 2015-16

Stock contracted for issue in
payment of debt

Dividends declared on common
stock

Dividends declared on Series B
preferred stock
Issuance of common stock in
connection with acquisition of
LS GFG Holdings Inc.

Stock dividend of Class B
Shares

Issuance costs related to
common equity
Series A Preferred shares
retired through issuance of
Series B Preferred shares

—

559,988

—

300,000

—

63,901

—

1,964,865

—

294,729

1,270,805

—

2,091

—

1,560,000

1,642

(1,381)

831

(7,442)

—

22,537

—

(26)

(25)

—

(315)

—

478,199

—

475

—

475

26,732

—

(31,583)

—

2,566

— 26,732

—

1,642

—

(1,381)

—

831

—

(7,442)

(4,084)

—

(4,084)

—

— 22,537

—

(25)

—

(315)

10,750

— 10,750

Balance at December 26, 2021

15,109,747

1,270,805 $

2 $

— $

(24,839) $ (24,837)

3,221,471 $ — $

55,661 $ 55,661 $

(52,479) $ (21,655)

The accompanying notes are an integral part of these audited consolidated financial statements.

F-7

Table of Contents

FAT BRANDS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)

For the Fiscal Years Ended December 25, 2022 and December 26, 2021

Cash flows from operating activities

Net loss

Adjustments to reconcile net loss to net cash (used in) provided by operations:

2022

2021

(126,188) $

(31,583)

Deferred income taxes

Net loss on extinguishment of debt

Depreciation and amortization

Share-based compensation

Change in operating right-of-use assets

Accretion of loan fees and interest

Adjustments to purchase price liability

Gain on sale of refranchised assets

Impairment of goodwill and other intangible assets

Change in provision for bad debts

Other

Change in:

Accounts receivable

Other current assets

Accounts payable

Accrued expense and other liabilities

Deferred income

Accrued advertising

Accrued interest payable

Dividend payable on preferred shares

Other current and non-current liabilities

Total adjustments

Net cash (used in) provided by operating activities

Cash flows from investing activities

Acquisitions, net of cash acquired

Acquisition of intangible assets

Payments received on loans receivable

Net proceeds from sale of refranchised restaurants

Proceeds from sale of property and equipment

Purchases of property and equipment

Purchase deposits received on refranchised restaurants

Other

Net cash used in investing activities

Cash flows from financing activities

Proceeds from borrowings, net of issuance costs

Repayments of borrowings

Issuance of preferred shares, net

Change in operating lease liabilities

F-8

17,463
—
27,015
7,619
7,021
10,771
(1,140)
—
14,000
20,720

(500)

(24,516)

29
(9,199)
6,501
3,419
3,966
2,563
(107)
(6,836)
78,789
(47,399)

(1,022)
(1,750)
1,762
—
9,934
(21,421)

—
—

(12,497)

(5,337)
6,087
8,474
1,642
3,851
2,787
95
(2,681)
1,037
1,843
301

(4,705)
(1,533)
5,374
3,002
768
1,894
8,831
1,188
(653)
32,265
682

(721,382)
—
212
2,692
4,233
(10,422)
1,500
(33)
(723,200)

55,220
(4,874)
—
(5,699)

897,215
(93,279)
26,732
(3,595)

Table of Contents

Payments made on acquisition purchase price liability

Exercise of warrants

Dividends paid on redeemable preferred stock

Dividends paid on common shares

Dividends paid on preferred shares

Other

Net cash provided by financing activities

Net (decrease) increase in cash and restricted cash

Cash and restricted cash at beginning of the period

Cash and restricted cash at end of the period

Supplemental disclosures of cash flow information:

Cash paid for interest

Cash paid for income taxes

Supplemental disclosure of non-cash financing and investing activities:

Director fees converted to common stock

Issuance of preferred stock in lieu of cash preferred dividends payable

—
694
(1,062)
(8,905)
(6,636)
—
28,738

(1,075)
2,567
(2,283)
(7,468)
(3,559)
(27)
815,228

(31,158)
99,921
68,763 $

92,710
7,211
99,921

66,851 $
1,029 $

14,978
842

30 $
— $

15
1,564

$
$

The accompanying notes are an integral part of these audited consolidated financial statements.

F-9

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND RELATIONSHIPS

Organization and Nature of Business

FAT Brands Inc. (the “Company”) is a leading multi-brand restaurant franchising company that develops, markets and acquires
primarily quick-service, fast casual, casual and polished casual dining restaurant concepts around the world. Organized in
March 2017 as a wholly-owned subsidiary of Fog Cutter Capital Group, Inc. (“FCCG”), the Company completed its initial
public offering on October 20, 2017 and issued additional shares of common stock representing 20 percent of its ownership
upon completion of the offering. During the fourth quarter of 2020, the Company completed a transaction in which FCCG
merged into a wholly-owned subsidiary of the Company, and the Company became the parent of FCCG.

As of December 25, 2022, the Company owned seventeen restaurant brands: Round Table Pizza, Fatburger, Marble Slab
Creamery, Johnny Rockets, Fazoli's, Twin Peaks, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express,
Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and
Bonanza Steakhouses. As of December 25, 2022, the Company had approximately 2,300 locations open and under construction,
of which approximately 95% were franchised.

Each franchising subsidiary licenses the right to use its brand name and provides franchisees with operating procedures and
methods of merchandising. Upon signing a franchise agreement, the franchisor is committed to provide training, some
supervision and assistance, and access to operations manuals. As needed, the franchisor will also provide advice and written
materials concerning techniques of managing and operating the restaurants.

The Company’s operations have historically been comprised primarily of franchising a growing portfolio of restaurant brands.
This growth strategy is centered on expanding the footprint of existing brands and acquiring new brands through a centralized
management organization which provides substantially all executive leadership, marketing, training and accounting services. As
part of these ongoing franchising efforts, the Company will, from time to time, make opportunistic acquisitions of operating
restaurants and may convert them to franchise locations. During the refranchising period, the Company may operate the
restaurants and classifies the operational activities as refranchising gains or losses and the assets and associated liabilities as
held-for sale. Through recent acquisitions, the Company also operates "company owned" restaurant locations of certain brands.
Our revenues are derived primarily from two sales channels, franchised restaurants and company owned restaurants, which we
operate as one segment.

COVID-19

The outbreak of the COVID-19 pandemic in March 2020 had a number of adverse effects on our business and that of our
franchisees, including temporary and permanent closures of restaurant locations, reduced or modified store operating hours,
difficulties in staffing restaurants and supply chain disruptions. While the disruptions to our business from the COVID-19
pandemic have mostly subsided, the resurgence of COVID-19 or its variants, as well as an outbreak of other widespread health
epidemics or pandemics, could cause a closure of restaurants and disrupt our operations and have a material adverse effect on
our business, financial condition and results of operations.

Liquidity

The Company recognized loss from operations of $17.9 million during fiscal year 2022 and income from operations of
$0.8 million during fiscal year 2021. The Company has a history of net losses and an accumulated deficit of $178.7 million as
of December 25, 2022. Additionally, as of December 25, 2022, the Company had negative working capital of $171.3 million.
Of this amount, $91.8 million represents the current portion of redeemable preferred stock as discussed in Note 12. Since the
Company did not deliver the applicable cash proceeds at the related due dates the amount accrues interest until the payments are
completed. The Company had $28.7 million of unrestricted cash as of December 25, 2022, has received $34.8 million in debt
financing subsequent to that date and plans on the combination of cash flows from operations and cash on hand to be sufficient
to cover any working capital requirements for the next twelve months from the date of this report. If the Company does not
achieve its operating plan, additional forms of financing may be required through the issuance of debt or equity. Although
management believes it will have access to financing, no assurances can be given that such financing will be available on
acceptable terms, in a timely manner or at all.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations – The Company operates on a 52-week calendar and its fiscal year ends on the last Sunday of the calendar
year. Consistent with the industry practice, the Company measures its stores’ performance based upon 7-day work weeks.

F-10

Table of Contents

Using the 52-week cycle ensures consistent weekly reporting for operations and ensures that each week has the same days,
since certain days are more profitable than others. The use of this fiscal year means a 53rd week is added to the fiscal year every
5 or 6 years, as will be the case in fiscal year 2023. In a 52-week year, all four quarters are comprised of 13 weeks. In a 53-
week year, one extra week is added to the fourth quarter. Both fiscal years 2022 and 2021 were 52-week years. Our revenues
are derived from two sales channels, franchised restaurants and company owned locations, which we operate as one reportable
segment.

Principles of consolidation – The accompanying consolidated financial statements include the accounts of the Company and its
subsidiaries. Newly-acquired subsidiaries are included from the date of acquisition. Intercompany accounts have been
eliminated in consolidation.

Use of estimates in the preparation of the consolidated financial statements – The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include the determination of fair values of goodwill and other intangible assets, the
allocation of basis between assets acquired, sold or retained, allowances for uncollectible notes receivable and accounts
receivable, and the valuation allowance related to deferred tax assets. Estimates and assumptions also affect the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Financial statement reclassification – Certain account balances from prior periods have been reclassified in these consolidated
financial statements to conform to current period classifications.

Credit and depository risks – Financial instruments that potentially subject the Company to concentrations of credit risk consist
principally of cash and accounts receivable. Management evaluates each of its franchisee’s financial condition prior to entry
into a franchise or other agreement, as well as periodically through the term of the agreement, and believes that it has
adequately provided for any exposure to potential credit losses. As of December 25, 2022 and December 26, 2021, accounts
receivable, net of allowance for doubtful accounts, totaled $23.9 million and $20.1 million, respectively, with no franchisee
representing more than 10% of that amount.

Restricted cash – The Company has restricted cash consisting of funds required to be held in trust in connection with its
securitized debt. The current portion of restricted cash was $25.4 million and $24.7 million as of December 25, 2022 and
December 26, 2021, respectively. Non-current restricted cash of $14.7 million and $18.5 million as of December 25, 2022 and
December 26, 2021, respectively, represents interest reserves required to be set aside for the duration of the securitized debt.

Accounts receivable – Accounts receivable are recorded at the invoiced amount and are stated net of an allowance for doubtful
accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in
existing accounts receivable. The allowance is based on historical collection data and current franchisee information. Account
balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery
is considered remote. As of December 25, 2022 and December 26, 2021 accounts receivable was stated net of an allowance for
doubtful accounts of $24.2 million and $3.5 million, respectively.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Security Act (the "CARES Act") to provide
certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures,
including a provision for an Employee Retention Credit ("ERC"). As there is no authoritative guidance under U.S. GAAP on
accounting for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to
International Accounting Standard, Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20").
During 2022 the Company filed with the Internal Revenue Service credits totaling $22.0 million and, in accordance with IAS
20, fully reserved the amounts claimed until such time when it is determined that the Company has reasonable assurance that
the credits will be realized.

Inventories – Inventories are carried at the lower of cost or net realizable value and consist primarily of raw materials used in
the Company's dough manufacturing facility in Atlanta, Georgia, and finished goods which consist primarily of food, beverages
and supplies for Company restaurants. Inventory costs are included in "Cost of restaurant and factory revenues" in the
Consolidated Statements of Operations.

Assets classified as held-for-sale – Assets are classified as held-for-sale when the Company commits to a plan to sell the asset,
the asset is available for immediate sale in its present condition, and an active program to locate a buyer at a reasonable price
has been initiated. The sale of these assets is generally expected to be completed within one year. The combined assets are
valued at the lower of their carrying amount or fair value, net of costs to sell, and included as current assets on the Company’s

F-11

Table of Contents

consolidated balance sheet. Assets classified as held-for-sale are not depreciated. However, interest attributable to the liabilities
associated with assets classified as held-for-sale and other related expenses are recorded as expenses in the Company’s
consolidated statement of operations.

Goodwill and other intangible assets – Intangible assets are stated at the estimated fair value at the date of acquisition and
include goodwill, trademarks, and franchise agreements. Goodwill and other intangible assets with indefinite lives, such as
trademarks, are not amortized but are reviewed for impairment annually or more frequently if indicators arise. All other
intangible assets are amortized over their estimated weighted average useful lives, which range from 4.9 years to 15.3 years.
Management assesses potential impairments to intangible assets at least annually, or when there is evidence that events or
changes in circumstances indicate that the carrying amount of an asset may not be recovered. Judgments regarding the existence
of impairment indicators and future cash flows related to intangible assets are based on operational performance of the acquired
businesses, market conditions and other factors.

Fair value measurements - The Company determines the fair market values of its financial assets and liabilities, as well as non-
financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis, based on the fair value
hierarchy established in U.S. GAAP. As necessary, the Company measures its financial assets and liabilities using inputs from
the following three levels of the fair value hierarchy:

•
•

•

Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active

markets for similar assets or liabilities.

Level 3 - Inputs are unobservable and reflect the Company’s own assumptions.

The Company does not have a material amount of financial assets or liabilities that are required to be measured at fair value on
a recurring basis under U.S. GAAP. None of the Company’s non-financial assets or non-financial liabilities are required to be
measured at fair value on a recurring basis.

Income taxes – The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax
assets and liabilities are determined based on the differences between financial reporting and tax reporting bases of assets and
liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected
to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.
A valuation allowance is recognized when the realization of our deferred tax assets is expected to be less than our carrying
amounts.

A two-step approach is utilized to recognize and measure uncertain tax positions. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will
be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second
step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon the ultimate
settlement.

Franchise fees - The franchise arrangement is documented in the form of a franchise agreement. The franchise arrangement
requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the
franchisee, but instead represent a single performance obligation, which includes the transfer of the franchise license. The
services provided by the Company are highly inter-related with the franchise license and are considered a single performance
obligation. Franchise fee revenue from the sale of individual franchises is recognized over the term of the individual franchise
agreement on a straight-line basis. Unamortized non-refundable deposits collected in relation to the sale of franchises are
recorded as deferred income.

The franchise fee may be adjusted from time to time at management’s discretion. Deposits are non-refundable upon acceptance
of the franchise application. In the event a franchisee does not comply with their development timeline for opening franchise
stores, the franchise rights may be terminated, at which point the franchise fee revenue is recognized for non-refundable
deposits.

Royalties – In addition to franchise fee revenue, the Company collects a royalty calculated as a percentage of net sales from our
franchisees. Royalties typically range from 0.75% to 7.0% and are recognized as revenue when the related sales are made by the
franchisees. Royalties collected in advance of sales are classified as deferred income until earned.

Company-owned restaurant revenue - Company-owned restaurant revenue is recognized at the point in time when food and
beverage products are sold. Company restaurant sales are presented net of sales-related taxes collected from customers and
remitted to governmental taxing authorities.

F-12

Table of Contents

Advertising – The Company requires advertising fee payments from franchisees based on a percent of net sales. The Company
also receives, from time to time, payments from vendors that are to be used for advertising. Advertising funds collected are
required to be spent for specific advertising purposes. Advertising revenue and the associated expense are recorded gross on the
Company’s consolidated statement of operations. Assets and liabilities associated with the related advertising fees are reflected
in the Company’s consolidated balance sheet.

Share-based compensation – The Company has a stock option plan which provides for options to purchase shares of the
Company’s common stock. Options issued under the plan may have a variety of terms as determined by the Board of Directors
including the option term, the exercise price and the vesting period. Options granted to employees and directors are valued at
the date of grant and recognized as an expense over the vesting period in which the options are earned. Cancellations or
forfeitures are accounted for as they occur. Stock options issued to non-employees as compensation for services are accounted
for based upon the estimated fair value of the stock option. The Company recognizes this expense over the period in which the
services are provided. Management utilizes the Black-Scholes option-pricing model to determine the fair value of the stock
options issued by the Company. See Note 14 for more details on the Company’s share-based compensation.

Earnings per share – The Company reports basic earnings or loss per share in accordance with FASB ASC 260, “Earnings Per
Share”. Basic earnings per share is computed using the weighted average number of common shares outstanding during the
reporting period. Diluted earnings per share is computed using the weighted average number of common shares outstanding
plus the effect of dilutive securities during the reporting period. Any potentially dilutive securities that have an anti-dilutive
impact on the per share calculation are excluded. During periods in which the Company reports a net loss, diluted weighted
average shares outstanding are equal to basic weighted average shares outstanding because the effect of the inclusion of all
potentially dilutive securities would be anti-dilutive. As of December 25, 2022, and December 26, 2021, there were no
potentially dilutive securities considered in the calculation of diluted loss per common share due to net losses for each period.

Recently Issued Accounting Standards

In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2022-02, Financial
Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The purpose of this amendment
is to enhance disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is
experiencing financial difficulty. It requires that an entity disclose current-period gross write-offs by year of origination for
financing receivables and net investments in leases. The amendments should be applied prospectively and are effective for
fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the
amendments is permitted if an entity has adopted the amendments in ASU 2016-13 described above, including adoption in an
interim period. The Company will evaluate ASC No. 2022-02 and does not expect the adoption of this standard will have a
material impact on its condensed consolidated financial statements.

F-13

Table of Contents

NOTE 3. MERGERS AND ACQUISITIONS

Nestle Toll House Cafe by Chip

On May 24, 2022, the Company agreed to acquire the royalty stream related to the chain of stores known as Nestlé® Toll
House® Café by Chip® from Crest Foods, Inc., consisting of all royalties generated under the Nestlé® Toll House® Café by
Chip® brand, and the franchisor has agreed to cause the network to rebrand the stores as Great American Cookies, subject to
the cooperation of the individual franchisees. Nestlé® Toll House® Café by Chip® is a franchised chain of stores with
approximately 85 cafés across the United States. The Company paid an initial installment of the purchase price of $1.8 million.
The final purchase price will be calculated on or before January 31, 2024.

Acquisition of Fazoli's

On December 15, 2021, the Company completed the acquisition of Fazoli's for a total cash purchase price of $138.1 million.

Founded in 1988 in Lexington, KY, Fazoli’s owns and operates nearly 210 restaurants in 26 states, making it the largest
premium quick service restaurant Italian chain priding itself on serving premium quality Italian food, fast, fresh and friendly.
Menu offerings include freshly prepared pasta entrees, Submarinos® sandwiches, salads, pizza and desserts – along with its
unlimited signature breadsticks.

Acquisition of Native Grill & Wings

On December 15, 2021, the Company completed the acquisition of Native Grill & Wings (“Native”) for a total cash purchase
price of $20.1 million.

Based in Chandler, Arizona, Native Grill & Wings is a family-friendly, polished sports grill with 22 franchised locations
throughout Arizona, Illinois, and Texas. Native serves over 20 award-winning wing flavors that guests can order by the
individual wing, as well as an extensive menu of pizza, burgers, sandwiches, salads and more.

Acquisition of Twin Peaks

On October 1, 2021, the Company completed the acquisition of Twin Peaks Buyer, LLC (“Twin Peaks”) from Twin Peaks
Holdings, LLC (the “Seller”). Twin Peaks is the franchisor and operator of a chain of sports lodge themed restaurants. The
purchase price totaled $310.3 million. See Note 10 for more details of the purchase price consideration.

Acquisition of GFG Franchise Group

On July 22, 2021, the Company completed the acquisition of LS GFG Holdings Inc. (“GFG”) for a total purchase price of
$444.9 million.

GFG is a franchisor of five restaurant brands. GFG’s brands (Great American Cookies, Marble Slab Creamery, Pretzelmaker,
Hot Dog on a Stick and Round Table Pizza) are in the quick service restaurant industry. The franchise network, across all of the
Company’s brands, consists of approximately 1,415 retail stores in 8 countries. GFG also operates a dough manufacturing
facility which supplies dough to certain of the GFG brands.

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Table of Contents

The allocation of the consideration to the valuation of net tangible and intangible assets acquired in the transactions described
above is presented in the following table (in millions). The allocations relating to Fazoli's, Native Grill & Wings, Twin Peaks
and GFG are as follows:

Cash

Accounts receivable

Prepaids and other current assets

Notes receivable

Other intangible assets, net

Goodwill

Right-of-use assets

Property, plant and equipment

Deferred tax asset, net

Other assets

Accounts payable

Accrued expenses

Accrued advertising

Deferred income

Operating lease liability

Deferred tax liability, net

Other liabilities

Fazoli's

Native Grill & Wings

Twin Peaks

GFG

9.6

0.2

14.9

3.3

1.8

—

83.3

53.4

43.1

22.0

—

0.3

(5.8)

(7.4)

—

(1.5)

(48.8)

(14.7)

(0.5)

0.3

0.1

—

14.7

5.3

0.2

0.1

—

(0.3)

(0.1)

(0.2)

—

1.6

2.8

1.5

165.4

105.1

43.7

46.8

0.2

0.5

(5.2)

(6.4)

(3.5)

(3.6)

(44.7)

—

(8.8)

Total net identifiable assets

138.1

20.1

310.3

8.7

7.3

3.8

—

348.3

120.2

6.5

8.4

—

1.2

(2.4)

(10.1)

(3.2)

(8.7)

(31.4)

(0.5)

444.9

Pro Forma Information

The table below presents the combined pro forma revenue and net loss of the Company and Fazoli's, Twin Peaks and GFG (the
"Material Acquired Entities") for the year December 26, 2021, assuming the acquisition of the Material Acquired Entities had
occurred on December 28, 2020 (the beginning of the Company’s 2021 fiscal year), pursuant to ASC 805-10-50 (in millions).
Actual consolidated results are presented in the pro forma information for any period in which a Material Acquired Entity was
actually a consolidated subsidiary of the Company. This pro forma information does not purport to represent what the actual
results of operations of the Company would have been had the acquisition of the Material Acquired Entities occurred on this
date nor does it purport to predict the results of operations for future periods.

Revenue
Net loss

Year Ended
December 26, 2021

$
$

347.9
28.8

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Table of Contents

NOTE 4. REFRANCHISING

As part of its ongoing franchising efforts, the Company may, from time to time, make opportunistic acquisitions of operating
restaurants in order to convert them to franchise locations or acquire existing franchise locations to resell to another franchisee
across all of its brands.

The following assets used in the operation of certain restaurants meet all of the criteria requiring that they be classified as held-
for-sale, and have been classified accordingly on the accompanying audited consolidated balance sheets as of December 25,
2022 and December 26, 2021 (in millions):

Property, plant and equipment

Operating lease right-of-use assets

Total

December 25,
2022

December 26,
2021

0.7 $

4.1

4.8 $

0.8

4.7

5.5

Operating lease liabilities related to the assets classified as held-for-sale in the amount of $4.1 million and $4.8 million, have
been classified as current liabilities on the accompanying audited consolidated balance sheets as of December 25, 2022 and
December 26, 2021, respectively.

The following table highlights the operating results of the Company’s refranchising program during 2022 and 2021 (in
millions):

Restaurant costs and expenses, net of revenue

Gains on store sales or closures

Refranchising loss

NOTE 5. PROPERTY AND EQUIPMENT, NET

Twelve
Months Ended
December 25,
2022

Twelve
Months Ended
December 26,
2021

(4.2) $

—

(4.2) $

(3.0)

2.7

(0.3)

Property and equipment consists primarily of real estate (including land, buildings and tenant improvements) and equipment.

As of December 25, 2022 and December 26, 2021, the Company's gross carrying value of property and equipment and
accumulated depreciation balances were (in millions):

Real estate

Equipment

Total property and equipment, gross

Less: accumulated depreciation

Total property and equipment, net

Total

2022

2021

67.7 $

26.5

94.2

(15.0)

79.2 $

60.5

22.9

83.4

(2.9)

80.5

Depreciation expense for the fiscal years ended December 25, 2022 and December 26, 2021 was $12.1 million and $2.6
million, respectively.

On an annual basis the Company assesses its property and equipment for impairment. For the fiscal year ended December 25,
2022 the company recognized impairment expense of $0.5 million which is included in General and administrative expense on

F-16

Table of Contents

the Consolidated Statements of Operations. The Company recognized no impairment expense for the fiscal year ended
December 26, 2021.

Upon retirement or other disposal of property and equipment, the cost and related amounts of accumulated depreciation are
eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset
value and the proceeds, is recorded in earnings.

NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The following table reflects the changes in carrying amounts of goodwill for the fiscal years ended December 25, 2022 and
December 26, 2021 (in millions):

Gross goodwill:
Balance, beginning of year
Acquired
Adjustment to preliminary purchase price allocation
Balance, end of year

Accumulated impairment:
Balance, beginning of year
Impairment
Balance, end of year

Net carrying value

December 25,
2022

December 26,
2021

296.8 $
1.2
(3.0)

295.0

(1.7)
—
(1.7)

12.4
285.9
(1.5)
296.8

(1.4)
(0.3)
(1.7)

293.3 $

295.1

When considering the available facts, assessments and judgments, the Company recorded goodwill impairment charges of $0.0
million and $0.3 million for the fiscal years ended December 25, 2022 and December 26, 2021, respectively.

Because of the risks and uncertainties related to the COVID-19 pandemic events, the negative effects on the operations of the
Company’s franchisees could prove to be worse than currently estimated and result in the need to record additional goodwill
impairment charges in future periods.

Other intangible assets consist primarily of trademarks, franchise agreements and customer relationships that were classified as
identifiable intangible assets at the time of the brands’ acquisition by the Company, or at the time they were acquired by FCCG
prior to FCCG’s contribution of the brands to the Company in connection with the initial public offering. Franchise agreements
and customer relationships are amortized over the useful life of the asset. Trademarks are considered to have an indefinite
useful life and are not amortized.

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Table of Contents

Changes in Carrying Value of Other Intangible Assets

The changes in carrying value of other intangible assets for the fiscal years ended December 25, 2022 and December 26, 2021
are as follows (in millions):

Amortizing

2022

2021

Non-Amortizing
2021
2022

Total

2022

2021

Balance, beginning of year
Impairment
Amortization expense
Acquisitions

Adjustment to preliminary purchase price allocation
$
Balance, end of year

175.6 $
—
(14.9)

12.6 $ 477.2 $
(14.0)
—
—

—
(6.0)

1.7
(0.3)

169.0
—

—

35.1 $
(0.8)
—

442.9
—

652.8 $
(14.0)
(14.9)
1.7

47.7
(0.8)
(6.0)
611.9

(0.3)

—
625.3 $ 652.8

162.1 $ 175.6 $ 463.2 $ 477.2 $

Gross Carrying Value and Accumulated Amortization of Other Intangible Assets

The carrying value of amortizing other intangible assets is as follows as of December 25, 2022 and December 26, 2021 (in
millions):

December 25, 2022

December 26, 2021

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Amortizing intangible assets
Franchise agreements
Customer relationships
Other
Balance, end of year

109.2 $
73.9
2.1
185.2 $

(14.8) $
(8.1)
(0.2)
(23.1) $

94.4 $
65.8
1.9
162.1 $

109.4 $
73.9
0.4
183.7 $

(5.7) $
(2.4)
—
(8.1) $

103.7
71.5
0.4
175.6

When considering the available facts, assessments and judgments, including increased interest rates, the Company recorded
impairment of trademarks in the amount of $14.0 million and $0.8 million for the fiscal years ended December 25, 2022 and
December 26, 2021, respectively.

The expected future amortization of the Company’s amortizable intangible assets is as follows (in millions):

Fiscal year:

2023
2024
2025

2026

2027

Thereafter

Total

15.0
14.7
14.5

14.5

14.4

89.0

162.1

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Table of Contents

NOTE 7. DEFERRED INCOME

Deferred income is as follows (in millions):

Deferred franchise fees

Deferred royalties

Deferred vendor incentives

Total

NOTE 8. INCOME TAXES

Components of the income tax provision (benefit), net are as follows (in millions):

December 25,
2022

December 26,
2021

23.5 $

—
0.2
23.7 $

19.8

0.2

0.3

20.3

Fiscal Year
Ended
December 25,
2022

Fiscal Year
Ended
December 26,
2021

Current

Federal

State

Foreign

Deferred

Federal

State

— $

0.4

1.0

1.4

8.2

9.2

17.4

Total income tax provision (benefit)

18.8 $

—

1.0

0.8

1.8

(5.1)

(0.2)

(5.3)

(3.5)

Income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory
income tax rate to pretax income as follows (in millions):

Tax benefit at statutory rate
State and local income taxes

State and federal valuation allowances

162(m) limitation

Foreign taxes

Tax credits

Nondeductible interest expense

Other

Total income tax provision (benefit)

Fiscal Year
Ended
December 25,
2022

Fiscal Year
Ended
December 26,
2021

(22.5) $
(0.7)

36.4

1.3

0.8

0.5

2.2

0.8

(7.4)
0.6

1.5

0.2

0.6

0.5

—

18.8 $

(3.5)

As of December 25, 2022, the Company’s subsidiaries’ annual tax filings for the prior three years are open for audit by Federal
and for the prior four years for state tax agencies. The Company is the beneficiary of indemnification agreements from the prior
owners of the subsidiaries for tax liabilities related to periods prior to its ownership of the subsidiaries. Management evaluated
the Company’s overall tax positions and has determined that no provision for uncertain income tax positions is necessary as of
December 25, 2022.

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Table of Contents

Deferred taxes reflect the net effect of temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for calculating taxes payable. Significant components of the Company’s deferred tax
assets and liabilities are as follows (in millions):

December 25,
2022

December 26,
2021

Deferred tax assets (liabilities), net

Net federal and state operating loss carryforwards

47.9 $

Deferred revenue

Intangibles

Deferred state income tax

Reserves and accruals

Interest expense carryforward

Tax credits

Share-based compensation

Fixed assets

Operating lease right-of-use assets

Operating lease liabilities

Valuation allowance

Other

Total

4.9

(92.6)

1.8

6.6

43.9

0.1

2.8

(4.4)

(26.0)

28.5

(40.6)

(0.1)

(27.2) $

43.8

4.1

(86.2)

0.6

7.3

22.4

0.1

0.9

(2.9)

(23.9)

26.1

(5.2)

—

(12.9)

Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not
(a likelihood of more than fifty percent) that some portion or all of the deferred tax assets will not be realized. As of
December 25, 2022 and December 26, 2021, the Company recorded a valuation allowance against its deferred tax assets in the
amount of $40.6 million and $5.2 million, respectively, as it determined that these amounts would not likely be realized.
Realization of our deferred tax assets is dependent upon future earnings, the timing and amount of which, if any, are uncertain.
The valuation allowance increased by $35.4 million and $4.7 million during the fiscal years ended December 25, 2022 and
December 26, 2021, respectively.

The Company had federal net operating loss carryforwards (“NOLs”) of approximately $176.9 million and $159.3 million as of
December 25, 2022 and December 26, 2021, respectively. The Company’s State NOLs were approximately $133.5 million and
$134.1 million as of December 25, 2022 and December 26, 2021, respectively. The NOLs begin to expire in 2037. Utilization
of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change
in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result
in the expiration of net operating losses and credits before utilization. The Company also had certain federal tax credits totaling
approximately $0.1 million and $0.1 million as of December 25, 2022 and December 26, 2021 respectively. The credits will
begin to expire in 2028.

Under Section 382 and 383 of the Internal Revenue Code, if an ownership change occurs with respect to a “loss corporation”,
as defined, there are annual limitations on the amount of the NOLs and certain other deductions and credits which are available
to the Company. The portion of the NOLs and other tax benefits accumulated by Johnny Rockets, GFG and Fazoli's prior to the
Acquisition are subject to this annual limitation.

F-20

Table of Contents

NOTE 9. LEASES

As of December 25, 2022, the Company has recorded 136 operating leases for corporate offices and for certain owned
restaurant properties, some of which are in the process of being refranchised. The leases have remaining terms ranging from 1
month to 23.9 years. The Company recognized lease expense of $18.8 million and $6.3 million for the fiscal years ended
December 25, 2022 and December 26, 2021, respectively. The weighted average remaining lease term of the operating leases as
of December 25, 2022 was 15.9 years.

Operating lease right-of-use assets and operating lease liabilities are as follows (in millions):

Operating lease right-of-use assets

Right of use assets classified as held-for-sale

Total right-of-use assets

Operating lease liabilities

Lease liabilities related to assets held-for-sale

Total operating lease liabilities

December 25,
2022

December 26,
2021

101.1 $

4.1

105.2 $

110.4 $

4.1

114.5 $

98.6

4.7

103.3

107.3

4.8

112.1

The operating lease right-of-use assets and operating lease liabilities include obligations relating to the optional term extensions
available on certain restaurant leases based on management’s intention to exercise the options. The weighted average discount
rate used to calculate the carrying value of the right-of-use assets and lease liabilities was 9.4% which is based on the
Company’s incremental borrowing rate at the time the lease is acquired.

The contractual future maturities of the Company’s operating lease liabilities as of December 25, 2022, including anticipated
lease extensions, are as follows (in millions):

Fiscal year:

2023

2024

2025

2026

2027

Thereafter
Total lease payments

Less imputed interest
Total

17.1

16.1

15.5

14.1

13.9

162.8
239.5

125.0
114.5

Supplemental cash flow information for the fiscal years ended December 25, 2022 and December 26, 2021 related to leases is
as follows (in millions):

Cash paid for amounts included in the measurement of operating lease liabilities:

Operating cash flows from operating leases

Operating lease right-of-use assets obtained in exchange for new lease obligations:

Operating lease liabilities

2022

2021

16.4 $

5.7

7.7 $

105.6

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Table of Contents

NOTE 10. DEBT

Long-term debt consisted of the following (in millions):

December 25, 2022

December 26, 2021

Final
Maturity

Anticipated
Call Date

Rate

Face
Value

Book
Value

Book Value

4/25/2051
7/25/2051
7/25/2051
7/25/2051

7/25/2023
7/25/2023
7/25/2023
7/25/2023

7/19/2026
5/5/2027 to
3/7/2029

8/5/2023
with One
Six-Month
Extension

N/A

Senior Debt

FB Royalty Securitization
GFG Royalty Securitization
Twin Peaks Securitization
Fazoli's/Native Securitization

Senior Subordinated Debt
FB Royalty Securitization
GFG Royalty Securitization
Twin Peaks Securitization
Fazoli's/Native Securitization

Subordinated Debt

FB Royalty Securitization
GFG Royalty Securitization
Twin Peaks Securitization
Fazoli's/Native Securitization

Total Securitized Debt

Elevation Note

Equipment Notes

Twin Peaks Construction Loan

Total debt
Current portion of long-term debt
Long-term debt

Terms of Outstanding Debt

FB Royalty Securitization

4.75% $
6.00%
7.00%
6.00%

139.8 $
234.0
150.0
128.8

135.3 $
228.9
147.5
124.8

8.00%
7.00%
9.00%
7.00%

46.6
84.0
50.0
25.0

9.00%
9.50%
10.00%
9.00%

6.00%

34.6
57.0
50.0
40.0
1,039.8
4.3

45.2
82.0
47.3
23.5

32.1
53.5
45.5
37.0
1,002.6
3.9

7.99% to

8.49%

1.3

8.00%

0.4
$ 1,045.8

0.4
1,008.2

(49.6)
958.6 $

95.4
205.6
146.8
122.8

31.8
81.5
46.6
22.7

14.1
52.6
44.2
35.2
899.3
5.6

—

—
904.9
(0.6)
904.3

On April 26, 2021, FAT Brands Royalty I, LLC (“FB Royalty”), a special purpose, wholly-owned subsidiary of FAT Brands,
completed the Offering of three tranches of fixed rate senior secured notes. Net proceeds totaled $140.8 million, which
consisted of the combined face amount of $144.5 million, net of debt offering costs of $3.0 million and original issue discount
of $0.7 million. A portion of the proceeds was used to repay and retire notes issued in 2020 under the Base Indenture (the "2020
Securitization Notes"). The payoff amount totaled $83.7 million, which included principal of $80.0 million, accrued interest of
$2.2 million and prepayment premiums of $1.5 million. The Company recognized a loss on extinguishment of debt of $7.8

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Table of Contents

million in connection with the refinance as well as interest expense on the 2020 Securitization Notes in the amount of
$2.6 million for the year ended December 26, 2021.

On July 6, 2022, FB Royalty issued an additional $76.5 million aggregate principal amount of three tranches of fixed rate senior
secured notes (in millions):

Closing Date
7/6/2022
7/6/2022
7/6/2022

Class
A-2
B-2
M-2

Seniority
Senior
Senior Subordinated
Subordinated

Principal
Balance
$42.7
$14.2
$19.6

Coupon
4.75%
8.00%
9.00%

Final Legal
Maturity
Date
7/25/2051
7/25/2051
7/25/2051

Of the $76.5 million aggregate principal amount, $30.0 million was sold privately during the third quarter of 2022, resulting in
net proceeds of $27.1 million (net of debt offering costs of $0.6 million and original issue discount of $2.3 million). The
remaining $46.5 million in aggregate principal was sold privately on October 21, 2022, when the Company entered into an
Exchange Agreement with the Twin Peaks sellers and redeemed 1,821,831 shares of the Company’s 8.25% Series B
Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and unpaid dividends to the date of redemption, in
exchange for $46.5 million aggregate principal amount of secured debt ($43.2 million net of debt offering costs and original
issue discount).

Prior to the redemption, the Twin Peaks sellers held 2,847,393 shares of Series B Cumulative Preferred Stock, which shares
were issued to it on October 1, 2021 as partial consideration for the Company’s acquisition of Twin Peaks.

Pursuant to the Exchange Agreement, (i) at any time prior to July 25, 2023, the Company may call from the Twin Peaks sellers
all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.86, plus any accrued plus unpaid
interest thereon; (ii) at any time on or after the date of the Exchange Agreement, the Company may call from the Twin Peaks
sellers, and at any time on or after July 25, 2023, the Twin Peaks sellers may put to the Company, all or a portion of the Class
A-2 Notes and/or Class B-2 Notes at the outstanding principal balance multiplied by 0.94, plus any accrued plus unpaid interest
thereon; and (iii) at any time on or after July 25, 2023, the Company may call from the Twin Peaks sellers, and the Twin Peaks
sellers may put to the Company, all or a portion of the Class M-2 Notes at the outstanding principal balance multiplied by 0.91,
plus any accrued plus unpaid interest thereon. If the Company does not remit the applicable call price or put price upon a duly
exercised call or put, as applicable, the amount owed by the Company will accrue interest at 10% per annum, which interest is
due and payable in cash monthly by the Company.

As of December 25, 2022, the carrying value of the FB Royalty Securitization Notes was $212.7 million (net of debt offering
costs of $2.5 million and original issue discount of $5.8 million). The Company recognized interest expense on the FB Royalty
Securitization Notes of $11.3 million for the year ended December 25, 2022, respectively, which includes $0.6 million for
amortization of debt offering costs, and $0.6 million for amortization of the original issue discount. The average annualized
effective interest rate of the FB Royalty Securitization Notes, including the amortization of debt offering costs and original
issue discount, was 6.3% for the time the debt was outstanding during the year ended December 25, 2022.

The FB Royalty Securitization Notes are generally secured by a security interest in substantially all the assets of FB Royalty
and its subsidiaries.

GFG Royalty Securitization

In connection with the acquisition of GFG, on July 22, 2021, FAT Brands GFG Royalty I, LLC (“GFG Royalty”), a special
purpose, wholly-owned subsidiary of the Company, completed the issuance and sale in a private offering (the “GFG Offering”)
of three tranches of fixed rate senior secured notes. Net proceeds totaled $338.9 million, which consisted of the combined face
amount of $350.0 million, net of debt offering costs of $6.0 million and original issue discount of $5.1 million. Substantially all

F-23

Table of Contents

of the proceeds were used to acquire GFG. Immediately following the closing of the acquisition of GFG, the Company
contributed the franchising subsidiaries of GFG to GFG Royalty, pursuant to a Contribution Agreement.

On December 15, 2022, GFG Royalty issued an additional $113.5 million aggregate principal amount of three tranches of fixed
rate senior secured notes as follows (in millions):

Closing Date
12/13/2022
12/13/2022
12/13/2022

Class
A-2
B-2
M-2

Seniority
Senior
Senior Subordinated
Subordinated

Principal
Balance
$67.8
$20.2
$25.5

Final Legal
Maturity
Date
7/25/2051
7/25/2051
7/25/2051

Coupon
6.00%
7.00%
9.50%

Of the $113.5 million aggregate principal amount, $25.0 million was sold privately during the fourth quarter, resulting in net
proceeds of $22.3 million (net of debt offering costs of $0.4 million and original issue discount of $2.3 million). The remaining
$88.5 million in aggregate principal was issued to FAT Brands Inc. and has been eliminated in consolidation. In January 2023,
an additional $40.0 million aggregate principal amount was sold privately, resulting in net proceeds of $34.8 million.

As of December 25, 2022, the carrying value of the GFG Securitization Notes was $364.4 million (net of debt offering costs of
$4.7 million and original issue discount of $5.9 million). The Company recognized interest expense on the GFG Securitization
Notes of $26.1 million for fiscal year ended December 25, 2022, which includes $1.2 million for amortization of debt offering
costs and $1.1 million for amortization of the original issue discount. The average annualized effective interest rate of the GFG
Securitization Notes, including the amortization of debt offering costs and original issue discount, was 7.5% during the fiscal
year ended December 25, 2022.

The GFG Securitization Notes are generally secured by a security interest in substantially all the assets of GFG Royalty and its
subsidiaries.

Twin Peaks Securitization

In connection with the acquisition of Twin Peaks, on October 1, 2021, the Company completed the issuance and sale in a
private offering through its special purpose, wholly-owned subsidiary, FAT Brands Twin Peaks I, LLC, of an aggregate
principal amount of $250.0 million. The net proceeds from the sale of the Notes were used by the Company to finance the cash
portion of the purchase price for the acquisition of Twin Peaks Buyer, LLC and its direct and indirect subsidiaries. Net proceeds
totaled $236.9 million, which consisted of the combined face amount of $250.0 million, net of debt offering costs of $5.6
million and original issue discount of $7.5 million. Substantially all of the proceeds were used to acquire Twin Peaks.
Immediately following the closing of the acquisition of Twin Peaks, the Company contributed the franchising subsidiaries of
Twin Peaks to FAT Brands Twin Peaks I, LLC,, pursuant to a Contribution Agreement.

As of December 25, 2022, the carrying value of the Twin Peaks Securitization Notes was $240.4 million (net of debt offering
costs of $4.2 million and original issue discount of $5.5 million). The Company recognized interest expense on the Twin Peaks
Securitization Notes of $22.8 million for year ended December 25, 2022, which includes $1.6 million for amortization of debt
offering costs and $1.1 million for amortization of the original issue discount. The effective interest rate of the Twin Peaks
Securitization Notes, including the amortization of debt offering costs and original issue discount, was 9.1% during the year
ended December 25, 2022.

The Twin Peaks Securitization Notes are generally secured by a security interest in substantially all the assets of FAT Brands
Twin Peaks I, LLC, and its subsidiaries.

Fazoli's / Native Securitization

In connection with the acquisition of Fazoli's and Native Grill & Wings, on December 15, 2021, the Company completed the
issuance and sale in a private offering through its special purpose, wholly-owned subsidiary, FAT Brands Fazoli's Native I,
LLC, of an aggregate principal amount of $193.8 million. Net proceeds totaled $180.6 million, which consisted of the
combined face amount of $193.8 million, net of debt offering costs of $3.8 million and original issue discount of $9.4 million.
The proceeds were used to close the acquisitions of Fazoli's and Native, and to provide working capital for the Company.
Immediately following the closing of the acquisition of Fazoli's and Native, the Company contributed the franchising
subsidiaries of these entities to FAT Brands Fazoli's Native I, LLC, pursuant to a Contribution Agreement. The Fazoli's-Native

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Securitization Notes are generally secured by a security interest in substantially all the assets of FAT Brands Fazoli's Native I,
LLC and its subsidiaries.

As of December 25, 2022, the carrying value of the Fazoli's-Native Securitization Notes was $185.2 million (net of debt
offering costs of $2.5 million and original issue discount of $6.0 million). The Company recognized interest expense on the
Fazoli's-Native Securitization Notes of $17.6 million for the fiscal year ended December 25, 2022, which includes $1.2 million
for amortization of debt offering costs and $3.4 million for amortization of the original issue discount. The effective interest rate
of the Fazoli's-Native Securitization Notes, including the amortization of debt offering costs and original issue discount, was
9.1% during the year ended December 25, 2022.

The Fazoli's-Native Securitization Notes are generally secured by a security interest in substantially all the assets of FAT
Brands Fazoli's Native I, LLC and its subsidiaries.

Terms and Debt Covenant Compliance

The 2021 FAT Royalty Securitization Notes, the 2021 GFG Royalty Securitization Notes, the 2021 Twin Peaks Securitization
Notes, and the 2021 Fazoli's/Native Securitization Notes (collectively, the "Securitization Notes"), require that the principal (if
any) and interest obligations be segregated to ensure appropriate funds are reserved to pay the quarterly principal and interest
amounts due. The amount of monthly cash flow that exceeds the required monthly interest reserve is generally remitted to the
Company. Interest payments are required to be made on a quarterly basis and, unless repaid on or before July 25, 2023,
additional interest equal to 1.0% per annum will accrue on the then outstanding principal balance of each tranche. Principal
payments, with an amount equal to 0.5% of the initial principal amount, will be made on the scheduled quarterly payment date
on and following the anticipated call date, starting in October 2023.

The material terms of the Securitization Notes contain covenants which are standard and customary for these types of
agreements, including the following financial covenants: (i) debt service coverage ratio, (ii) leverage ratio, and (iii) senior
leverage ratio. As of December 25, 2022, the Company was in compliance with these covenants.

Elevation Note

On June 19, 2019, the Company completed the acquisition of Elevation Burger. A portion of the purchase price included the
issuance to the Seller of a convertible subordinated promissory note (the “Elevation Note”) with a principal amount of $7.5
million, bearing interest at 6.0% per year and maturing in July 31, 2026. The Elevation Note is convertible under certain
circumstances into shares of the Company’s common stock at $12.00 per share. In connection with the valuation of the
acquisition of Elevation Burger, the Elevation Note was recorded on the financial statements of the Company at $6.1 million,
net of a loan discount of $1.3 million and debt offering costs of $0.1 million.

As of December 25, 2022, the carrying value of the Elevation Note was $3.9 million which is net of the loan discount of $0.4
million and debt offering costs of $35,329. In June 2022, pursuant to the claw-back provision of the purchase agreement, the
balance of the Elevation Note was reduced by $1.0 million to $6.5 million. The Company recognized interest expense relating
to the Elevation Note during the fiscal year ended December 25, 2022 in the amount of $0.6 million, which included
amortization of the loan discount of $0.2 million and amortization of $10,191 in debt offering costs. The Company recognized
interest expense relating to the Elevation Note during the year ended December 26, 2021 in the amount of $0.7 million, which
included amortization of the loan discount of $0.3 million and amortization of $10,000 in debt offering costs. The effective
interest rate for the Elevation Note during the year ended December 25, 2022 was 20.2%.

The Elevation Note is a general unsecured obligation of Company and is subordinated in right of payment to all indebtedness of
the Company arising under any agreement or instrument to which Company or any of its Affiliates is a party that evidences
indebtedness for borrowed money that is senior in right of payment.

Equipment Financing (Twin Peaks)

During fiscal year 2022, an indirect subsidiary of the Company entered into certain equipment financing arrangements to
borrow up to $1.0 million, the proceeds of which will be used to purchase certain equipment for a new Twin Peaks restaurant
and to retrofit existing restaurants with equipment (the "Equipment Financing"). The Equipment Financing has maturity dates
ranging from May 5, 2027 and March 7, 2029, and bear interest at fixed rates between 7.99% and 8.49% per annum. The
Equipment Financing is secured by certain equipment of the Twin Peaks restaurant.

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Construction Loan Agreement (Twin Peaks)

On July 12, 2022, an indirect subsidiary of the Company entered into a construction loan agreement, the proceeds of which
were used for a new corporate Twin Peaks in Northlake, TX. The loan was paid in full in December 2022.

On December 5, 2022, an indirect subsidiary of the Company entered into a construction loan agreement to borrow up to
$4.5 million, the proceeds of which will be used for a new corporate Twin Peaks restaurant (the "Construction Loan"). The
Construction Loan has an initial maturity of August 5, 2023, with an optional six-month extension, bearing interest at the
greater of the 3-month Secured Overnight Financing Rate (SOFR) plus 360 basis points, or 8% per year, and is secured by land
and building.

Paycheck Protection Program Loans

During 2020, the Company received loan proceeds in the amount of approximately $1.5 million under the Paycheck Protection
Program Loans (the "PPP Loans") and Economic Injury Disaster Loan Program (the “EIDL Loans”). The Paycheck Protection
Program, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to
qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans
and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes,
including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if
the borrower terminates employees or reduces salaries during the eight-week period.

At inception, the PPP Loans and EIDL Loans related to FAT Brands Inc. and five restaurant locations that were part of the
Company’s refranchising program. During 2021, the Company received confirmation that the entire balance remaining on the
PPP Loans, plus accrued interest, had been forgiven under the terms of the program. The Company recognized interest expense
of $4,000 and a gain on extinguishment of debt in the amount of $1.2 million relating to the PPP Loans and EIDL Loans during
the fiscal year ended December 26, 2021.

Scheduled Principal Maturities

Scheduled principal maturities of long-term debt and redemptions of redeemable preferred stock (Note 12) for the next five
fiscal years are as follows (in millions):

Fiscal
Year

2023
2024
2025
2026
2027

Long-Term Debt
49.6
$
21.2
$
21.4
$
21.0
$
20.2
$

Redeemable
Preferred Stock
(Note 12)

$
$
$
$
$

91.8
—
—
—
—

NOTE 11. PREFERRED STOCK

Series B Cumulative Preferred Stock

On July 13, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) to issue and sell, in a
public offering (the “Offering”), 360,000 shares of 8.25% Series B Cumulative Preferred Stock (“Series B Preferred Stock”)
and 1,800,000 warrants, plus 99,000 additional warrants pursuant to the underwriter’s overallotment option (the “2020 Series B
Offering Warrants”), to purchase common stock at $5.00 per share.

In connection with the Offering, on July 15, 2020 the Company filed an Amended and Restated Certificate of Designation of
Rights and Preferences of Series B Cumulative Preferred Stock with the Secretary of State of Delaware, designating the terms
of the Series B Preferred Stock (the “Certificate of Designation”).

The Certificate of Designation amends and restates the terms of the Series B Cumulative Preferred Stock issued in October
2019 (the “Original Series B Preferred”). At the time of the Offering, there were 57,140 shares of the Original Series B

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Preferred outstanding, together with warrants to purchase 34,284 shares of the Company’s common stock at an exercise price of
$8.50 per share (the “Series B Warrants”).

Holders of Series B Cumulative Preferred Stock do not have voting rights and are entitled to receive, when declared by the
Board, cumulative preferential cash dividends at a rate per annum equal to the 8.25% multiplied by $25.00 per share stated
liquidation preference of the Series B Preferred Stock. The dividends shall accrue without interest and accumulate, whether or
not earned or declared, on each issued and outstanding share of the Series B Preferred Stock from (and including) the original
date of issuance of such share and shall be payable monthly in arrears on a date selected by the Company each calendar month
that is no later than twenty days following the end of each calendar month.

If the Company fails to pay dividends on the Series B Preferred Stock in full for any twelve accumulated, accrued and unpaid
dividend periods, the dividend rate shall increase to 10.0% until the Company has paid all accumulated accrued and unpaid
dividends on the Series B Preferred Stock in full and has paid accrued dividends during the two most recently completed
dividend periods in full, at which time the 8.25% dividend rate shall be reinstated.

The Company may redeem the Series B Preferred Stock, in whole or in part, at the option of the Company, for cash, at the
following redemption price per share, plus any unpaid dividends:

i.
ii.
iii.
iv.

After July 16, 2022 and on or prior to July 16, 2023: $26.50 per share.
After July 16, 2023 and on or prior to July 16, 2024: $26.00 per share.
After July 16, 2024 and on or prior to July 16, 2025: $25.50 per share.
After July 16, 2025: $25.00 per share.

As a result of the amended and restated terms of the Series B Cumulative Preferred Stock, the Company classified the Series B
Preferred Stock as equity as of July 15, 2020.

In addition to the shares issued in the Offering, The Company concurrently engaged in the following transactions:

•

The holders of the outstanding 57,140 shares of Original Series B Preferred became subject to the new terms of the
Certificate of Designation. At the time of the amendment and restatement of the Certificate of Designation, the
adjusted basis of the Original Series B Preferred on the Company’s books was $1.1 million, net of unamortized debt
discounts and debt offering costs. As a result of the amendment and restatement of the Certificate of Designation, the
recorded value of the new Series B Stock was $1.1 million with $0.3 million allocated to the 2020 Series B Offering
Warrants, resulting in an aggregate loss on the exchange of $0.3 million. The original holders were also issued 3,537
shares of new Series B Preferred Shares in payment of $0.1 million accrued and outstanding dividends relating to the
Original Series B Preferred at a price of $25.00 per share.

The Company entered into an agreement to exchange 15,000 shares of Series A Fixed Rate Cumulative Preferred
Stock owned by FCCG for 60,000 shares of Series B Preferred Stock valued at $1.5 million, pursuant to a Settlement,
Redemption and Release Agreement. At the time of the exchange, the adjusted basis of the Series A Preferred on the
Company’s books was $1.5 million, net of unamortized debt discounts and debt offering costs, and the Company
recognized a loss on the exchange in the amount of $11,000. The Company also agreed to issue 14,449 shares of
Series B Preferred Stock valued at $0.4 million as consideration for accrued dividends due to FCCG.

The Company entered into an agreement to exchange all of the outstanding shares of Series A-1 Fixed Rate
Cumulative Preferred Stock for 168,001 shares of Series B Preferred Stock valued at $4.2 million, pursuant to a
Settlement, Redemption and Release Agreement with the holders of such shares. At the time of the exchange, the
adjusted basis of the Series A-1 Preferred Stock on the Company’s books was $4.4 million, net of unamortized debt
discounts and debt offering costs, and the Company recognized a gain on the exchange in the amount of $0.2 million.

On June 22, 2021, the Company closed a second underwritten public offering of 460,000 shares of 8.25% Series B Cumulative
Preferred Stock at a price of $20.00 per share. The net proceeds to the Company totaled $8.3 million (net of $0.9 million in
underwriting discounts and other offering expenses).

On August 25, 2021, the Company redeemed the final 80,000 shares of outstanding Series A Preferred Stock held by Trojan
Investments, LLC, with a redemption value of $8.0 million, plus accrued dividends thereon in the amount of $1.6 million, in
exchange for 478,199 shares of Series B Preferred Stock valued at $10.8 million. The Company recognized a loss on
extinguishment of debt in the amount of $1.2 million resulting from the redemption of the Series A Preferred Stock. The loss on
extinguishment of debt was recognized during the fourth quarter of 2021 and was deemed by the Company to be immaterial to
the third quarter 2021 financial statements. Following this transaction, the Company no longer has outstanding shares of its

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Series A Preferred Stock and has cancelled all shares. The Company had accounted for the Series A Preferred Stock as debt and
recognized interest expense on the Series A Preferred Stock of $0.7 million for the fiscal year ended December 26, 2021.

On November 1, 2021, the Company closed an additional underwritten public offering of 1,000,000 shares of 8.25% Series B
Cumulative Preferred Stock at a price of $18.00 per share. The net proceeds to the Company totaled $16.8 million (net of $1.2
million in underwriting discounts and other offering expenses).

As of December 25, 2022, the Series B Preferred Stock consisted of 3,252,154 shares outstanding with a balance of $45.5
million. The Company declared preferred dividends to the holders of the Series B Preferred Stock totaling $6.6 million during
the fiscal year ended December 25, 2022. As of December 26, 2021, the Series B Preferred Stock consisted of 3,221,471 shares
outstanding with a balance of $55.7 million. The Company declared preferred dividends to the holders of the Series B Preferred
Stock totaling $4.1 million during the fiscal year ended December 26, 2021. These amounts do not include 5,936,638 shares of
Series B Preferred Stock classified as redeemable preferred stock due to associated put options granted to the holders by the
Company (see Note 12).

NOTE 12. REDEEMABLE PREFERRED STOCK

GFG Preferred Stock Consideration

On July 22, 2021, the Company completed the acquisition of GFG (Note 3). A portion of the consideration paid included
3,089,245 newly issued shares of the Company’s Series B Cumulative Preferred Stock valued at $67.3 million (the "GFG
Preferred Stock Consideration"). Additionally, on July 22, 2021, the Company entered into a put/call agreement with the GFG
sellers, pursuant to which the Company may purchase, or the GFG Sellers may require the Company to purchase, the GFG
Preferred Stock Consideration for $67.5 million plus any accrued but unpaid dividends on or before August 20, 2022 (extended
from the original date of April 22, 2022), subject to the other provisions of the Put/Call Agreement. Since the Company did not
deliver the applicable cash proceeds to the GFG Sellers by that date, the amount accrues interest at the rate of 5% per annum
until repayment is completed. On March 22, 2022, the Company received a put notice on the GFG Preferred Stock
Consideration and reclassified the GFG Preferred Stock Consideration from redeemable preferred stock to current liabilities on
its consolidated balance sheet. As of December 25, 2022, the carrying value of the redeemable preferred stock was $67.5
million.

On September 16, 2022, the Company entered into an agreement with one of the GFG sellers who held 1,544,623 put preferred
shares. Pursuant to the agreement, the closing date of the redemption was extended from April 22, 2022 to July 23, 2023 and,
effective August 23, 2022, the interest rate applicable to such holder's 1,544,623 put shares was increased from 5% to 10% per
annum, payable monthly in arrears. In the fiscal year ended December 25, 2022, the Company paid $1.7 million for the accrued
interest.

Twin Peaks Preferred Stock Consideration

On October 1, 2021, the Company completed the acquisition of Twin Peaks. A portion of the consideration paid included
2,847,393 shares of the Company’s Series B Cumulative Preferred Stock (the "Twin Peaks Preferred Stock Consideration")
valued at $67.5 million.

On October 1, 2021, the Company and the Twin Peaks Seller entered into a Put/Call Agreement (the “Put/Call Agreement”)
pursuant to which the Company was granted the right to call from the Twin Peaks Seller, and the Twin Peaks Seller was
granted the right to put to the Company, the Initial Put/Call Shares at any time until March 31, 2022 for a cash payment of
$42.5 million, and the Secondary Put/Call Shares at any time until September 30, 2022 for a cash payment of $25.0 million (the
Initial Put/call Shares together with the Secondary Put/Call Shares total $67.5 million), plus any accrued but unpaid dividends
on such shares. Unpaid balances, when due, accrue interest at a rate of 10.0% per annum until repayment is completed. On
October 7, 2021, the Company received a put notice on the Initial Put/Call Shares and the Secondary Put/Call Shares.

On October 21, 2022, the Company entered into an Exchange Agreement with the Twin Peaks Seller and redeemed 1,821,831
shares of the Company’s 8.25% Series B Cumulative Preferred Stock at a price of $23.69 per share, plus accrued and unpaid
dividends to the date of redemption in exchange for $46.5 million aggregate principal amount of secured debt ($43.2 million net
of debt offering costs and original issue discount) as discussed in Note 10.

As of December 25, 2022, the carrying value of the Twin Peaks Preferred Stock Consideration totaled $24.3 million. The
Company recognized interest expense relating to the Twin Peaks Preferred Stock Consideration in the amount of $3.2 million
during the year ended December 25, 2022.

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NOTE 13. STOCKHOLDERS’ EQUITY AND DIVIDENDS ON COMMON STOCK

On August 16, 2021, the Company filed its Second Amended and Restated Certificate of Incorporation (the “Amended
Certificate”) with the Secretary of State of the State of Delaware, which among other things, (i) authorized 50,000,000 shares of
Class A Common Stock and 1,600,000 shares of Class B Common Stock, and (ii) reclassified the Company’s outstanding
shares of Common Stock as Class A Common Stock as of such date (the "Recapitalization"). Prior to the Recapitalization, the
Company’s authorized common shares totaled 51,600,000 in a single class.

The terms of the Amended Certificate require equal or better treatment for the Class A Common Stock to the Class B Common
Stock in transactions such as distributions, mergers, dissolution or recapitalization. Generally, each holder of shares of Class A
Common Stock shall be entitled to 1 vote for each share of Class A Common Stock held as of the applicable date on any matter
that is submitted to a vote or for the consent of the stockholders of the Corporation, while each holder of shares of Class B
Common Stock shall be entitled to 2,000 votes for each share of Class B Common Stock held as of the applicable date on any
matter that is submitted to a vote or for the consent of the stockholders of the Corporation. The foregoing is qualified in its
entirety by reference to the full text of the Amended Certificate, which is filed as Exhibit 3.1 on the Current Report on Form 8-
K, filed with the Securities and Exchange Commission on August 19, 2021 and incorporated by reference herein.

On October 15, 2021, the Board of Directors of the Company approved an amendment and restatement (the “Amendment”) of
the Company’s Bylaws, effective as of the same date. The Amendment revised the stockholder voting provisions of the Bylaws
to reflect the dual class common stock structure adopted by the Company in August 2021. In addition, the Amendment revised
the provisions in the Bylaws for stockholder voting by written consent and the procedure for fixing the size of the Board of
Directors and made certain other conforming changes.

As of December 25, 2022 and December 26, 2021, the total number of authorized shares of Class A and Class B common stock
was 51,600,000. There were 15,300,870 shares of Class A common stock and 1,270,805 shares of Class B common stock
outstanding at December 25, 2022, and 15,109,747 shares of Class A common stock and 1,270,805 shares of Class B common
stock issued and outstanding at December 26, 2021.

Below are the changes to the Company’s common stock during the fiscal year ended December 25, 2022:

● Warrants to purchase 36,362 shares of Class A common stock were exercised during the year ended December 25,

2022. The proceeds to the Company from the exercise of the warrants totaled $0.7 million.

● The Company granted 150,000 restricted shares of Class A common stock to Board members. The shares vest over 3
years in equal installments at the anniversary date of grant. The value of the restricted stock grant was $1.2 million and
will be amortized as compensation expense over the vesting period.

● On January 11, 2022, the Board of Directors declared a cash dividend of $0.13 per share of Class A and Class B
common stock, payable on March 1, 2022 to stockholders of record as of February 15, 2022, for a total of $2.2 million.

● On April 12, 2022, the Board of Directors declared a cash dividend of $0.13 per share of Class A and Class B common

stock, payable on June 1, 2022 to stockholders of record as of May 16, 2022, for a total of $2.1 million.

● On July 12, 2022, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common

stock, payable on September 1, 2022 to stockholders of record as of August 16, 2022, for a total of $2.3 million.

● On October 25, 2022, the Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B
common stock, payable on December 1, 2022 to stockholders of record as of November 15, 2022, for a total of $2.3
million.

● On May 3, 2022, one non-employee member of the Board of Directors elected to receive a portion of his compensation
in shares of the Company’s Class A common stock in lieu of cash. As such, the Company issued a total of 4,761 shares
of Class A common stock with a value of $30,000 to the electing director as consideration for accrued director's fees.

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NOTE 14. SHARE-BASED COMPENSATION

Effective September 30, 2017, the Company adopted the 2017 Omnibus Equity Incentive Plan (the “Plan”). The Plan was
amended on December 20, 2022 to increase the number of shares available for issuance under the Plan. The Plan is a
comprehensive incentive compensation plan under which the Company can grant equity-based and other incentive awards to
officers, employees and directors of, and consultants and advisers to, FAT Brands Inc. and its subsidiaries. The Plan provides a
maximum of 5,000,000 shares available for grant.

The Company has periodically issued stock options under the Plan. All of the stock options issued by the Company to date have
included a vesting period of three years, with one-third of each grant vesting annually. The Company’s stock option activity for
fiscal year ended December 25, 2022 can be summarized as follows:

Stock options outstanding at December 26, 2021

Grants

Forfeited

Expired

Stock options outstanding at December 25, 2022

Stock options exercisable at December 25, 2022

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life (Years)

10.50

7.09

11.66

—

10.06

7.75

9.1

7.1

6.2

—

8.3

7.8

Number of
Shares

2,791,785 $

243,180 $

(286,059) $

— $

2,748,906 $

1,208,004 $

The range of assumptions used in the Black-Scholes valuation model to value to options granted in 2022 are as follows:

Expected dividend yield
Expected volatility
Risk-free interest rate
Expected term (in years)

4.6% - 7.8%

84.2 %
1.3% - 4.0%
6.0

During the year ended December 25, 2022 the Company granted a total of 150,000 restricted shares of its common stock to five
Board members. During the year ended December 26, 2021 the Company granted a total of 300,000 restricted shares of its
common stock to three employees (collectively, the “Grant Shares”). The Grant Shares vest one-third each year on the
anniversary date of the grant. The grantees are entitled to any common dividends relating to the Grant Shares during the vesting
period. The Grant Shares were valued at $1.2 million and $2.8 million as of the date of grant, respectively. The related
compensation expense will be recognized over the vesting period.

The Company recognized share-based compensation expense in the amount of $7.7 million and $1.6 million during the fiscal
years ended December 25, 2022 and December 26, 2021, respectively. As of December 25, 2022, there remains $6.8 million of
share-based compensation expense relating to non-vested grants, which will be recognized over the remaining vesting period,
subject to future forfeitures.

NOTE 15. WARRANTS

As of December 25, 2022, the Company had issued outstanding warrants to purchase shares of its Class A common stock as
follows:

Issue Date
06/07/2018
06/27/2018
07/03/2018
07/03/2018
06/19/2019
10/03/2019

Number of
Warrants
Outstanding
102,125
25,530
57,439
22,230
46,875
60

Commencement
Date
06/07/2018
06/27/2018
07/03/2018
07/03/2018
12/24/2020
10/03/2019

Termination
Date
06/07/2023
06/27/2023
07/03/2023
07/03/2023
06/19/2024
10/03/2024

$
$
$
$
$
$

Exercise
Price

7.12
7.12
7.12
6.54
7.27
7.73

Value at
Grant Date
(in thousands)
87
$
25
$
58
$
26
$
N/A (1)
—

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07/16/2020
07/16/2020

1,318,349
18,648

1,591,256

12/24/2020
12/24/2020

07/16/2025
07/16/2025

$
$

3.76
3.76

$
$

1,163
64

(1) Values were not calculated at the issue date because the warrants were only exercisable in the event of a merger involving the Company

and FCCG.

In addition to the warrants to purchase common stock described above, the Company has also granted warrants issued on July
16, 2020, to purchase 3,600 shares of the Company’s Series B Preferred Stock at an exercise price of $24.95 per share,
exercisable beginning on the earlier of one year from the date of issuance, or the consummation of a merger or other similar
business combination transaction involving the Company and FCCG, and will expire on July 16, 2025.

The Company’s activity in warrants to purchase Class A common stock for the fiscal year ended December 25, 2022 was as
follows:

Warrants outstanding at December 26, 2021

Grants

Exercised

Cancelled

Warrants outstanding at December 25, 2022

Warrants exercisable at December 25, 2022

Weighted
Average
Exercise Price
(1)

Weighted
Average
Remaining
Contractual
Life (Years)

Number of
Shares

1,707,670 $

— $

(34,714) $

(81,700) $

1,591,256 $

4.72

—

3.57

13.35

3.88

3.2

—

2.6

—

2.4

(1) Exercise price adjusted due to cash dividends and Class B stock dividend.

The Company’s warrant activity for the fiscal year ended December 26, 2021 was as follows:

Warrants outstanding at December 27, 2020

Grants
Exercised
Cancelled

Warrants outstanding at December 26, 2021

Warrants exercisable at December 26, 2021

Number of
Shares

Weighted
Average
Exercise Price

2,273,533 $

8,184 $
(571,198) $
(2,849) $

1,707,670 $

5.68

3.76
3.85
3.76

4.72

Weighted
Average
Remaining
Contractual
Life (Years)

4.3

3.6
3.5
3.6

3.2

During the fiscal year ended December 25, 2022, a total of 34,714 warrants were exercised in exchange for 36,362 shares of
common stock with net proceeds to the Company of $0.7 million.

The range of assumptions used to establish the initial value of the warrants using the Black-Scholes valuation model were as
follows:

Expected dividend yield
Expected volatility

Risk-free interest rate

Expected term (in years)

F-31

Warrants

4.00% - 6.63%
30.23% - 31.73%

0.99% - 1.91%

3.8 - 5.0

Table of Contents

NOTE 16. COMMITMENTS AND CONTINGENCIES

Litigation and Investigations

On June 10, 2021, plaintiffs James Harris and Adam Vignola (“Plaintiffs”), putative stockholders of the Company, filed a
shareholder derivative action in the Delaware Court of Chancery nominally on behalf of the Company against the Company’s
directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn (the “Individual Defendants”)), and the
Company’s majority stockholders, Fog Cutter Holdings, LLC and Fog Cutter Capital Group, Inc. (collectively with the
Individual Defendants, “Defendants”). Plaintiffs assert claims of breach of fiduciary duty, unjust enrichment and waste of
corporate assets arising out of the Company’s December 2020 merger with Fog Cutter Capital Group, Inc. Defendants filed a
motion to dismiss Plaintiffs’ complaint, which the Court denied in an oral ruling on February 11, 2022 and subsequent written
order on May 25, 2022. On April 7, 2022, the Court entered a Scheduling Order setting forth the key dates and deadlines that
will govern the litigation, including a discovery cutoff of March 24, 2023 and trial date of February 5-9, 2024. To date, the
parties have engaged in substantial written discovery, though no depositions have been taken. On February 3, 2023, the
Company’s board of directors appointed a Special Litigation Committee ("SLC"), which retained independent counsel and
moved for a six-month stay of the action pending resolution of the SLC's investigation. On February 17, 2023, the Court
granted the SLC’s motion to stay. Defendants dispute the allegations of the lawsuit and intend to vigorously defend against the
claims. We cannot predict the outcome of this lawsuit. This lawsuit does not assert any claims against the Company.
However, subject to certain limitations, we are obligated to indemnify our directors in connection with the lawsuit and any
related litigation or settlements amounts, which may be time-consuming, result in significant expense and divert the attention
and resources of our management. An unfavorable outcome may exceed coverage provided under our insurance policies, could
have an adverse effect on our financial condition and results of operations and could harm our reputation.

On March 17, 2022, plaintiffs James Harris and Adam Vignola (“Plaintiffs”), putative stockholders of the Company, filed a
shareholder derivative action in the Delaware Court of Chancery nominally on behalf of the Company against the Company’s
directors (Squire Junger, James Neuhauser, Edward Rensi and Andrew Wiederhorn (the “Individual Defendants”)), and the
Company’s majority stockholder, Fog Cutter Holdings, LLC (collectively with the Individual Defendants, “Defendants”).
Plaintiffs assert claims of breach of fiduciary duty in connection with the Company’s June 2021 recapitalization transaction.
On May 27, 2022, Defendants filed a motion to dismiss Plaintiff's complaint (the "Motion"). Argument on the Motion was
heard on November 17, 2022 and again on February 23, 2023, and the Court took its decision under advisement. To date, the
Court has not issued a ruling on the Motion, nor has the Court issued a scheduling order in this matter. Defendants dispute the
allegations of the lawsuit and intend to vigorously defend against the claims. As this matter is still in the early stages, we cannot
predict the outcome of this lawsuit. This lawsuit does not assert any claims against the Company. However, subject to certain
limitations, we are obligated to indemnify our directors in connection with the lawsuit and any related litigation or settlements
amounts, which may be time-consuming, result in significant expense and divert the attention and resources of our
management. An unfavorable outcome may exceed coverage provided under our insurance policies, could have an adverse
effect on our financial condition and results of operations and could harm our reputation.

F-32

Table of Contents

Chipman under the caption In re FAT Brands Inc. Securities Litigation. On June 13, 2022, the Court appointed plaintiff Robert
Matthews as lead plaintiff and The Rosen Law Firm, P.A., as lead counsel in the consolidated action. Plaintiffs filed their
Consolidated Amended Complaint on June 27, 2022. On July 19, 2022, the parties entered into a stipulation to stay the
litigation so that they could engage in voluntary mediation. In August 2022, after mediation, the Company reached an
agreement in principle to settle this matter for a cash payment by the Company of $2.5 million and issuance of $0.5 million in
Class A common stock. The Stipulation of Settlement and other documents pertinent to the settlement, along with a motion for
preliminary approval thereof, were filed with the court on September 23, 2022. The Court granted the motion for preliminary
approval on November 8, 2022, and on January 31, 2023, plaintiffs moved for final approval of the settlement and certification
of the settlement class. The hearing on the motion for final approval is set for February 28, 2023, at 9:00 am PT. Upon final
approval by the court, the settlement will provide a full release of all claims by the settlement class members against all
defendants, including the Company and the named officers and directors, will expressly deny any liability, wrongdoing or
responsibility by any of the defendants, and will result in the dismissal of the litigation with prejudice.

Government Investigations

Stratford Holding LLC v. Foot Locker Retail Inc. (U.S. District Court for the Western District of Oklahoma, Case No. 5:12-
cv-772-HE)

In 2012 and 2013, two property owners in Oklahoma City, Oklahoma sued numerous parties, including Foot Locker Retail Inc.
and our subsidiary Fog Cutter Capital Group Inc. (now known as Fog Cutter Acquisition, LLC), for alleged environmental
contamination on their properties, stemming from dry cleaning operations on one of the properties. The property owners seek
damages in the range of $12.0 million to $22.0 million. From 2002 to 2008, a former Fog Cutter subsidiary managed a lease
portfolio, which included the subject property. Fog Cutter denies any liability, although it did not timely respond to one of the
property owners’ complaints and several of the defendants’ cross-complaints and thus is in default. The parties are currently
conducting discovery, and the matter is scheduled for trial for October 2023. The Company is unable to predict the ultimate
outcome of this matter, however, reserves have been recorded on the balance sheet relating to this litigation. There can be no
assurance that the defendants will be successful in defending against these actions.

SBN FCCG LLC v FCCGI (Los Angeles Superior Court, Case No. BS172606)

SBN FCCG LLC (“SBN”) filed a complaint against Fog Cutter Capital Group, Inc. (“FCCG”) in New York state court for an
indemnification claim (the “NY case”) stemming from an earlier lawsuit in Georgia regarding a certain lease portfolio formerly
managed by a former FCCG subsidiary. In February 2018, SBN obtained a final judgment in the NY case for a total of $0.7
million, which included $0.2 million in interest dating back to March 2012. SBN then obtained a sister state judgment in Los
Angeles Superior Court, Case No. BS172606 (the “California case”), which included the $0.7 million judgment from the NY
case, plus additional statutory interest and fees, for a total judgment of $0.7 million. In May 2018, SBN filed a cost memo,
requesting an additional $12,411 in interest to be added to the judgment in the California case, for a total of $0.7 million. In
May 2019, the parties agreed to settle the matter for $0.6 million, which required the immediate payment of $0.1 million, and
the balance to be paid in August 2019. FCCG wired $0.1 million to SBN in May 2019, but has not yet paid the remaining
balance of $0.5 million. The parties have not entered into a formal settlement agreement, and they have not yet discussed the
terms for the payment of the remaining balance.

F-33

Table of Contents

resources. As of December 25, 2022, the Company had accrued an aggregate of $5.1 million for the specific matters mentioned
above and claims and legal proceedings involving franchisees as of that date.

Operating Leases (See Also Note 9)

The Company's headquarters, including its principal administrative, sales and marketing, customer support, and research and
development operations, are located in Beverly Hills, California, comprising approximately 13,000 square feet of space,
pursuant to a lease that expires on September 29, 2025, as well as an additional approximately 3,000 square feet of space
pursuant to a lease amendment that expires on February 29, 2024.

Our subsidiary, GFG Management, LLC, leases offices in Atlanta, Georgia comprising approximately 9,000 square feet under a
lease expiring on March 1, 2023, and an approximately 16,000 square foot warehouse location under a lease expiring on
May 31, 2024.

Our subsidiary, GAC Supply, LLC, owns and operates an approximately 40,000 square foot manufacturing and production
facility in Atlanta, Georgia, which supplies our franchisees with cookie dough, pretzel dry mix and other ancillary products.

Our subsidiary, Twin Restaurant Holding, LLC, leases offices in Dallas, TX comprising approximately 8,300 square feet under
a lease expiring on April 30, 2025.

Our subsidiary, Fazoli's Holdings, LLC, leases offices located in Lexington, KY comprising approximately 19,200 square feet
under a lease expiring on April 30, 2027.

Our subsidiary, Native Grill & Wings Franchising, LLC, leases offices located in Chandler, AZ comprising 5,825 square feet
under a lease expiring on October 31, 2024.

In addition to the above locations, certain of our subsidiaries directly own and operate restaurant locations, substantially all of
which are located in leased premises. As of December 25, 2022, we owned and operated approximately 130 restaurant
locations.

The Company believes that its existing facilities are in good operating condition and adequate to meet current and foreseeable
needs. Additional information related to the Company’s operating leases are disclosed in Note 9.

NOTE 17. GEOGRAPHIC INFORMATION AND MAJOR FRANCHISEES

Revenues by geographic area are as follows (in millions):

United States

Other countries

Total revenues

Fiscal Year Ended
December 25, 2022
$

397.4 $

9.8

407.2 $

Fiscal Year Ended
December 26, 2021

108.6

10.3

118.9

Revenues are shown based on the geographic location of our licensee restaurants. All of our owned restaurant assets are located
in the United States.

During the fiscal years ended December 25, 2022 and December 26, 2021, no individual franchisee accounted for more than
10% of the Company's revenues.

NOTE 18. SUBSEQUENT EVENTS

In January 2023, the Company sold $40.0 million aggregate principal amount of secured debt as disclosed in Note 10.

F-34

Table of Contents

FAT BRANDS INC.

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

FOR THE FISCAL YEAR ENDED DECEMBER 25, 2022

Dollars In Millions

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

Deductions/
Recoveries/
Acquisitions

Balance at
End of
Period

Allowance for:

Trade notes and accounts receivable

4.4

20.7 $

— $

25.1

F-35

Table of Contents

ITEM 16. FORM 10-K SUMMARY

Not applicable.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly

caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FAT BRANDS INC.

By:

/s/ Andrew A. Wiederhorn
Andrew A. Wiederhorn

Chief Executive Officer

The undersigned directors and officers of FAT Brands Inc. do hereby constitute and appoint Andrew A. Wiederhorn
and Kenneth J. Kuick, and each of them, with full power of substitution and resubstitution, as their true and lawful attorneys
and agents, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute
any and all instruments for us and in our names in the capacities indicated below, which said attorney and agent, may deem
necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended and any
rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on
Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below, any and all amendments (including post-effective amendments) hereto, and we do hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the

following persons on behalf of the Registrant and in the capacities and on the dates indicated.

DATE

February 24, 2023

NAME AND TITLE

/s/ Andrew A. Wiederhorn
Andrew A. Wiederhorn

Chief Executive Officer and Director (Principal Executive
Officer)

/s/ Kenneth J. Kuick
Kenneth J. Kuick

Chief Financial Officer (Principal Financial and Accounting
Officer)

/s/ Edward Rensi
Edward Rensi, Director

/s/ Kenneth J. Anderson
Kenneth J. Anderson, Director

/s/ Lynne Collier
Lynne Collier, Director

/s/ Amy V. Forrestal
Amy V. Forrestal, Director

/s/ James Neuhauser
James Neuhauser, Executive Chairman

Table of Contents

EXHIBIT INDEX

Exhibit
Number
3.1

3.2

3.3

3.4

3.5

3.6

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

Description
Second Amended and Restated Certificate
of Incorporation, filed on August 16,
Certificate of Amendment to Second
Amended and Restated Certificate of
Incorporation, filed on August 24, 2021
Certificate of Increase of Series B
Cumulative Preferred Stock, filed on
September 15, 2021
Certificate of Increase of Series B
Cumulative Preferred Stock, filed on
October 28, 2021
Certificate of Amendment to Second
Amended and Restated Certificate of
Incorporation, filed with the Delaware
Secretary of State on December 20, 2022

Amended and Restated Bylaws, effective
as of February 21, 2023
Warrant Agency Agreement, dated July
16, 2020, between the Company and
VStock Transfer, LLC, to act as the
Warrant Agent (including the form of
Warrant to Purchase Common Stock,
dated June 7, 2018, issued to Trojan
Investments, LLC
Warrant to Purchase Common Stock,
dated June 27, 2018, issued to Fog Cutter
Capital Group, Inc.
Form of Warrants to Purchase Common
Stock, dated July 3, 2018, issued to sellers
of Hurricane AMT, LLC
Warrant to Purchase Common Stock,
dated July 3, 2018, issued to FB Lending,
Base Indenture, dated March 6, 2020, and
amended and restated as of April 26,
2021, by and between FAT Brands
Royalty I, LLC and UMB Bank, N.A., as
trustee and securities intermediary
Series 2021-1 Supplement to the Base
Indenture, dated April 26, 2021, by and
between FAT Brands Royalty I, LLC and
UMB Bank, N.A., as trustee
Series 2022-1 Supplement to the Base
Indenture, dated July 6, 2022, by and
between FAT Brands Royalty I, LLC and
UMB Bank, N.A., as trustee and
securities intermediary
Base Indenture, dated July 22, 2021, by
and between FAT Brands GFG Royalty I,
LLC, and UMB Bank, N.A., as trustee
and securities intermediary

Filed
Herewith

Incorporated By Reference to

Form
8-K

8-K

Exhibit
3.1

Filing Date
08/19/2021

3.1

08/30/2021

3.1

09/16/2021

3.1

10/28/2021

3.1

12/23/2022

8-K

10.1

07/16/2020

10-Q

8-K

4.1

08/15/2018

4.2

08/15/2018

4.1

07/10/2018

4.2

4.1

07/10/2018

04/26/2021

4.2

04/26/2021

4.2

10/25/2022

8-K

4.1

07/26/2021

Table of Contents

4.10

4.11

4.12

4.13

4.14

4.15

4.16

10.1

10.2*

10.3*

10.4

10.5

10.6

Series 2021-1 Supplement to the Base
Indenture, dated July 22, 2021, by and
between FAT Brands GFG Royalty I,
LLC, and UMB Bank, N.A., as trustee
and securities intermediary
Series 2022-1 Supplement to the Base
Indenture, dated December 15, 2022, by
and between FAT Brands GFG Royalty I,
LLC, and UMB Bank, N.A., as trustee
and securities intermediary
Base Indenture, dated October 1, 2021, by
and between FAT Brands Twin Peaks I,
LLC, and UMB Bank, N.A., as trustee
and securities intermediary

Series 2021-1 Supplement to the Base
Indenture, dated October 1, 2021, by and
between FAT Brands Twin Peaks I, LLC,
and UMB Bank, N.A., as trustee and
securities intermediary
Base Indenture, dated December 15,
2021, by and among FAT Brands Fazoli’s
Native I, LLC, and UMB Bank, N.A., as
trustee and securities intermediary
Series 2021-1 Supplement to Base
Indenture, dated December 15, 2021, by
and among FAT Brands Fazoli’s Native I,
LLC, and UMB Bank, N.A., as trustee
and securities intermediary
Description of Registrant’s Securities
Registered Pursuant to Section 12 of the
Securities Exchange Act of 1934
Form of Indemnification Agreement,
dated October 20, 2017, between the
Company and each director and executive
Amended and Restated 2017 Omnibus
Equity Incentive Plan

Amendment to 2017 Omnibus Equity
Incentive Plan

Amended and Restated Office Lease,
dated November 18, 2019, by and among
Duesenberg Investment Company, LLC,
Fatburger North America, Inc., Fog
Cutter Capital Group Inc., and Fatburger
Corporation
Management Agreement, dated March 6,
2020, and amended and restated as of
April 26, 2021, by and among FAT
Brands Inc., FAT Brands Royalty I, LLC,
each of the Securitization Entities named
therein, and UMB Bank, N.A., as Trustee
Management Agreement, dated July 22,
2021, by and among FAT Brands Inc.,
FAT Brands GFG Royalty I, LLC, each
of the Franchise Entities named therein,
and UMB Bank, N.A., as trustee

8-K

4.2

07/26/2021

8-K

4.2

01/31/2023

8-K

4.1

10/06/2021

8-K

4.2

10/06/2021

8-K

4.1

12/16/2021

4.2

12/16/2021

1-A

6.3

09/06/2017

Schedule 14A
(proxy statement)

Appendix A 09/09/2021

Appendix B 11/28/2022

10-K

10.12

04/28/2020

8-K

10.2

04/26/2021

8-K

10.2

07/26/2021

Table of Contents

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17*

10.18*

10.19

21.1
23.1

31.1

Management Agreement, dated October
1, 2021, by and among FAT Brands Inc.,
FAT Brands Twin Peaks I, LLC, each of
the Securitization Entities named therein,
and UMB Bank, N.A., as trustee
Management Agreement, dated December
15, 2021, by and among FAT Brands Inc.,
FAT Brands Fazoli’s Native I, LLC, each
of the Guarantors named therein and
UMB Bank, N.A., as trustee
Back-Up Management and Consulting
Agreement, dated December 15, 2021, by
and among FAT Brands Inc., FAT Brands
Fazoli’s Native I, LLC, each of the
Guarantors named therein, UMB Bank,
N.A., as trustee, and FTI Consulting, Inc.,
as back-up manager
Guarantee and Collateral Agreement,
dated April 26, 2021, by and among each
of the Securitization Entities named
therein, as Guarantors, in favor of UMB
Bank, N.A., as Trustee
Guarantee and Collateral Agreement,
dated July 22, 2021, by and among the
Guarantors named therein in favor of
UMB Bank, N.A., as trustee
Guarantee and Collateral Agreement,
dated October 1, 2021, by and among the
Guarantors named therein in favor of
UMB Bank, N.A., as trustee
Guarantee and Collateral Agreement,
dated December 15, 2021, by and among
the Guarantors named therein in favor of
UMB Bank, N.A., as trustee
Put/Call Agreement, dated July 22, 2021,
by and between FAT Brands Inc. and LS
Global Franchise L.P.
Put/Call Agreement, dated October 1,
2021, by and between FAT Brands Inc.
and Twin Peaks Holdings, LLC
Exchange Agreement, dated October 21,
2022, by and between FAT Brands Inc.
and Twin Peaks Holdings, LLC.
Employment Agreement, dated as of
November 18, 2021, by and between FAT
Brands Inc. and Andrew A. Wiederhorn
Letter Agreement, dated March 30, 2022,
by and between FAT Brands Inc. and
Kenneth J. Kuick
ATM Sales Agreement, dated November
14, 2022, by and between FAT Brands
Inc. and ThinkEquity LLC
Significant Subsidiaries
Consent of Independent Registered Public
Accounting Firm
Chief Executive Officer Certification
Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002

8-K

10.2

10/06/2021

8-K

10.2

12/16/2021

8-K

10.3

12/16/2021

8-K

10.1

04/26/2021

8-K

10.1

07/26/2021

8-K

10.1

10/06/2021

8-K

10.1

12/16/2021

8-K

10.3

07/26/2021

10.3

10/06/2021

10.1

10/25/2022

10.1

11/24/2021

10.1

04/05/2022

10.1

11/14/2022

X
X

Table of Contents

31.2

32.1

Chief Financial Officer Certification
Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certifications of the Chief Executive
Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema
Document

101.CAL

XBRL Taxonomy Extension Calculation
Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition
Linkbase Document

101.LAB

XBRL Taxonomy Extension Label
Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation
Linkbase Document

•

Indicates management contract or compensatory plan or arrangement.

X
(Furnished)

(Furnished)