FAT Brands, Home Of The Fatburger And Ponderosa, Initiated With Buy Rating At Lafferty

FAT Brands Inc FAT is a small-cap restaurant franchising company with four brands under its umbrella, including Fatburger, Buffalo's Cafe, Ponderosa Steakhouse and Bonanza Steakhouse. The company completed its initial public offering in late October and some of Wall Street analysts are now covering the name.

The Analyst

R.F. Lafferty Equity Research's James Anderson initiated coverage of Fat Brands with a Buy rating and $12.50 price target.

The Thesis

Fat Brands' business model consists of charging a franchise fee and ongoing royalty to operators instead of directly owning and operating restaurants, Anderson said in a note. This allows the company to grow revenue without the need to allocate upfront capital, manage real estate commitments, and assume operational risk associated with running a location.

Fat Brands can also grow its revenue base by acquiring new brands and can do so with "minimal added corporate overhead cost," the analyst said. Following this strategy would give the company a diversified brand of additional restaurants to offer franchisees who show success in their network.

The company has 181 Fatburger and Buffalo's Cafe locations across eight states and 18 countries. Coupled with 100 Ponderosa and Bonanza restaurants brings its total store count to nearly 300 and the company has agreements to double its current base over the next five years.