Surely, I’m not the only one who has needed or provided a life jacket in case of troubled waters. Ambition provides a sense of moral flexibility that even Simone Biles could appreciate. But driving over an iceberg, putting a hole in the Titanic, and then calling for a lifeboat may be the most selfish thing one can do to save their own ass. Especially when you saw the twin peaks on the horizon.

Prudent leadership is as rare as finding a DMV with good customer service. Talk about driving you crazy... But in the case of Andy Wiederhorn, founder of FAT Brands, the reality will not deviate from the norm.

FAT Brands announced its intention to spin off Twin Peaks through an IPO last year. At that time, the company had already disclosed a U.S. Securities and Exchange Commission investigation into Wiederhorn.

Now to be clear, I did not initially intend on writing this article and had no idea this was going on. But when the Chairman of a once 250-million-dollar company announced his recent purchase of Smokey Bones restaurant group as a contingency plan for his new IPO of Twin Peaks, I desperately needed to know more.

Financial Conception: The Acquisition Strategy Behind Twin Peaks and Smokey Bones

Andy mentioned the plan for the Twin Peaks and Smokey Bones IPO was to use unsuccessful Smokey Bones as a newer addition to FAT Brands’ portfolio, which currently includes 18 chains. Olive Garden owner Darden Restaurants created the barbecue chain in 1999 but later sold the brand. FAT Brands acquired it in September 2023, with the goal of converting more than half of its 61 corporate-owned restaurants into Twin Peaks locations.

“Our priority is to use the proceeds from any transaction to deleverage the balance sheet,” Wiederhorn said about the potential IPO on the company’s first-quarter conference call on May 1 as a rebranded opportunity for Twin Peaks expansion was a bit out of a comic book.

Now in this article above, the strategy of this purchase was through a term called "securitization". If careful like any professional jargon the intention can be hidden in the language. So, what is securitization?

Securitization is the financial alchemy of taking illiquid or non-tradable assets, pooling them together, and selling tradeable shares in that pool to investors. Broadly, securitization could be taking any assets, as with bitcoin or ether for crypto exchange-traded funds or properties and related assets for real estate investment trusts, and selling securities related to them.

However, the focus here is on its primary meaning for investors and regulators: when an issuer designs a marketable financial instrument by merging financial assets, normally mortgage loans and consumer or commercial debt.

Investors who buy these securities receive the principal and interest payments for the underlying assets.

In securitization, the company or the originator that holds the assets determines which assets to remove from its balance sheets. A bank might do this with mortgages and personal loans it no longer wants to service or raise capital for additional loans.

This gathered group of assets is now considered a reference portfolio. The originator then sells the portfolio to an issuer who creates tradable securities with a stake in the assets in the portfolio. Investors buy the new securities for a specific rate of return and effectively take the position of the lender.

What does this mean for FAT Brands?

Hiding the 'Bump'

According to the indictment, Wiederhorn began disguising distributions to himself in the form of shareholder loans approximately 30 years ago, when he served as CEO of another company, Wilshire Credit Corporation (WCC). After forgiving himself some $65 million in putative debts owed to WCC, Wiederhorn resolved a federal grand jury investigation into that and related conduct by pleading guilty in 2004 in the District of Oregon to the payment of illegal gratuities and filing a false federal tax return. FOG and its affiliates are successor corporate entities to WCC and its affiliates.

From at least 2006 through 2021, Wiederhorn was the subject of efforts by the IRS to collect personal income tax and trust fund taxes he owed personally and as a responsible party and guarantor for entities, including FOG, the indictment states. The IRS efforts included levies and liens on Wiederhorn’s accounts and assets due to outstanding taxes he owed. The IRS, beginning in 2016, assessed Wiederhorn penalties for FOG’s failure to pay trust fund taxes and failure to establish a payment plan. By March 2021, Wiederhorn’s unpaid personal income tax liability to the IRS totaled approximately $7,743,952, inclusive of statutory interest and penalties, according to the indictment.

Beginning no later than 2010 and continuing through early 2021, Wiederhorn allegedly caused employees of FAT and FOG to compensate him by distributing to him approximately $47 million for his personal use and benefit. Wiederhorn, Amon, Hershinger and others miscategorized these distributions as “shareholder loans” and failed to disclose as reportable compensation to the IRS, SEC and the broader investing public, the indictment alleges.

So, the acquisition of Smokey Bones was first a real estate play using them to rebrand into Twin Peaks. Second, another slush fund to cashout and avoid taxes. And third, a form of securitization to make the balance sheet of the Twin Peaks merger look more appealing than it is. And finally, the IPO of Twin Peaks was to be huge pay off to avoid creditors' lawsuits and the IRS. Because he would have the cash to return to the balance sheet unscathed.

Adoption? A New Future for Smokey Bones

But what about the baby? What about Smokey Bones? What does he expect to do with its 3,700 employees? It's nothing wrong with wanting to have a baby but to do so just to save the marriage is beyond deplorable. After all, the kid's life must be considered too.

So, let's consider saving the kid’s life! What can Smokey Bones do to survive horrible parenting? What most of us do when the leadership in the house falls short of the expectations. We seek an example outside the home. And here’s a perfect example to turn around a beloved brand.

Smokey Bones's annual revenue is $200.0M. Zippia's data science team found the following key financial metrics about Smokey Bones after extensive research and analysis.

• Smokey Bones peak revenue was $200.0M in 2023.

• Smokey Bones has 3,700 employees, and the revenue per employee ratio is $54,054.

Looking at these numbers, it seems Smokey Bones is doing ok. But let's look at a local competitor and let the numbers tell the story.

• Duffy's Sports Grill's estimated annual revenue is currently $217.8M per year.

• Duffy's Sports Grill's estimated revenue per employee is $245,000.

• Duffy's Sports Grill has 889 employees.

• Duffy's Sports Grill increased their employee count by 12% last year.

Duffy’s Sports Grill brings in more revenue than Smokey Bones with half the locations and 25% of the staff. And you know Duffy’s Secret? It has a robust rewards system that generates repeat customers monthly and raises the floor of revenue as its client base is the anchor to any new customer acquisition cost. Something I think Smokey Bones has paid close attention to.

So far, the Smokey Bones’ team is doing a great job under the circumstances surrounding its parent company and parent leadership. But I think I speak for many when I say maybe we should give the baby up for adoption. You never know what this baby can become. Steve Jobs, Simone Biles and Dave Thomas (founder of Wendy’s) all were adopted. Because much like the parents of those individuals, it’s clear the parents of Smokey Bones don’t want them and are willing to let it go malnourished. Executives of Smokey Bones, call social services. Or Call Colonial Scrip Partners, we would love to find you a new home.