When companies file for bankruptcy, it’s often not because they don’t have positive cash flow.
Bankruptcies can happen simply because a company can’t generate the cash it needs to service its debt. In many cases, if you took on that debt, the business itself would actually be successful.
That’s the argument, Andy Wiederhorn, CEO of FAT Brands, on Jan. 12 at the ICR conference in Orlando.
“We’ve been talking for 18 months to two years about restructuring this debt with our noteholders,” Wiederhorn said, according to Nation’s Restaurant News. “It wasn’t a very constructive negotiation. … We’re looking at ways to reduce the debt and make it practical. I wish I could say that this will go quickly and be resolved, but it could take a few rounds.”
The company warned late last year that it might have to file for Chapter 11 bankruptcy after a key creditor announced its rating. Wiederhorn’s comments made it clear that the situation is more complicated than it appears on the surface.
FAT Brands owns a number of well-known restaurant brands, including Johnny Rockets, Ponderosa Steakhouse, Great American Cookie and the Twin Peaks restaurant concept, which is owned by a subsidiary.
The company shared details of its latest financial trouble in a 10-K filing with the SEC.
“On November 25, 2025, FAT Brands Inc. received a Notice of Acceleration (the “Notice of Acceleration”) from UMB Bank, National Association, as trustee pursuant to the Master Indenture dated July 10, 2023 by and between the Company’s subsidiary, FB Resid Holdings I, LLC FB Resid and FB Resid’s fixed rate issuance, guaranteed by FB Resid. The notice stated that UMB, pursuant to Section 9.2 of the FB Resid Indenture, acting at the direction of the Controlling Class Representative pursuant to the FB Resid Indenture, accelerates and declares that the outstanding principal amount of the FB Resid Securities is immediately due and payable,” the company wrote.
In practical terms, the filing said UMB served Fat Brands with a “Notice of Default” regarding the FB Resid Agreement, stating that an “Event of Default has occurred pursuant to Section 9.2 of the FB Resid Agreement. Note,” it shared.
Similar notices were sent to four other subsidiaries of FAT Brands.
FAT Brands has a complicated financial structure.
“While an administrator stated FAT Brands’ $1.26 billion in debt, Wiederhorn said Tuesday that the debt is not guaranteed by the parent company as a whole. Instead, the total liability is spread across five securitization trusts, involves multiple layers of investors and is tied to individual brands reported by NRN.
That means they could theoretically file for Chapter 11 bankruptcy for some parts of the business, but not all of it.
Wiederhorn, who was indicted by the U.S. government on money laundering charges but had those charges dismissed, explained during his deposition that “the debt restructuring process was complicated by the involvement of approximately 25 different investors or noteholders who were unable to agree on a single solution,” according to NRN.
The company, he claimed, despite $1.26 billion in debt, was “in good shape” with $60 million in free cash flow.
“We just need the debt pile to be restructured to be affordable,” Wiederhorn said. “I think that’s a conclusion that our noteholders need to come to sooner rather than later.”
Fatburger: signature burger chain and founding brand of FAT Brands
Johnny Rockets: Classic style burger and shake restaurant
Elevation Burger: Organic/better-burger concept
Fazoli’s: Italian chain of quick service restaurants
Round Table Pizza: Pizza chain with traditional and delivery formats
Great American Biscuits: the franchise of cakes and sweets
Cream of marble tiles: Premium Hand Blended Ice Cream Franchise
Hot dog on a stick: the fast-casual hot dog and lemonade brand
Bagel maker: pretzel and snack brand (often collocated with other concepts)
Buffalo’s Cafe & Express: Wings and American Cafe concept
Hurricane Grill & Wings: A grill wing and chain
Native Grill & Wings: regional brand of wings and barbecue (added in 2021)
Twin Peaks: a sports bar/cabin, casual dining and a chain of bars
Smokey Bones Bar & Fire Grill: BBQ/Grill casual dining brand (added in 2023)
FAT Brands owns the Johnny Rockets burger chain.PV Productions/Shutterstock” loading=”lazy” height=”540″ width=”960″ class=”yf-lglytj loader”/>
FAT Brands owns the Johnny Rockets burger chain.PV Productions/Shutterstock
“FAT Brands has potential due to revenue growth and strategic initiatives such as the Twin Hospitality spin-off. However, highly leveraged financial instability, persistent losses and negative cash flows are significant concerns. The stock’s technical indicators show neutral momentum, and while valuation metrics such as dividend yield are attractive, the negative P/E ratio highlights the reported underlying risks.”
After covering retail, restaurants and the stock market for 30 years, I’ve seen countless public brands wipe out their equity with a Chapter 11 bankruptcy case.
More bankruptcy:
“A company files for bankruptcy because it owes more than it can pay. To get out of that, it works with banks and other creditors to create what can be considered a new company that doesn’t owe as much money. Almost always, that company is one that current shareholders won’t own stock in,” said Chris Stuttard, editor for BankruptcyData.com.
“Our experience is that you get very little return on equity after bankruptcy,” he added.
FAT Brand’s CFO tried to put a positive spin on the company’s third-quarter results in his Q3 earnings release.
“We are implementing several strategic initiatives to strengthen our balance sheet. Our dividend break remains in place, preserving $35-40 million in annual cash flow. We are actively negotiating a debt restructuring with our bondholders,” he said.
Total revenue fell 2.3% to $140.0 million, compared to $143.4 million in the fiscal third quarter of 2024.
Systemwide sales were down 5.5%.
System-wide same-store sales fell 3.5%. Thirteen new stores were opened in the third fiscal quarter of 2025.
Net loss was $58.2 million, or $3.39 per diluted share, compared to $44.8 million, or $2.74 per diluted share, in the fiscal third quarter of 2024.
Related: Forget Red Lobster, another seafood chain has closed 135 restaurants
This story was originally published by TheStreet on January 13, 2026, where it first appeared in the Restaurants section. Add TheStreet as a favorite source by clicking here.
