Dive Brief:

• Fat Brands has agreed to acquire Nestle Toll House Cafe by Chip from Crest Foods, an 85-unit franchised chain of stores that sells lunch, cookies, espresso and ice cream treats, the company said on Wednesday. Fat will rebrand the stores as Great American Cookies locations. Terms of the acquisition were not disclosed.
• Fat expects the acquisition will increase capacity at its Atlanta-based manufacturing facility, as well as increase its market share in the dessert category. The deal may also drive supply chain efficiencies and cost savings, and boost scale with additional manufacturing volume. 
• The franchised dessert chain is one in a long list of companies Fat has purchased over the last two years, including Johnny Rockets, Global Franchise Group, Twin Peaks and Native Grill & Wings.

Dive Insight:

During Fat's Q1 earnings call, CEO Andy Wiederhorn said the company would focus on “tuck-in acquisitions" and possibly slow outright acquisitions of companies outside of its existing portfolio. Wiederhorn said Fat would stay focused on absorbing the M&A it completed in 2021. 

“In 2022 we are focused heavily on our deep organic growth pipeline, but we saw great value in making this accretive acquisition,” Wiederhorn said in a statement about the Nestle Toll House Cafe deal. “These stores will fold seamlessly into our Quick-Service Division and provide us the opportunity to increase the capacity of our manufacturing business, a key growth objective.” 

Acquisitions have been a major part of Fat's growth strategy, which also includes organic and nontraditional growth. Fat's 2021 acquisitions led to a 13.5% increase in systemwide sales, Wiederhorn said on the company's Q1 earnings call. Round Table Pizza, which was part of Fat's Global Franchise Group acquisition, and Twin Peaks were the company’s two best performing acquired brands during the quarter. The restaurants increased comparable sales by 7% and 24.4%, respectively, Wiederhorn said.

“To date, acquisitions have been a strong growth vehicle for FAT Brands, and we anticipate the combination of our production and distribution facility and scale to increase the profitability of the franchisees that are joining us in this acquisition,” Wiederhorn said in the press release. 

The Nestle Toll House Cafe purchase is the first acquisition announced by Fat since a February SEC disclosure revealed Wiederhorn and his son, Thayer Wiederhorn, Fat's COO, were under federal investigation. At the time, the Los Angeles Times reported Andy Wiederhorn was under investigation for money laundering and misrepresentations to investors. To date, neither Wiederhorn has been charged in relation to the investigation. 

While acquisition activity has been relatively slow in 2022 compared to 2021, companies that have been active buyers in the past have continued to snap up brands in the last few months. Woworks added two fast casual companies to its portfolio, while BBQ Holdings completed an acquisition of a seven-unit fine dining Mexican restaurant. Dave & Buster’s made the largest acquisition so far with its proposed purchase of Main Event for $835 million.