When companies file for bankruptcy, it is often not because they are not cash-flow positive.
Bankruptcies can occur simply because a company cannot generate the cash needed to service its debt. In many cases, if you have taken that debt away, the business itself will actually be successful.
That’s the argument made by FAT Brands CEO Andy Wiederhorn on January 12 at the ICR conference in Orlando.
“We have been talking about restructuring this debt for 18 months to two years with our cardholders,” Wiederhorn said, according to Nation’s Restaurant News. “It was not a very constructive negotiation… We are 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 may take a few rounds.”
The company warned late last year that it might have to file for Chapter 11 bankruptcy after a major lender called its note. Wiederhorn’s comments made it clear that the situation is more complicated than it appears on the surface.
FAT Brands owns a number of big-name restaurant brands, including Johnny Rockets, Ponderosa Steakhouse, Great American Cookie, and the Twin Peaks restaurant concept, which it owns as a subsidiary.
The company shared details of its latest financial woes in a 10-K filing with the SEC.
“On November 25, 2025, FAT Brands Inc. received an acceleration notice (the “Acceleration Notice”) from UMB Bank, National Association, as trustee under the Base Indenture, dated July 10, 2023 by and between the company’s subsidiary, FB Resid Holdings I, LLC FB Resid and fixed Acceleration papers related to UMB Resid. Notice stated that UMB, pursuant to Section 9.2 of the FB Resid Indenture, acting at the direction of the Controlling Class Representative under the FB Resid Indenture, accelerates and declares the outstanding principal amount of the FB Resid Notes to be immediately due and payable,” the company wrote.
In practical terms, the filing said UMB delivered to Fat Brands a “Notice of Event of Default” with respect to the FB Resid Indenture, stating that “An Event of Default has occurred pursuant to Section 9.2 of the FB Resid Indenture. The aggregate principal amount outstanding under the FB Resid Notes is $158 million net. Note,” it shared.
Similar notices were sent to four other FAT Brands subsidiaries.
FAT Brands has a complicated financial structure.
“While a trustee declared $1.26 billion in debt of FAT Brands immediately due, Wiederhorn stated on Tuesday that the debt is not guaranteed by the parent company as a whole. Instead, the total responsibility is spread over five securitization trusts, involves multiple layers of investors, and is linked to individual brands reported NRN.
This means that you can, in theory, file for Chapter 11 bankruptcy for parts of the business, but not all of it.
Wiederhorn, who was indicted by the US government on charges of money laundering, but had those charges dismissed, explained during his remarks that “the debt restructuring process was complicated by the involvement of around 25 different investors or cardholders, who could not agree on a single solution,” according to NRN.
The company, he claimed, despite the $1.26 billion in debt, was “in good shape” with $60 million of 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 cardholders need to come to sooner rather than later.”
Fatburger: Signature burger chain and founding brand of FAT Brands
Johnny Rockets: A classic diner-style burger and shake restaurant
Elevation Burger: Organic/better-burger concept
Of Beans: Italian chain of quick service restaurants
Pizza Round Table: Pizza chain with traditional and delivery formats
Great American Cookies: Franchise of cookies and sweets
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, financial instability with high leverage, 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,” TipRank.
After covering retail, restaurants, and the stock market for 30 years, I’ve seen countless public firms wipe out shareholders’ equity with a Chapter 11 bankruptcy case.
More Failure:
“A company declares bankruptcy because it owes more than it can pay. To get rid of this, it works with banks and other creditors to create what can be considered a new company that does not give as much money. Almost always, that company is one that the current shareholders will not have shares in,” said Chris Stuttard, editor of BankruptcyData.com.
“Our experience is that you get very little return on equity after bankruptcy,” he added.
The CFO of FAT Brand tried to put a positive spin on the company’s third quarter results in its Q3 earnings release.
“We are implementing several strategic initiatives to strengthen our balance sheet. Our dividend pause remains in effect, preserving $35-$40 million in annual cash flow. We are actively negotiating a debt restructuring with our cardholders,” he shared.
Total revenue decreased 2.3% to $140.0 million compared to $143.4 million in the fiscal third quarter of 2024.
Systemwide sales were down 5.5%.
Sales in the same stores of the system decreased by 3.5%. Thirteen new stores were opened during 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 Preferred Source by clicking here.