FAT Brands Inc. (FATBB): 5 FORCES Analysis [Nov-2025 Updated]

You're trying to make sense of FAT Brands Inc. (FATBB) in this late 2025 environment, and honestly, the near-term risks are flashing red: a $58.2 million net loss in Q3 2025, plus that looming $1.3 billion debt situation, all while same-store sales are slipping by 3.5% as customers push back on pricing. To cut through the noise and see exactly where the company's competitive footing lies-from the power of its franchisees to the pressure from cheaper grocery alternatives-we need a disciplined look at the industry structure. So, I've mapped out the five core forces that are truly shaping the battlefield for FAT Brands right now, detailing the exact leverage points you need to watch below.

FAT Brands Inc. (FATBB) - Porter's Five Forces: Bargaining power of suppliers

You're looking at the supplier landscape for FAT Brands Inc. as of late 2025, and the picture is mixed. On one hand, the sheer scale of the operation gives the company some leverage, but on the other, external economic pressures are definitely keeping supplier power elevated.

The bargaining power of suppliers is somewhat mitigated by the company's massive footprint. FAT Brands manages a portfolio of 18 distinct restaurant brands, operating or franchising approximately 2,300 units worldwide. This scale, especially for core items, should theoretically allow for better volume discounts, even if the centralized purchasing mechanism isn't explicitly detailed as a third-party function in the latest reports. Still, the cost of goods sold remains a significant line item.

Here's a quick look at the relevant cost structure from the third quarter of 2025:

FAT Brands actively works to control key input costs, which directly counters supplier leverage. The company owns a dough factory, which strengthens control over a critical input for several brands. Management is actively pursuing a strategy to grow factory production to utilize approximately 55% of excess capacity through expanded organic channels and third-party dough and mix manufacturing. This vertical integration is a clear move to lock in costs and reduce dependency on external dough suppliers.

However, the external environment still empowers suppliers. The Q3 2025 results noted that the decrease in cost of restaurant and factory revenues was partially offset by wage and food cost inflation. This means that despite operational efficiencies or lower sales volume, the underlying prices for raw materials were still rising, giving those commodity suppliers more leverage in negotiations. Honestly, high inflation and commodity price volatility are still major near-term risks here.

The diversity of the portfolio acts as a buffer. With 18 brands, FAT Brands Inc. is not overly reliant on the supply chain for any single concept. If one input category sees a sharp price increase, the company can potentially shift marketing focus or leverage other brands in the portfolio. This diversification reduces the switching cost impact from any one supplier group.

Key factors influencing supplier power include:

• The 2,300 unit scale provides some purchasing leverage.
• Ownership of the dough factory offers direct cost control.
• The portfolio spans 18 distinct brands.
• Cost of restaurant and factory revenues was $94.6 million in Q3 2025.
• Food cost inflation remains a noted headwind.

Finance: draft 13-week cash view by Friday.

FAT Brands Inc. (FATBB) - Porter's Five Forces: Bargaining power of customers

You're analyzing the customer side of the equation for FAT Brands Inc. (FATBB), and honestly, the power dynamic leans heavily toward the buyer, both the end-consumer and the franchisee. For the everyday diner, the sheer number of quick-service and casual dining choices available means they have plenty of alternatives if FAT Brands Inc.'s concepts get too expensive or the experience slips. This price sensitivity is definitely showing up in the numbers.

We saw clear customer pushback on pricing and value in the third quarter of 2025. Same-store sales (SSS) across the portfolio declined by 3.5% in Q3 2025. To be fair, the CEO noted this was a narrowing of the decline from 4.2% in the second quarter, suggesting some slowing of the negative trend, but a decline is a decline. This persistent negative SSS trend, which has now marked eight straight quarters of decline, suggests consumers are still being selective with their dining dollars.

Now, let's talk about the direct customers: the franchisees. Their bargaining power has spiked considerably because of the severe financial stress at the corporate level. Lenders recently declared the company's entire $1.3 billion debt load immediately due in late November 2025, pushing FAT Brands Inc. closer to a potential bankruptcy filing. When the parent company is scrambling, as evidenced by ending the most recent quarter with only $2 million in available cash and $12 million restricted, franchisees gain leverage in negotiations and disputes. We've already seen this friction surface, with franchisees of Round Table Pizza accusing FAT Brands Inc. of not sending them Pepsi rebates held in escrow, and Hurricane Grill and Wings franchisees alleging the company raided their marketing fund.

On the flip side, FAT Brands Inc.'s multi-brand portfolio offers a slight buffer against concentrated customer power. With 18 restaurant brands under its umbrella, the company can direct marketing and operational focus to the segments that are performing better. For example, while the overall SSS was negative, the casual dining segment actually posted same-store sales growth of 3.9% in Q3 2025. This variety means a consumer boycott of one brand doesn't necessarily sink the entire ship, though the corporate financial crisis affects all of them.

Digital channels are also changing the convenience dynamic for end-customers, which can be a double-edged sword. Increased convenience can boost loyalty, but it also makes price comparison easier. For the Great American Cookies brand, digital sales now represent a significant 25% of total revenue. This channel strength is something FAT Brands Inc. is trying to build upon, hoping to drive loyalty-based sales, which were up 40% for Great American Cookies.

Here's a quick look at the key customer-relevant metrics from the latest reporting period:

The power of the end-customer is amplified by the visible financial distress of FAT Brands Inc., while franchisee leverage is currently at a high point due to the $1.3 billion debt situation and the resulting operational strain.

You should track the success of the debt restructuring negotiations closely, as that will directly impact the leverage balance with franchisees. Finance: draft 13-week cash view by Friday.

FAT Brands Inc. (FATBB) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive rivalry section, and honestly, the landscape for FAT Brands Inc. is a pressure cooker. This isn't a niche market; you are fighting across the Quick Service Restaurant (QSR), fast-casual, and casual dining segments simultaneously. That means the sheer number of established players, from massive global entities to nimble local concepts, keeps the pressure on unit-level economics every single day.

The market share battle is evident in the top-line results. For the third quarter of 2025, system-wide sales for FAT Brands Inc. were down 5.5%, hitting \$567.5 million compared to the prior year period's \$600.7 million. This overall contraction, coupled with a portfolio-wide same-store sales (SSS) decline of 3.5% in Q3 2025, signals that consumers are either trading down, spending less, or choosing rivals. To be fair, that 3.5% decline was an improvement, narrowing from the 4.2% drop seen in the second quarter of 2025. Still, the pressure is real.

The financial strain from this rivalry directly impacts pricing power. When you look at the bottom line for Q3 2025, FAT Brands Inc. reported a GAAP net loss of \$58.2 million on total revenue of \$140.0 million. Furthermore, the GAAP EBITDA for the quarter turned negative at -\$7.7 million. Honestly, posting significant losses like this makes it incredibly difficult to engage in price wars or offer deep promotional discounts against competitors with stronger balance sheets.

Still, FAT Brands Inc. is actively pushing strategies to counteract this rivalry intensity. A key focus is co-branding, which aims to capture more consumer occasions under one roof and boost unit-level sales. For instance, the success of the Round Table Pizza-Fatburger dual location is cited as having more than doubled weekly sales. The company also launched a Round Table Pizza and Marble Slab Creamery pairing in Q1 2025. These efforts are critical for driving incremental revenue where the overall market is contracting.

The competitive set is formidable. While the prompt mentions giants like Yum! Brands and Restaurant Brands International, the data shows direct competition across FAT Brands Inc.'s portfolio of 18 restaurant concepts. The company, which franchises approximately 2,300 units globally, is competing against players like Buffalo Wild Wings (a Private Equity-Backed company), and other publicly traded peers like Texas Roadhouse, Inc. and Red Robin Gourmet Burgers, Inc.. The company's market capitalization as of November 7, 2025, was only \$26.9M, which puts it at a significant scale disadvantage against these established rivals.

Here's a quick look at how FAT Brands Inc.'s recent performance metrics reflect the competitive environment:

The rivalry forces strategic actions, such as the push for co-branding and the continued, albeit slowed, expansion. The company opened 13 new locations in Q3 2025, bringing the year-to-date total to 60. However, the initial 2025 new store target was reduced from over 100 to 80 new openings, partly due to franchisee delays, which itself is a sign of operational friction in a tough market.

The competitive intensity is further illustrated by the need for internal optimization and external capital:

• Securing a bondholder agreement to convert amortizing bonds to interest-only, saving \$30 to \$40 million annually in cash flow.
• Implementing over \$5 million in annual General & Administrative (G&A) reductions.
• General and Administrative expenses increased to \$42.7 million in Q3 2025 from \$34.5 million in the prior year quarter.
• Plans for a \$75 million to \$100 million equity raise at Twin Hospitality Group to pay down debt.
• The stock price as of November 7, 2025, was \$1.45.

The casual dining segment shows some resilience, with a 3.9% increase in same-store sales for that specific group. Still, the overall portfolio is fighting for every dollar, evidenced by the -3.5% SSS decline across all brands in the latest reported quarter.

FAT Brands Inc. (FATBB) - Porter's Five Forces: Threat of substitutes

You're looking at the competitive landscape for FAT Brands Inc. (FATBB) as of late 2025, and the threat of substitutes is definitely a major pressure point. When consumers have many options for a meal that isn't one of your 18 diverse concepts, your pricing and value proposition come under intense scrutiny. Honestly, the sheer volume of alternatives available right now is staggering.

The digital convenience layer has become a massive substitute, driven by third-party aggregators. The US online food delivery market is projected to hit $429.90 billion in revenue in 2025. Within that, DoorDash commands a 67% market share, while Uber Eats holds 23%. These platforms offer a seamless way for customers to bypass your brick-and-mortar locations entirely, substituting a Fatburger or a Round Table Pizza order with a competitor's offering delivered to their door.

We also see substitution pressure from the at-home meal preparation sector, which is evolving rapidly. While the Meal Kit Delivery Services industry in the US is estimated to generate $9.1 billion in revenue in 2025, this figure reflects a slowdown as consumers increasingly pivot to other convenient options.

Here's a quick look at the scale of these substitute markets compared to FAT Brands' recent top-line performance:

The health and wellness trend is another significant force pulling consumer dollars. The global plant-based food market is valued at $56.37 billion in 2025, with North America driving much of that growth. The US segment is projected to grow at a Compound Annual Growth Rate (CAGR) of 12.53% through 2032. This means more non-meat, non-traditional options are entering the consideration set for customers looking for lunch or dinner.

Furthermore, the sheer variety within FAT Brands Inc. itself is somewhat neutralized by the ease of switching to substitutes. You manage 18 distinct restaurant concepts, operating approximately 2,300 locations globally. However, a customer can just as easily switch from considering a Fatburger to ordering a prepared meal from a grocery store deli, which often presents a cheaper alternative when household budgets are tight.

Economic pressures are definitely amplifying this threat. You saw this play out in the Q3 2025 results, where system-wide sales dropped 5.5% and the net loss widened to $58.2 million. When consumers feel the pinch-and the $3.39 per diluted share loss in Q3 2025 suggests they are-they trade down. This environment makes cheaper, more accessible substitutes, like value-focused grocery prepared meals or even fast-food value menus outside the FAT Brands portfolio, much more appealing.

The substitution risk is high because:

• Digital delivery platforms capture a massive share of the convenience spend.
• Plant-based and health-focused options are growing at a double-digit CAGR.
• Grocery and convenience store prepared foods offer a lower-cost, immediate alternative.
• FAT Brands Inc.'s own Q3 2025 SSS decline of 3.5% signals customers are actively choosing substitutes.

If onboarding takes 14+ days, churn risk rises, and in this environment, customers are definitely looking for immediate value elsewhere.

FAT Brands Inc. (FATBB) - Porter's Five Forces: Threat of new entrants

You're assessing the barriers to entry in the multi-brand restaurant franchising space, and honestly, it's not a wide-open door for just anyone. For FAT Brands Inc., the threat of new entrants is generally low-to-moderate, primarily because starting a comparable platform requires serious capital outlay. Launching a single concept is one thing; building a multi-brand platform across 18 concepts, as FAT Brands Inc. currently does, demands significant upfront investment in technology, legal infrastructure, and initial corporate overhead. This high capital requirement acts as a solid initial moat.

The established brand recognition across FAT Brands Inc.'s portfolio creates a significant hurdle. New entrants don't just need a good burger or pizza concept; they need instant consumer trust. FAT Brands Inc. has a portfolio that includes concepts with decades of history, like Fatburger, founded in 1947, and Johnny Rockets, founded in 1986. A new player has to spend heavily just to get to parity in consumer awareness, let alone surpass it. This is especially true when you consider the scale they've already achieved.

Scale is where FAT Brands Inc. signals its defensive strength. They aren't just maintaining; they are aggressively expanding. The company has a robust development pipeline of approximately 900 committed new locations, which management expects will contribute $50-$60 million in incremental Adjusted EBITDA once fully ramped. Furthermore, they opened 60 new restaurants year-to-date in Q3 2025, keeping them on track for a goal of over 100 new openings for the full year. This pipeline signals deep franchisee confidence and operational momentum that new entrants would struggle to match quickly.

New concepts definitely face friction when trying to secure the best real estate. Prime locations near high-traffic areas are often locked up by established operators like FAT Brands Inc. Also, building a resilient global supply chain-one that can service ~2,300 units worldwide across diverse concepts-is a massive undertaking. A new entrant would have to negotiate national distribution agreements from a position of very low volume, leading to higher initial procurement costs and less favorable terms than what an established player commands.

However, you can't ignore the structural vulnerability inherent in the model itself. The asset-light franchising model, which FAT Brands Inc. is actively pursuing with the planned refranchising of 57 company-operated Fazoli's restaurants, is designed for rapid scalability, but that scalability can be turned against them. Well-funded private equity firms, which have deep pockets for acquisition and rapid rollout, can potentially replicate the structure-acquiring smaller chains or developing a new concept and aggressively franchising it using similar legal and operational templates. The speed at which FAT Brands Inc. itself has grown through acquisition is the blueprint for replication.

Here's a quick look at the scale metrics that define the current barrier:

The company's focus on co-branding, like the Round Table Pizza and Fatburger dual location that more than doubled weekly sales, shows an innovation lever that new entrants must also master to compete effectively.