UP TO 40 SMOKEY BONES COULD BECOME TWIN PEAKS UNDER FAT BRANDS’ RECENT OWNERSHIP.
FAT Brands has hinted at the possibility of acquiring a concept that could be easily converted into Twin Peaks for a while. Smokey Bones, a full-service barbecue chain with a lively sports bar atmosphere, appears to fit the bill. The company acquired the brand for $30 million in September and plans to turn as many as two-thirds of its existing locations into Twin Peaks.
The conversions will fast-track growth for the sports lodge concept amid a period of rising costs and longer construction timelines, says FAT Brands chairman and founder Andy Wiederhorn. It cost about $5.5 million to build a new Twin Peaks when the company purchased the brand two years ago. Now, that figure is closer to $7.5 million.
“The cost to convert a Smokey Bones is somewhere between $3 million to $3.5 million, so you’re saving yourself a couple million dollars by doing these second-generation conversions,” he says.
FAT Brands won’t be turning every Smokey Bones into a Twin Peaks. The barbecue chain has 61 units, all of which are company owned. Twenty stores were ruled out immediately because they’re already neighbors with Twin Peaks. The remaining 41 stores were identified as potential conversion opportunities, but the company estimates 30–40 will end up being flipped due to lease and permitting restrictions.
“Twenty of the locations are in franchise markets for Twin Peaks, where we expect business partners to take advantage of conversion opportunities,” he says. “At least ten of them will be corporate stores. For the others, it just depends on the geography.”
The chain already had 20 percent expansion locked in for the next five years before Smokey Bones entered the picture. That would put it at more than 200 units and approximately $1 billion in systemwide sales. The 30 to 40 converted locations add to a pipeline of more than 125 restaurants that have already been signed and paid for by franchisees.
“These conversions give us a runway for the next couple of years,” Wiederhorn says. “If we’re trying to open somewhere around 20 to 25 restaurants a year, then we’ve got the next two years of solid growth identified already.”
FAT Brands announced plans to take the chain public earlier this year, but Wiederhorn says a sale isn’t off the table, if it can find the right buyer. Either way, the company is preparing for a “massive liquidity event” that could pay down most of its debt after a busy few years of borrowing. The same is true for its cookie dough factory in Atlanta, where it’s working to utilize excess capacity and build up the value of that asset before selling it off.
“We hope to get it back to its peak of 120 units when Darden owned it,” Wiederhorn says. “It’s the second-highest AUV concept in our system, so we have significant upside to open more Smokey Bones, and some of our casual dining operators have already expressed interest in it.”
Twin Peaks has an AUV of over $6 million, with top stores in key states like Florida generating AUVs between $9 million and $12 million. Smokey Bones has an AUV of $3.4 million. Other full-service brands like Hurricane Grill & Wings, Buffalo’s Cafe, and Native Grill & Wings have AUVs in the $2.5 million range.
“I think there’s a tremendous opportunity here,” Wiederhorn says. “It’s a 100 percent company-owned system today, so we have maximum flexibility and control of what we do for Smokey Bones. We’re excited about the acquisition and taking the brand to the next level, but it’s also going to put rocket fuel on Twin Peaks.”