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Fat Brands Inc. is buying burger chain Johnny Rockets Group Inc., expanding its stable of restaurant brands in a bet that casual-dining demand will bounce back from the coronavirus pandemic.
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The Beverly Hills, Calif.-based company said Thursday it would pay about $25 million for Johnny Rockets, widening its holdings to about 700 locations across nine chains when the deal is completed next month.
Restaurants across the country are operating with restrictions as a result of the pandemic. Many have added outdoor seating or expanded takeout operations to make up for sales in closed or greatly diminished dining rooms.
Adding to their challenges are higher labor costs and expenses for cleaning and protective equipment. Many independent restaurants are closing for good.
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Still, restaurant operators and food-service distributors say people are returning to restaurant fare after months cooking and sheltering at home. Fat Brands Chief Executive Andy Wiederhorn said the deal for Johnny Rockets reflects his expectation that customers will come back to casual-dining chains after the pandemic subsides. Already, he said, sales have jumped in some markets thanks to outdoor seating and delivery.
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“If working from home becomes a bigger component of daily life, that just adds to the demand to be able to socialize in some way,” he said in an interview.
He said Fat Brands would consider bringing more casual-dining brands into a portfolio that also includes Fatburger and Hurricane Grill & Wings. By buying regional chains, Fat Brands can gain scale and negotiate better deals for advertising and supplies, Mr. Wiederhorn added.
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“There is an opportunity now to take casual dining chains and get a consolidation of similar concepts,” he said.
He said Fat Brands expressed interest in Johnny Rockets when Sun Capital Partners Inc. started a sales process for the company in January. That process was put on hold when the pandemic took hold in the U.S., but deal talks reignited in the summer.
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Fat Brands completed a financing round of $40 million in March that gives it capital to pursue more deals. Since going public in 2017, the company has acquired Yalla Mediterranean and Ponderosa and Bonanza Steakhouses, among other chains.
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