For the Thirteen Weeks Ended March 29, 2020

The accompanying notes are an integral part of these consolidated financial statements.

FAT BRANDS INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(dollars in thousands)

Period from March 21, 2017 (inception) to September 24, 2017

For the Thirteen Weeks Ended March 28, 2021 and March 29, 2020

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - BASIS OF PRESENTATION1. ORGANIZATION AND ACCOUNTING POLICIESRELATIONSHIPS

Organization and Nature of Business

FAT Brands Inc. (the “Company”“Company or FAT”) was formed asis a Delaware corporation onleading multi-brand restaurant franchising company that develops, markets, and acquires primarily quick-service, fast casual and casual dining restaurant concepts around the world. Organized in March 21, 2017 as a wholly owned subsidiary of Fog Cutter Capital Group, Inc. (“FCCG”FCCG”). The, the Company was formed for the purpose of completing acompleted an initial public offering on October 20, 2017 and related transactions,issued additional shares of common stock representing 20 percent of its ownership. During the fourth quarter of 2020, the Company completed a transaction in which FCCG merged into a wholly owned subsidiary of FAT (the “Merger”), and to acquire and continue certain businesses previously conducted by subsidiariesFAT became the indirect parent company of FCCG. These planned transactions have occurred subsequent to the effective date

As of the accompanying financial statements, and as a result, the financial statements reflect thatMarch 28, 2021, the Company has engaged onlyowns and franchises nine restaurant brands through various wholly owned subsidiaries: Fatburger, Johnny Rockets, Buffalo’s Cafe, Buffalo’s Express, Hurricane Grill & Wings, Ponderosa Steakhouses, Bonanza Steakhouses, Yalla Mediterranean and Elevation Burger. Combined, these brands have approximately 700 locations, including units under construction, and more than 200 under development.

Each franchising subsidiary licenses the right to use its brand name and provides franchisees with operating procedures and methods of merchandising. Upon signing a franchise agreement, the franchisor is committed to provide training, some supervision and assistance, and access to operations manuals. As needed, the franchisor will also provide advice and written materials concerning techniques of managing and operating the restaurants.

With minor exceptions, the Company’s operations are comprised exclusively of franchising a growing portfolio of restaurant brands. This growth strategy is centered on expanding the footprint of existing brands and acquiring new brands through a centralized management organization which provides substantially all executive leadership, marketing, training, and corporate accounting services. As part of its ongoing franchising efforts, the Company will, from time to time, make opportunistic acquisitions of operating restaurants in organizationalorder to convert them to franchise locations. During the refranchising period, the Company may operate the restaurants and classifies the operational activities from its inception through September 24, 2017.as refranchising gains or losses and the assets and associated liabilities as held-for sale.

COVID-19

The accompanying interim financial statementsIn March 2020, the World Health Organization declared the outbreak of the Company are unaudited and have been prepared in conformity with the requirements of Regulation S-X promulgated under the Securities Exchange Act of 1934,a novel coronavirus (COVID-19) as amended (the “Exchange Act”), particularly Rule 10-01 thereof,a pandemic, which governs the presentation of interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted incontinues to spread throughout the United States and other countries. As a result, Company franchisees temporarily closed some retail locations, modified store operating hours, adopted a “to-go” only operating model, or a combination of Americathese actions. These actions reduced consumer traffic, all resulting in a negative impact to franchisee and Company revenues. While the disruption to our business from the COVID-19 pandemic is currently expected to be temporary, there is still a great deal of uncertainty around the severity and duration of the disruption. We may experience longer-term effects on our business and economic growth and changes in consumer demand in the U.S. and worldwide. The effects of COVID-19 may materially adversely affect our business, results of operations, liquidity and ability to service our existing debt, particularly if these effects continue in place for complete financial statements. a significant amount of time.

Liquidity

The accompanying interim financial statements should be readCompany recognized income from operations of $104,000 during the thirteen weeks ended March 28, 2021 compared to a loss from operations of $578,000 for the thirteen weeks ended March 29, 2020. The Company recognized a net loss of $2,432,000 during the thirteen weeks ended March 28, 2021 compared to a net loss of $2,370,000 during the thirteen weeks ended March 29, 2020. Net cash used in conjunction withoperations totaled $1,246,000 for the disclosures containedthirteen weeks ended March 28, 2021 compared to $3,371,000 for thirteen weeks ended March 29, 2020. As of March 28, 2021, the Company’s total liabilities exceeded total assets by $45,576,000 compared to $41,883,000 as of December 27, 2020. The change in the Company’s Offering Circular filed withfinancial position reflects operating improvements as the Securities and Exchange Commission on October 23, 2017 (the “Offering Circular”). There have been no changeseffects of COVID-19 began to stabilize offset by the assumption of certain liabilities related to the Company’s significant accounting policies as describedMerger in the Offering Circular.December 2020.

In the Company’s opinion,2020 Annual Report on Form 10-K (“2020 Form 10-K”), the Company disclosed that the combination of the operating performance during the twelve months ended December 27, 2020 and the Company’s financial position as of December 27, 2020 raised substantial doubt about the Company’s ability to continue as a going concern as assessed under the framework of FASB’s Accounting Standard Codification (“ASC”) 205 for the twelve months following the date of the issuance of the 2020 Form 10-K.

Subsequent to the reporting period ended March 28, 2021, on April 26, 2021, the Company completed the issuance and sale in a private offering (the “Offering”) of three tranches of fixed rate secured notes (see Note 21). Proceeds of the Offering were used to repay in full its 2020 Securitization Notes as well as fees and expenses related to the Offering, resulting in net proceeds to the Company of approximately $57 million (see Note 11). The Offering alleviated the substantial doubt about the Company’s ability to continue as a going concern that was disclosed in the 2020 Form 10-K.

The Company utilized a portion of the net proceeds from the Offering to repay a portion of indebtedness assumed as a result of the Merger (see Notes 11 and 21).

In addition to the liquidity provided by the successful completion of the Offering, the Company has experienced significant improvement in its operating performance subsequent to December 27, 2020, as COVID-19 vaccinations have become more prevalent in the United States and federal, state and local restrictions have eased in many of the markets where its franchisees operate. As a result, the Company believes that its liquidity position will be sufficient for the twelve months of operations following the issuance of this Form 10-Q.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations – The Company operates on a 52-week calendar and its fiscal year ends on the last Sunday of the calendar year. Consistent with the industry practice, the Company measures its stores’ performance based upon 7-day work weeks. Using the 52-week cycle ensures consistent weekly reporting for operations and ensures that each week has the same days, since certain days are more profitable than others. The use of this fiscal year means a 53^rd week is added to the fiscal year every 5 or 6 years. In a 52-week year, all adjustments,four quarters are comprised of normal recurring accruals necessary13 weeks. In a 53-week year, one extra week is added to the fourth quarter. The first reporting period for each of fiscal years 2020 and 2021 were 13 weeks.

Principles of consolidation – The accompanying consolidated financial statements include the fair presentationaccounts of the interim financial statements,Company and its subsidiaries. The operations of Johnny Rockets have been included since its acquisition on September 21, 2020 and the operations of FCCG have been included since the merger on December 24, 2020. Intercompany accounts have been eliminated in the accompanying financial statements. Operating results for the period from the Company’s inception through September 24, 2017 are not indicative of the results that may be expected for the remainder of the period ending December 31, 2017.consolidation.

Use of estimates in the preparation of the consolidated financial statements – The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuresdisclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the determination of fair values of intangibles for which there is no active market, the allocation of basis between assets acquired, sold or retained, valuation allowances for notes and accounts receivable, and deferred tax assets. Estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

At September 24, 2017, certain Company officers and directors had indirect majority voting control of the Company.

NOTE 2 - DEFERRED OFFERING COSTSFinancial statement reclassification – Certain account balances from prior periods have been reclassified in these consolidated financial statements to conform to current period classifications including measurement period adjustments to the preliminary purchase price allocations relating to the acquisition of Johnny Rockets and the Merger in accordance with ASU 2015-16. During the first quarter of 2021, adjustments were made to provisional amounts reclassifying $1,203,000 between goodwill and additional paid in capital on the consolidated balance sheet. These adjustments did not impact the Company’s consolidated statement of operations during the current period or during prior periods.

During the period from inception through September 24, 2017,Credit and Depository Risks – Financial instruments that potentially subject the Company incurred coststo concentrations of credit risk consist principally of cash and accounts receivable. Management reviews each of its franchisee’s financial condition prior to entry into a franchise or other agreement, as well as periodically through the term of the agreement, and believes that it has adequately provided for exposures to potential credit losses. As of March 28, 2021 and December 27, 2020, accounts receivable, net of allowance for doubtful accounts, totaled $4,466,000 and $4,208,000, with no franchisee representing more than 10% of that amount at either date.

The Company maintains cash deposits in connection with its organizationnational financial institutions. From time to time the balances for these accounts exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insured amount. Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account. As of March 28, 2021 and initial public offeringDecember 27, 2020, the Company had uninsured deposits in the amount of $232,000. Of this$3,931,238 and $6,047,299, respectively.

Restricted Cash – The Company has restricted cash consisting of funds required to be held in trust in connection with the Company’s securitized debt. The current portion of restricted cash as of March 28, 2021 and December 27, 2020 consisted of $3,353,000 and $2,867,000, respectively. Non-current restricted cash of $400,000 as of March 28, 2021 and December 27, 2020, represents interest reserves required to be set aside for the duration of the securitized debt.

Accounts receivable – Accounts receivable are recorded at the invoiced amount $8,000 was paymentand are stated net of an allowance for internet rights todoubtful accounts. The allowance for doubtful accounts is the trade name. The funds for these expenditures were provided by an advance from FCCGCompany’s best estimate of $201,000 and accounts payable in the amount of $31,000.probable credit losses in the existing accounts receivable. The deferred offering costs will be nettedallowance is based on historical collection data and current franchisee information. Account balances are charged off against the proceedsallowance after all means of the initial public offeringcollection have been exhausted and the intercompany advance will be repaid at that time.

NOTE 3 - SUBSEQUENT EVENTSpotential for recovery is considered remote. As of March 28, 2021 and December 27, 2020, accounts receivable was stated net of an allowance for doubtful accounts of $762,000 and $739,000, respectively.

IssuanceAssets classified as held for sale – Assets are classified as held for sale when the Company commits to a plan to sell the asset, the asset is available for immediate sale in its present condition and an active program to locate a buyer at a reasonable price has been initiated. The sale of Common Stockthese assets is generally expected to be completed within one year. The combined assets are valued at the lower of their carrying amount or fair value, net of costs to sell and included as current assets on the Company’s consolidated balance sheet. Assets classified as held for sale are not depreciated. However, interest attributable to the liabilities associated with assets classified as held for sale and other related expenses are recorded as expenses in the Company’s consolidated statement of operations.

On October 19, 2017,Goodwill and other intangible assets – Intangible assets are stated at the Company conducted a forward splitestimated fair value at the date of its common stock, par value $0.0001,acquisition and include goodwill, trademarks, and franchise agreements. Goodwill and other intangible assets with indefinite lives, such as trademarks, are not amortized but are reviewed for impairment annually or more frequently if indicators arise. All other intangible assets are amortized over their estimated weighted average useful lives, which increased shares held by FCCGrange from nine to 8,000,000 shares. On October 20, 2017,twenty-five years. Management assesses potential impairments to intangible assets at least annually, or when there is evidence that events or changes in circumstances indicate that the Company completed its initial public offering and issued 2,000,000 additional shares of its common stock at an offering price of $12.00 per share, for an aggregatecarrying amount of $24,000,000 (the “Offering”). The net proceedsan asset may not be recovered. Judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of the Offering were approximately $21,200,000 after deducting the selling agent fees of approximately $1,780,800acquired businesses, market conditions and Offering expenses of approximately $1,019,200. The shares associated with the Offering constitute 20 percent of the currently outstanding common stock of the Company. The common stock of the Company trades on the Nasdaq Capital Market under the symbol “FAT.”other factors.

Fair Value Measurements - The Reorganization TransactionsCompany determines the fair market values of its financial assets and liabilities, as well as non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis, based on the fair value hierarchy established in U.S. GAAP. As necessary, the Company measures its financial assets and liabilities using inputs from the following three levels of the fair value hierarchy:

In

Other than a derivative liability that existed during part of 2020 and the contingent consideration payable liabilities incurred in connection with the closingacquisition of certain of our brands, the Company does not have a material amount of financial assets or liabilities that are required to be measured at fair value on a recurring basis under U.S. GAAP (See Note 12). None of the Offering, the Company completed the following transactions, whichCompany’s non-financial assets or non-financial liabilities are referredrequired to collectively as the “Reorganization Transactions”:be measured at fair value on a recurring basis.

Effective October 20, 2017, FCCG contributed two of its operating subsidiaries, Fatburger North America Inc. (“Fatburger”) and Buffalo’s Franchise Concepts Inc., (“Buffalo’s”) to the Company in exchange for an unsecured promissory note with a principal balance of $30,000,000, bearing interest at a rate of 10.0% per annum, and maturing in five years (the “Related Party Debt”). The contribution was consummated pursuant to a Contribution Agreement between the Company and FCCG. Approximately $9,500,000 of the net proceeds from the Offering was used to repay a portion of Related Party Debt owed to FCCG.

FCCG agreed in March 2017 to acquire Homestyle Dining LLC from Metromedia Company and its affiliate (“Metromedia”) pursuant to a Membership Interest Purchase Agreement, as amended, which provided for a cash purchase price of $10,550,000 to be paid at closing. Effective October 20, 2017, the Company provided approximately $10,550,000 of the net proceeds from the Offering to FCCG to consummate the acquisition of Homestyle Dining LLC. In exchange, the Company received full ownership in the Homestyle Dining operating subsidiaries: Ponderosa Franchising Company, Bonanza Restaurant Company, Ponderosa International Development, Inc. and Puerto Rico Ponderosa, Inc. (collectively, “Ponderosa”). These subsidiaries conduct the worldwide franchising of the Ponderosa Steakhouse Restaurants and the Bonanza Steakhouse Restaurants.

Income taxes – Effective October 20, 2017, the Company entered into a Tax Sharing Agreement with FCCG that provides that FCCG will,would, to the extent permitted by applicable law, file consolidated federal, California and Oregon (and possibly other jurisdictions where revenue is generated, at FCCG’s election) income tax returns with the Company and its subsidiaries. The Company willwould pay FCCG the amount that its tax liability would have been had it filed a separate return. ToAs such, prior to the extentMerger, the Company accounted for income taxes as if it filed separately from FCCG. The Tax Sharing Agreement was cancelled in connection with the Merger.

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.

A two-step approach is utilized to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon the ultimate settlement.

Franchise Fees: The franchise arrangement is documented in the form of a franchise agreement. The franchise arrangement requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which includes the transfer of the franchise license. The services provided by the Company are highly interrelated with the franchise license and are considered a single performance obligation. Franchise fee revenue from the sale of individual franchises is recognized over the term of the individual franchise agreement on a straight-line basis. Unamortized non-refundable deposits collected in relation to the sale of franchises are recorded as deferred franchise fees.

The franchise fee may be adjusted at management’s discretion or in a situation involving store transfers between franchisees. Deposits are non-refundable upon acceptance of the franchise application. In the event a franchisee does not comply with their development timeline for opening franchise stores, the franchise rights may be terminated, at which point the franchise fee revenue is recognized for non-refundable deposits.

Royalties – In addition to franchise fee revenue, the Company collects a royalty calculated as a percentage of net sales from our franchisees. Royalties range from 0.75% to 6% and are recognized as revenue when the related sales are made by the franchisees. Royalties collected in advance of sales are classified as deferred income until earned.

Advertising – The Company requires advertising payments from franchisees based on a percent of net sales. The Company also receives, from time to time, payments from vendors that are to be used for advertising. Advertising funds collected are required to be spent for specific advertising purposes. Advertising revenue and associated expense is recorded on the Company’s consolidated statement of operations. Assets and liabilities associated with the related advertising fees are reflected in the Company’s consolidated balance sheet.

Share-based compensation – The Company has a stock option plan which provides for options to purchase shares of the Company’s common stock. Options issued under the plan may have a variety of terms as determined by the Board of Directors including the option term, the exercise price and the vesting period. Options granted to employees and directors are valued at the date of grant and recognized as an expense over the vesting period in which the options are earned. Cancellations or forfeitures are accounted for as they occur. Stock options issued to non-employees as compensation for services are accounted for based upon the estimated fair value of the stock option. The Company recognizes this expense over the period in which the services are provided. Management utilizes the Black-Scholes option-pricing model to determine the fair value of the stock options issued by the Company. See Note 15 for more details on the Company’s share-based compensation.

Earnings per share – The Company reports basic earnings or loss per share in accordance with FASB ASC 260, “Earnings Per Share”. Basic earnings per share is computed using the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is computed using the weighted average number of common shares outstanding plus the effect of dilutive securities during the reporting period. Any potentially dilutive securities that have an anti-dilutive impact on the per share calculation are excluded. During periods in which the Company reports a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of the inclusion of all potentially dilutive securities would be anti-dilutive. As of March 28, 2021 and March 29, 2020, there were no potentially dilutive securities considered in the calculation of diluted loss per common share due to losses for each period.

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments, and later amended the ASU in 2019, as described below. This guidance replaces the current incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an entity is required payment exceedsto recognize an allowance that reflects its current estimate of credit losses expected to be incurred over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts.

In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). The purpose of this amendment is to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities. This granted certain classes of companies, including Smaller Reporting Companies (“SRCs”), additional time to implement major FASB standards, including ASU 2016-13. Larger public companies will have an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities are permitted to defer adoption of ASU 2016-13, and its related amendments, until the earlier of fiscal periods beginning after December 15, 2022. Under the current SEC definitions, the Company meets the definition of an SRC and is adopting the deferral period for ASU 2016-13. The guidance requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements but does not expect that the adoption of this standard will have a material impact on its consolidated financial statements.

NOTE 3. MERGERS AND ACQUISITIONS

Merger with Fog Cutter Capital Group Inc.

On December 10, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with FCCG, Fog Cutter Acquisition, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub”), and Fog Cutter Holdings, LLC, a Delaware limited liability company (“Holdings”).

Pursuant to the Merger Agreement, FCCG agreed to merge with and into Merger Sub, with Merger Sub surviving as a wholly owned subsidiary of the Company (the “Merger”). Upon closing of the Merger, the former stockholders of FCCG became direct stockholders of the Company holding, in the aggregate, 9,679,288 shares of the Company’s common stock (the same number of shares of common stock held by FCCG immediately prior to the Merger) and will receive certain limited registration rights with respect to the shares received in the Merger. As a result of the Merger, FCCG’s wholly owned subsidiaries, Homestyle Dining, LLC, Fog Cap Development LLC, Fog Cap Acceptance Inc. and BC Canyon LLC, became indirect wholly owned subsidiaries of the Company (the “Merged Entities”).

Under the Merger Agreement, Holdings has agreed to indemnify the Company for breaches of FCCG’s representations and warranties, covenants and certain other matters specified in the Merger Agreement, subject to certain exceptions and qualifications. Holdings has also agreed to hold a minimum fair market value of shares of Common Stock of the Company to ensure that it has assets available to satisfy such indemnification obligations if necessary.

In connection with the Merger, the Company declared a special stock dividend (the “Special Dividend”) payable on the record date only to holders of our Common Stock, other than FCCG, consisting of 0.2319998077 shares of the Company’s 8.25% Series B Cumulative Preferred Stock (liquidation preference $25.00 per share) (the “Series B Preferred Stock”) for each outstanding share of Common Stock held by such stockholders, with the actual combined income tax liability (which may occur,value of any fractional shares of Series B Preferred Stock being paid in cash. FCCG did not receive any portion of the Special Dividend, which had a record date of December 21, 2020 and payment date of December 23, 2020. The Special Dividend was expressly conditioned upon the satisfaction or valid waiver of the conditions to closing of the Merger set forth in the Merger Agreement. The Special Dividend was intended to reflect consideration for example, duethe potential financial impact of the Merger on the common stockholders other than FCCG, including the assumption of certain debts and obligations of FCCG by the Company by virtue of the Merger.

The Company undertook the Merger primarily to simplify its corporate structure and eliminate limitations that restrict the applicationCompany’s ability to issue additional Common Stock for acquisitions and capital raising. FCCG holds a substantial amount of FCCG’s net operating loss carryforwards)carryforwards (“NOLs”), which could only be made available to the Company as long as FCCG owned at least 80% of FAT Brands. With the Merger, the NOLs will be held directly by the Company, which will then have greater flexibility in managing its capital structure. In addition, after the Merger the Company will no longer be permitted,required to compensate FCCG for utilizing its NOLs under the Tax Sharing Agreement previously in effect between the Company and FCCG.

The Merger is treated under ASC 805-50-30-6 which indicates that when there is a transfer of assets or exchange of shares between entities under common control, the receiving entity shall recognize those assets and liabilities at their net carrying amounts at the date of transfer. As such, on the date of the Merger, all of the transferred assets and assumed liabilities of FCCG and the Merged Entities are recorded on the Company’s books at FCCG’s book value. The consolidation of the operations of FCCG and the Merged Entities with the Company is presented on a prospective basis from the date of transfer as there has not been a change in the discretionreporting entity.

The Merger resulted in the following assets and liabilities being included in the consolidated financial statements of the Company as of the Merger date (in thousands):

A net loss of $432,000 attributed to the Merged Entities is included in the accompanying consolidated statements of operations for the thirteen weeks ended March 28, 2021. There were no revenues attributed to the Merged Entities during the period.

Proforma Information

The table below presents the proforma revenue and net loss of the Company for the thirteen weeks ended March 29, 2020, assuming the Merger had occurred on December 30, 2019 (the beginning of the Company’s 2020 fiscal year), pursuant to ASC 805-10-50 (in thousands). This proforma information does not purport to represent what the actual results of operations of the Company would have been had the Merger occurred on that date, nor does it purport to predict the results of operations for future periods.

The proforma information above reflects the combination of the Company’s results as disclosed in the accompanying consolidated statements of operations for the thirteen weeks ended March 29, 2020, together with the results of the Merged Entities for the thirteen weeks ended March 29, 2020, with the following adjustment:

Acquisition of Johnny Rockets

On September 21, 2020, the Company completed the acquisition of Johnny Rockets Holding Co., a Delaware corporation (“Johnny Rockets”) for a cash purchase price of approximately $24.7 million. The transaction was funded with proceeds from an increase in the Company’s securitization facility (See Note 11).

Immediately following the closing of the acquisition of Johnny Rockets, the Company contributed the franchising subsidiaries of Johnny Rockets to FAT Royalty I, LLC pursuant to a Contribution Agreement. (See Note 11).

The preliminary assessment of the fair value of the net assets and liabilities acquired by the Company through the acquisition of Johnny Rockets was estimated at $24,730,000. This preliminary assessment of fair value of the net assets and liabilities as well as the final purchase price were estimated at closing and are subject to change. Under Sections 382 and 383 of the Internal Revenue Code, if an ownership change occurs with respect to a “loss corporation”, as defined, there are annual limitations on the amount of the NOLs and certain other deductions and credits which are available to the Company (the “Section 382 and 383 Limitations”). The portion of the NOLs and other tax benefits accumulated by Johnny Rockets prior to the Acquisition are subject to these Section 382 and 382 Limitations. Analysis of these Section 382 and 383 Limitations are ongoing. The preliminary allocation of the consideration to the preliminary valuation of net tangible and intangible assets acquired is presented in the table below (in thousands):

Revenues of $2,257,000 and net loss of $26,000 attributed to Johnny Rockets are included in the accompanying consolidated statements of operations for the thirteen weeks ended March 28, 2021. The net loss attributed to Johnny Rockets includes allocations of corporate overhead in accordance with the Company’s allocation methodology.

The values of goodwill and other intangible assets were initially considered as of the acquisition date. Descriptions of the Company’s subsequent assessments of impairment of the goodwill and other intangible assets acquired in this acquisition related to COVID-19 are in Note 6.

Proforma Information

The table below presents the proforma revenue and net (loss) income of the Company for the thirteen weeks ended March 29, 2020, assuming the acquisition of Johnny Rockets had occurred on December 30, 2019 (the beginning of the Company’s 2020 fiscal year), pursuant to ASC 805-10-50 (in thousands). This proforma information does not purport to represent what the actual results of operations of the Company would have been had the acquisition of Johnny Rockets occurred on this date nor does it purport to predict the results of operations for future periods.

The proforma information above reflects the combination of the Company’s unaudited results as disclosed in the accompanying consolidated statements of operations for the thirteen weeks March 29, 2020, together with the unaudited results of Johnny Rockets for the thirteen weeks ended March 29, 2020, with the following adjustments:

nOTE 4. REFRANCHISING

As part of its ongoing franchising efforts, the Company may, from time to time, make opportunistic acquisitions of operating restaurants in order to convert them to franchise locations or acquire existing franchise locations to resell to another franchisee across all of its brands.

The Company meets all of the criteria requiring that acquired assets used in the operation of certain restaurants be classified as held for sale. As a result, the following assets have been classified as held for sale on the accompanying consolidated balance sheets as of March 28, 2021 and December 27, 2020 (in thousands):

Operating lease liabilities related to the assets classified as held for sale in the amount of $9,656,000 and $9,892,000, have been classified as current liabilities on the accompanying consolidated balance sheet as of March 28, 2021 and December 27, 2020, respectively.

Restaurant operating costs, net of food sales, totaled $427,000 and $539,000 for the thirteen weeks ended March 28, 2021 and March 29, 2020, respectively.

Note 5. NOTES RECEIVABLE

The Elevation Buyer Note was funded in connection with the purchase of Elevation Burger in 2019. The Company loaned $2,300,000 in cash to the Seller under a subordinated promissory note bearing interest at 6.0% per year and maturing in August 2026. The balance owing to the Company under the Elevation Buyer Note may be used by the Company to offset amounts owing to the Seller under the Elevation Note under certain circumstances (See Note 11). As part of the total consideration for the Elevation acquisition, the Elevation Buyer Note was recorded at a carrying value of $1,903,000, which was net of a committeediscount of $397,000. As of March 28, 2021 and December 27, 2020, the balance of the Elevation Note was $1,850,000 and $1,830,000, respectively, which was net of discounts of $247,000 and $267,000, respectively. During the thirteen weeks ended March 28, 2021 and March 29, 2020, the Company recognized $52,000 and $53,000 in interest income on the Elevation Buyer Note, respectively.

Note 6. GOODWILL

Goodwill consists of the following (in thousands):

The Company reviewed the carrying value of its boardgoodwill as of directors comprised solelyDecember 27, 2020 and recognized impairment charges as deemed necessary at that time. A subsequent review of directorsthe carrying value as of March 28, 2021 did not affiliated with or interestedresult in FCCG, to pay such excess to FCCG by issuing an equivalent amountadditional impairment charges for the thirteen weeks ended as of its common stock in lieuthat date. There were also no impairment charges during the thirteen weeks ended March 29, 2020.

Note 7. OTHER INTANGIBLE ASSETS

Other intangible assets consist of cash, valued at the fair market valuetrademarks and franchise agreements that were classified as identifiable intangible assets at the time of the payment. In addition, anbrands’ acquisition by the Company or by FCCG prior to FCCG’s contribution of the brands to the Company at the time of the initial public offering (in thousands):

The Company reviewed the carrying value of its other intangible assets as of December 27, 2020 and recognized impairment charges as deemed necessary at that time. A subsequent review of the carrying value as of March 28, 2021 did not result in additional impairment charges for the thirteen weeks ended as of that date. There were also no impairment charges during the thirteen weeks ended March 29, 2020.

The expected future amortization of the Company’s franchise agreements is as follows (in thousands):

Note 8. DEFERRED INCOME

Deferred income is as follows (in thousands):

Note 9. Income Taxes

Effective October 20, 2017, the Company entered into a Tax Sharing Agreement with FCCG that provided that FCCG would, to the extent permitted by applicable law, file consolidated federal, California and Oregon (and possibly other jurisdictions where revenue is generated, at FCCG’s election) income tax returns with the Company and its subsidiaries. Under the Tax Sharing Agreement, the Company would pay FCCG the amount that its current tax liability would have been had it filed a separate return. An inter-company receivable of approximately $13,175,000 due from FCCG to Fatburger and Buffalo’s will beits affiliates was applied first to reduce such excess income tax payment obligationobligations to FCCG under the Tax Sharing Agreement. The Tax Sharing Agreement was terminated in connection with the Merger during the fourth quarter of 2020.

On October 20, 2017,Deferred taxes reflect the Company granted stock options to purchase 367,500 shares undernet effect of temporary differences between the 2017 Omnibus Equity Incentive Plan to directorscarrying amount of assets and employees, each with an exercise price equal to $12.00 per shareliabilities for financial reporting purposes and subject tothe amounts used for calculating taxes payable. Deferred tax assets are reduced by a three-year vesting requirement.

Agreement to Purchase Hurricane Grill & Wings

On November 14, 2017,valuation allowance if, based on the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) to purchaseweight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the right, titledeferred tax assets will not be realized. As of March 28, 2021 and interestDecember 27, 2020, the Company recorded a valuation allowance against its deferred tax assets in the amount of $678,000 and $513,000, respectively, as it determined that these amounts would not likely be realized.

Income tax provision related to continuing operations differ from the membership interestsamounts computed by applying the statutory income tax rate to pretax income as follows (in thousands):

As of Hurricane AMT, LLC, a Florida limited liability corporation (“Hurricane”)March 28, 2021, the Company’s and its subsidiaries’ annual tax filings for a purchase price of $12,500,000. Hurricanethe prior three years are open for audit by Federal and generally, for the prior four years for state tax agencies, based on the filing date for each return. The Company is the franchisorbeneficiary of Hurricane Grill & Wings and Hurricane BTW Restaurants. The original Hurricane Grill & Wings opened in Fort Pierce, Florida in 1995indemnification agreements from the prior owners of the subsidiaries for tax liabilities related to periods prior to its ownership of the subsidiaries. Management evaluated the Company’s overall tax positions and has expanded to over 60 restaurant locations in Alabama, Arizona, Colorado, Florida, Georgia, Kansas, New York, and Texas.determined that no provision for uncertain income tax positions is necessary as of March 28, 2021.

NOTE 4 – COMMITMENTS, CONTINGENCIES & OFF-BALANCE SHEET RISK10. LEASES

As of March 28, 2021, the Company has thirteen operating leases for corporate offices and for certain restaurant properties that are in the process of being refranchised. The leases have remaining terms ranging from 2.6 to 17.8 years. The Company recognized lease expense of $810,000 and $347,000 for the thirteen months ended March 28, 2021 and March 29, 2020, respectively. The weighted average remaining lease term of the operating leases as of March 28, 2021 was 7.4 years.

Operating lease right of use assets and operating lease liabilities relating to the operating leases are as follows (in thousands):

The weighted average discount rate used to calculate the carrying value of the right of use assets and lease liabilities was 9.4% which is based on the Company’s incremental borrowing rate at the time the lease is acquired.

The contractual future maturities of the Company’s operating lease liabilities as of March 28, 2021, including anticipated lease extensions, are as follows (in thousands):

Supplemental cash flow information for the thirteen weeks ended March 28, 2021 related to leases is as follows (in thousands):

Note 11. DEBT

LitigationSecuritization

On March 6, 2020, the Company completed a whole-business securitization (the “Securitization”) through the creation of a bankruptcy-remote issuing entity, FAT Brands Royalty I, LLC (“FAT Royalty”), in which FAT Royalty issued $20 million of Series 2020-1 Fixed Rates Senior Secured Notes, Class A-2 and $20 million of Series 2020-1 Fixed Rate Senior Subordinated Notes, Class B-2 (collectively the “Series A-2 and B-2 Notes”) pursuant to an indenture and the supplement thereto, each dated March 6, 2020 (collectively, the “Indenture”).

The Series A-2 and B-2 Notes have the following terms:

Net proceeds from the issuance of the Series A-2 and B-2 Notes were $37,389,000, which consisted of the combined face amount of $40,000,000, net of discounts of $246,000 and debt offering costs of $2,365,000. The discount and offering costs are accreted as additional interest expense over the expected term of the Series A-2 and B-2 Notes.

On September 21, 2020, FAT Royalty completed the sale of an additional $40 million of Series 2020-2 Fixed Rate Asset-Backed Notes (the “Series M-2 Notes”), pursuant to the Indenture as amended by the Series 2020-2 Supplement.

The Series M-2 Notes consist of the following:

Net proceeds from the issuance of the Series M-2 Notes were $35,371,000, which consists of the face amount of $40,000,000, net of discounts of $3,200,000 and debt offering costs of $1,429,000. The discount and offering costs are accreted as additional interest expense over the expected term of the Series M-2 Notes.

The Series M-2 Notes are subordinate to the Series A-2 and B-2 Notes. The Series A-2 and B-2 Notes and the Series M-2 Notes (collectively, the “2020 Securitization Notes”) issued under the Indenture, as amended, are secured by an interest in substantially all of the assets of FAT Royalty, including the Johnny Rockets companies, that have been contributed to FAT Royalty and are obligations only of FAT Royalty under the Indenture and not obligations of the Company.

While the 2020 Securitization Notes are outstanding, scheduled payments of principal and interest are required to be made on a quarterly basis, with the scheduled principal payments of $1,000,000 per quarter on each of the Series A-2 and Series B-2 Notes and $200,000 per quarter on the Series M-2 Notes beginning the second quarter of 2021.

In connection with the Securitization, FAT Royalty and each of the Franchise Entities (as defined in the Indenture) entered into a Management Agreement with the Company, dated as of the Closing Date (the “Management Agreement”), pursuant to which the Company agreed to act as manager of FAT Royalty and each of the Franchise Entities. The Management Agreement provides for a management fee payable monthly by FAT Royalty to the Company in the amount of $200,000, subject to three percent (3%) annual increases (the “Management Fee”). The primary responsibilities of the manager are to perform certain franchising, distribution, intellectual property and operational functions on behalf of the Franchise Entities pursuant to the Management Agreement.

The 2020 Securitization Notes are secured by substantially all of the assets of FAT Royalty, including the equity interests in the Franchise Entities. The restrictions placed on the Company’s subsidiaries require that FAT Royalty’s principal and interest obligations have first priority, after the payment of the Management Fee and certain other FAT Royalty expenses (as defined in the Indenture), and amounts are segregated monthly to ensure appropriate funds are reserved to pay the quarterly principal and interest amounts due. The amount of monthly cash flow that exceeds the required monthly debt service is generally remitted to the Company. Once the required obligations are satisfied, there are no further restrictions, including payment of dividends, on the cash flows of the subsidiaries.

The 2020 Securitization Notes have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any jurisdiction.

The 2020 Securitization Notes are subject to certain financial and non-financial covenants, including a debt service coverage ratio calculation, as defined in the Indenture. If certain covenants are not met, the 2020 Securitization Notes may become partially or fully due and payable on an accelerated schedule. In addition, FAT Royalty may voluntarily prepay, in part or in full, the 2020 Securitization Notes in accordance with the provisions in the Indenture. As of March 28, 2021, FAT Royalty was in compliance with these covenants.

As of March 28, 2021, the recorded balance of the 2020 Securitization Notes was $73,682,000, which is net of debt offering costs of $3,216,000 and original issue discount of $3,102,000. As of December 27, 2020, the recorded balance of the 2020 Securitization Notes was $73,369,000, which was net of debt offering costs of $3,374,000 and original issue discount of $3,257,000. The Company recognized interest expense on the 2020 Securitization Notes of $2,063,000 for the thirteen weeks ended March 28, 2021, which includes $158,000 for amortization of debt offering costs and $155,000 for amortization of the original issue discount. The average effective interest rate of the 2020 Securitization Notes, including the amortization of debt offering costs and original issue discount, was 11.2% for the thirteen weeks ended March 28, 2021.

The 2020 Securitization Notes were repaid in full in April 2021 (see Note 21).

Loan and Security Agreement

On January 29, 2019, the Company as borrower, and its subsidiaries and affiliates as guarantors, entered into the Loan and Security Agreement with Lion. Pursuant to the Loan and Security Agreement, the Company borrowed $20.0 million from Lion, and utilized the proceeds to repay the existing $16.0 million term loan from FB Lending, LLC plus accrued interest and fees, and provide additional general working capital to the Company.

The term loan under the Loan and Security Agreement was due to mature on June 30, 2020. Interest on the term loan accrued at an annual fixed rate of 20.0% and was payable quarterly.

The Loan and Security Agreement was subsequently amended several times which allowed the Company to increase its borrowing by $3,500,000 in connection with the acquisition of Elevation Burger; extended the exercise date of the Lion Warrant to June 30, 2020; extended the due date for certain quarterly payments and imposed associated extension and other loan fees.

On March 6, 2020, the Company repaid the Lion Loan and Security Agreement in full by making a total payment of approximately $26,771,000. This consisted of $24,000,000 in principle, approximately $2,120,000 in accrued interest and $651,000 in penalties and fees.

The Company recognized interest expense on the Loan and Security Agreement of $1,783,000 for the thirteen weeks ended March 29, 2020, which includes $212,000 for amortization of all unaccreted debt offering costs at the time of the repayment and $650,000 in penalties and fees.

Elevation Note

On June 19, 2019, the Company completed the acquisition of Elevation Burger. A portion of the purchase price included the issuance to the Seller of a convertible subordinated promissory note (the “Elevation Note”) with a principal amount of $7,510,000, bearing interest at 6.0% per year and maturing in July 2026. The Elevation Note is convertible under certain circumstances into shares of the Company’s common stock at $12.00 per share. In connection with the valuation of the acquisition of Elevation Burger, the Elevation Note was recorded on the financial statements of the Company at $6,185,000, which is net of a loan discount of $1,295,000 and debt offering costs of $30,000.

As of March 28, 2021, the carrying value of the Elevation Note was $5,987,000 which is net of the loan discount of $807,000 and debt offering costs of $53,000. As of December 27, 2020, the carrying value of the Elevation Note was $5,919,000 which is net of the loan discount of $872,000 and debt offering costs of $56,000. The Company recognized interest expense relating to the Elevation Note during the thirteen months ended March 28, 2021 in the amount of $171,000, which included amortization of the loan discount of $65,000 and amortization of $3,000 in debt offering costs. The Company recognized interest expense relating to the Elevation Note during the thirteen weeks ended March 29, 2020 in the amount of $189,000, which included amortization of the loan discount of $71,000 and amortization of $3,000 in debt offering costs. The effective interest rate for the Elevation Note during the thirteen weeks ended March 28, 2021 was 11.5%.

The Elevation Note is a general unsecured obligation of Company and is subordinated in right of payment to all indebtedness of the Company arising under any agreement or instrument to which Company or any of its Affiliates is a party that evidences indebtedness for borrowed money that is senior in right of payment.

Paycheck Protection Program Loans

During 2020, the Company received loan proceeds in the amount of approximately $1,532,000 under the Paycheck Protection Program (the “PPP Loans”) and Economic Injury Disaster Loan Program (the “EIDL Loans”). The Paycheck Protection Program, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period.

At inception, the PPP Loans and EIDL Loans related to FAT Brands Inc. as well as five restaurant locations that were part of the Company’s refranchising program. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loans, there can be no assurance that the Company will be eligible for forgiveness of the loans, in whole or in part. Any unforgiven portion of the PPP Loans is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. As of March 28, 2021 and December 27, 2020, the balance remaining on the PPP Loans and EIDL Loans was $1,186,000 and $1,183,000 related to FAT Brands Inc., as the five restaurant locations were closed or refranchised during the second and third quarters of 2020.

Subsequent to March 28, 2021, the PPP Loans and EIDL Loans were forgiven (see Note 21).

Assumed Debt from Merger

The following debt of FCCG (the “FCCG Debt”) was assumed by Fog Cutter Acquisition LLC, a subsidiary of the Company, as part of the Merger (in thousands):

Subsequent to March 28, 2021, the FCCG Debt was repaid in full (see Note 21).

Note 12. PREFERRED STOCK

Series B Cumulative Preferred Stock

On July 13, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) to issue and sell in a public offering (the “Offering”) 360,000 shares of 8.25% Series B Cumulative Preferred Stock (“Series B Preferred Stock”) and 1,800,000 warrants, plus 99,000 additional warrants pursuant to the underwriter’s overallotment option (the “2020 Series B Offering Warrants”), to purchase common stock at $5.00 per share. In the Underwriting Agreement, the Company agreed to pay the underwriters an underwriting discount of 8.0% of the gross proceeds received by the Company in the Offering and issue five-year warrants exercisable for 1% of the number of Series B Preferred Stock shares and the number of 2020 Series B Offering Warrants sold in the Offering.

In connection with the Offering, on July 15, 2020 the Company filed an Amended and Restated Certificate of Designation of Rights and Preferences of Series B Cumulative Preferred Stock with the Secretary of State of Delaware, designating a total of 850,000 shares of Series B Preferred Stock (the “Certificate of Designation”), and on July 16, 2020 entered into a Warrant Agency Agreement with VStock Transfer, LLC, to act as the Warrant Agent for the Series B Offering Warrants (the “Warrant Agency Agreement”).

The Certificate of Designation amends and restates the terms of the Series B Cumulative Preferred Stock issued in October 2019 (the “Original Series B Preferred”). At the time of the Offering, there were 57,140 shares of the Original Series B Preferred outstanding, together with warrants to purchase 34,284 shares of the Company’s common stock at an exercise price of $8.50 per share (the “Series B Warrants”).

The Offering closed on July 16, 2020 with net proceeds to the Company of $8,122,000, which was net of $878,000 in underwriting and offering costs.

Holders of Series B Cumulative Preferred Stock shall be entitled to receive, when, as and if declared by the FAT Board or a duly authorized committee thereof, in its sole discretion, out of funds of the Company legally available for the payment of distributions, cumulative preferential cash dividends at a rate per annum equal to the 8.25% multiplied by $25.00 per share stated liquidation preference of the Series B Preferred Stock. The dividends shall accrue without interest and accumulate, whether or not earned or declared, on each issued and outstanding share of the Series B Preferred Stock from (and including) the original date of issuance of such share and shall be payable monthly in arrears on a date selected by the Company each calendar month that is no later than twenty (20) days following the end of each calendar month.

If the Company fails to pay dividends on the Series B Preferred Stock in full for any twelve accumulated, accrued and unpaid dividend periods, the dividend rate shall increase to 10% until the Company has paid all accumulated accrued and unpaid dividends on the Series B Preferred Stock in full and has paid accrued dividends during the two most recently completed dividend periods in full, at which time the 8.25% dividend rate shall be reinstated.

The Company may redeem the Series B Preferred Stock, in whole or in part, at the option of the Company, for cash, at the following redemption price per share, plus any unpaid dividends:

As a result of the amended and restated terms of the Series B Cumulative Preferred Stock, the Company classified the Series B Preferred Stock as equity as of July 15, 2020.

Concurrent with the Offering, the holders of the outstanding 57,140 shares of Original Series B Preferred became subject to the new terms of the Certificate of Designation. As a result, the recorded value of the new Series B Stock was $1,136,000 with $292,000 allocated to the 2020 Series B Offering Warrants. The original holders were also issued 3,537 shares of new Series B Preferred Shares in payment of $88,000 accrued and outstanding dividends relating to the Original Series B Preferred at a price of $25 per share.

The Company entered into an agreement to exchange 15,000 shares of Series A Fixed Rate Cumulative Preferred Stock owned by FCCG for 60,000 shares of Series B Preferred Stock valued at $1,500,000, pursuant to a Settlement, Redemption and Release Agreement. The Company also agreed to issue 14,449 shares of Series B Preferred Stock valued at $361,224 as consideration for accrued dividends due to FCCG.

The Company entered into an agreement to exchange all of the outstanding shares of Series A-1 Fixed Rate Cumulative Preferred Stock for 168,001 shares of Series B Preferred Stock valued at $4,200,000, pursuant to a Settlement, Redemption and Release Agreement with the holders of such shares.

In connection with the acquisition of FCCG by the Company, in December 2020 the Company declared a special stock dividend (the “Special Dividend”) payable only to holders of our Common Stock, other than FCCG, on the record date, consisting of 0.2319998077 shares of Series B Cumulative Preferred Stock for each outstanding share of Common Stock held by such stockholders. The Special Dividend was paid on December 23, 2020 and resulted in the issuance of 520,145 additional shares of Series B Preferred Stock with a market value on the payment date of approximately $8,885,000.

As of March 28, 2021, the Series B Preferred Stock consisted of 1,183,272 shares outstanding with a balance of $21,267,000. The Company declared preferred dividends to the holders of the Series B Preferred Stock totaling $610,000 during the thirteen weeks ended March 28, 2021.

Series A Fixed Rate Cumulative Preferred Stock

On June 8, 2018, the Company filed a Certificate of Designation of Rights and Preferences of Series A Fixed Rate Cumulative Preferred Stock (“Series A Preferred Stock”) with the Secretary of State of the State of Delaware (the “Certificate of Designation”), designating a total of 100,000 shares of Series A Preferred Stock.

The Company issued 100,000 shares of Series A Preferred stock in the following two transactions:

On July 13, 2020, the Company entered into the following transactions pertaining to the outstanding Series A Preferred Stock:

The Company classifies the Series A Preferred Stock as debt.

As of March 28, 2021, there were 80,000 shares of Series A Preferred Stock outstanding, with a balance of $7,970,000 which is net of debt offering costs and discounts of $30,000.

The Company recognized interest expense on the Series A Preferred Stock of $288,000 for the thirteen weeks ended March 28, 2021, which includes accretion expense of $9,000 as well as $1,000 for the amortization of debt offering costs. The Company recognized interest expense on the Series A Preferred Stock of $355,000 for the thirteen weeks ended March 29, 2020, which includes accretion expense of $6,000 and $1,000 for the amortization of debt offering costs. The year-to-date effective interest rate for the Series A Preferred Stock for 2021 was 14.5%.

Note 13. Related Party Transactions

As of September 24, 2017,During the thirteen weeks ended March 28, 2021, there were no reportable related party transactions. For the thirteen weeks ended March 29, 2020, the Company was not involved in any adversarial legal proceedings. The subsidiaries acquired on October 20, 2017 are involved in various legal proceedings occurring inreported the ordinary course of business which management believes will not have a material adverse effect on the financial condition or operations of the Company.

Liquidityfollowing:

FollowingDue from Affiliates

On April 24, 2020, the completionCompany entered into an Intercompany Revolving Credit Agreement with FCCG (“Intercompany Agreement”). The Company had previously extended credit to FCCG pursuant to a certain Intercompany Promissory Note (the “Original Note”), dated October 20, 2017, with an initial principal balance of $11,906,000. Subsequent to the issuance of the Offering, franchising operations will becomeOriginal Note, the major source of liquidity for the Company. Management expects these sources, including the sale of new franchises, to generate adequate cash flow to meet the Company’s liquidity needs for the 2017 fiscal year. As the Company contemplates significant acquisitions, other sources of liquidity will be considered, including borrowings or placements of securities.

Fatburger Debt Covenant

On June 1, 2010, Fatburger and certain of its affiliates becamedirect or indirect subsidiaries made additional intercompany advances in the aggregate amount of $10,523,000. Pursuant to the Intercompany Agreement, the revolving credit facility bore interest at a rate of 10% per annum, had a five-year term with no prepayment penalties, and had a maximum capacity of $35,000,000. All additional borrowings under the Intercompany Agreement were subject to a judgment payable to GE Capital Franchise Finance Corporation (GEFFC) for approximately $4,300,000. No proceeds from the original loan had been received by Fatburger, however it is jointly and severally liable as a co-borrower. On October 11, 2011, GEFFC agreed to accept payments in full satisfactionapproval of the obligation totaling approximately $2,600,000 plus interest at 5%. Subsequently, FCCG made payments totaling approximately $2,000,000, plus interestBoard of Directors, in advance, on a quarterly basis and may have been subject to GEFFC.other conditions as set forth by the Company. The borrowers have not made allinitial balance under the Intercompany Agreement totaled $21,067,000 including the balance of the payments required byOriginal Note, borrowings subsequent to the settlement agreement. On November 28, 2016, GEFFC soldOriginal Note, accrued and unpaid interest income, and other adjustments through December 29, 2019. As of March 29, 2020, the debt to an unrelated third party. On June 21, 2017,balance receivable under the debtIntercompany Agreement was purchased by a limited partnership in which Andrew Wiederhorn,$26,854,000.

During the CEO ofthirteen weeks ended March 29, 2020, the Company isrecorded a general partner. Fog Cutter Capital Group Inc. has agreedreceivable from FCCG in the amount of $121,000 under the Tax Sharing Agreement, which was added to indemnify FAT Brands Inc. and Subsidiaries from costs and liabilities which may arise from this matter.the intercompany receivable.

DividendsSeries B Cumulative Preferred Stock

TheOn October 3 and October 4, 2019, the Company intendscompleted the initial closing of its continuous public offering (the “Series B Preferred Offering”) of up to declare quarterly dividends$30,000,000 of units (the “Series B Units”) at $25.00 per Series B Unit, with each Series B Unit comprised of one share of 8.25% Series B Cumulative Preferred Stock (“Series B Preferred Stock”) and 0.60 warrants (the “Series B Warrants”) to holders ofpurchase common stock. The declaration and payment of future dividends, if any, will bestock at $8.50 per share, exercisable for five years. At the sole discretioninitial closing of the boardPreferred Offering, the Company completed the sale of directors and may be discontinued at any time. In determining43,080 Series B Units for gross proceeds of $1,077,000.

As of March 29, 2020, the amountfollowing reportable related persons participated in the initial closing of any future dividends, the board of directors will take into account: (i) the Company’s consolidated financial results, available cash, future cash requirements and capital requirements, (ii) contractual, legal, tax and regulatory restrictions on, and implications of, the payment of dividends to stockholders, (iii) general economic and business conditions, and (iv) any other factors that the board of directors may deem relevant. The ability to pay dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred equity securities of the Company or its subsidiaries.Preferred Offering:

No dividends have been declared or paid as of September 24, 2017.

Franchising operations

The Company is pursuing a growth strategy through developing additional franchising opportunities. Franchise development involves substantial risks that the Company intends to manage; however, it cannot be assured that present or future development will perform in accordance with the Company’s expectations or that any franchising activities will generate the Company’s expected returns on investment. The Company’s inability to expand franchises in accordance with planned expansion or to manage that growth could have a material adverse effect on the Company’s operations and financial condition. In addition, if its franchisees are unsuccessful in obtaining capital sufficient to fund this expansion, the timing of restaurant openings may be delayed and the Company’s operating results may be harmed.

Other

Following the Reorganization Transactions, the Company and its subsidiaries are parties to various operating leases for office space which expire through April 30, 2020. The leases provide for varying minimum annual rental payments including rent increases and free rent periods. The Company has future minimum rental payments under non-cancelable operating leases with initial or remaining terms of one year or more of approximately $796,000 as of September 24, 2017.

There were no other off balance sheet arrangements in effect during the period from March 21, 2017, (inception) through September 24, 2017.

NOTE 5 – STOCK OPTIONS AND RIGHTSNote 14. SHAREHOLDERS’ EQUITY

As of March 28, 2021 and December 27, 2020, the total number of authorized shares of common stock was 25,000,000, and there were 12,029,264 and 11,926,264 shares of common stock outstanding, respectively.

Below are the changes to the Company’s common stock during the thirteen weeks ended March 28, 2021:

On October 19,Note 15. SHARE-BASED COMPENSATION

Effective September 30, 2017, the Company adopted and approved the 2017 Omnibus Equity Incentive Plan (the “Plan”“Plan”). The Plan is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, FAT Brands Inc. and its subsidiaries. The purpose of the Plan is to help attract, motivate and retain such persons and thereby enhance stockholder value. The Plan allows for management and the board of directors to award stock incentives to substantially all employees as a retention incentive and to ensure that employees’ compensation incentives are aligned with stock price performance. The Plan provides for a maximum of 1,000,0001,021,250 shares available for grant.

All of the stock options issued by the Company to date have included a vesting period of three years, with one-third of each grant vesting annually. The Company’s stock option activity for thirteen weeks ended March 28, 2021 is summarized as follows:

The range of assumptions used in the Black-Scholes valuation model to record the stock-based compensation are as follows:

The Company recognized share-based compensation expense in the amount of $37,000 and $15,000, respectively, during the thirteen weeks ended March 28, 2021 and March 29, 2020. As of March 28, 2021, there remains $124,000 of related share-based compensation expense relating to non-vested grants, which will be recognized over the remaining vesting period, subject to future forfeitures.

Note 16. WARRANTS

Outstanding Warrants

As of March 28, 2021, the Company had the following outstanding warrants to purchase shares of its common stock:

The Company’s warrant activity for the thirteen weeks ended March 28, 2021 is as follows:

The range of assumptions used to establish the value of the warrants using the Black-Scholes valuation model are as follows:

In addition to the warrants to purchase common stock described above, the Company has also granted the following warrants on other securities to the underwriters in connection with the Series B Preferred Stock Offering (See Note 12):

Note 17. DIVIDENDS ON COMMON STOCK

During the thirteen weeks ended March 28, 2021, there were no dividends declared or paid on the Company’s common stock. Subsequent to the end of that period, on April 20, 2021, the Board of Directors declared a cash dividend of $0.13 per share of common stock, payable on May 7, 2021 to shareholders of record as of May 3, 2021, for a total of $1,590,000.

Note 18. Commitments and Contingencies

Litigation

Stratford Holding LLC v. Foot Locker Retail Inc. (U.S. District Court for the Western District of Oklahoma, Case No. 5:12-cv-00772-HE)

In 2012 and 2013, two property owners in Oklahoma City, Oklahoma sued numerous parties, including Foot Locker Retail Inc. and our subsidiary Fog Cutter Capital Group Inc. (now known as Fog Cutter Acquisition, LLC), for alleged environmental contamination on their properties, stemming from dry cleaning operations on one of the properties. The property owners seek damages in the range of $12 million to $22 million. From 2002 to 2008, a former Fog Cutter subsidiary managed a lease portfolio, which included the subject property. Fog Cutter denies any liability, although it did not timely respond to one of the property owners’ complaints and several of the defendants’ cross-complaints and thus is in default. The parties are currently conducting discovery, and the matter is scheduled for trial for November 2021. The Company is unable to predict the ultimate outcome of this matter, however, reserves have been recorded on the balance sheet relating to this litigation. There can be no assurance that the defendants will be successful in defending against these actions.

SBN FCCG LLC v FCCGI (Los Angeles Superior Court, Case No. BS172606)

SBN FCCG LLC (“SBN”) filed a complaint against Fog Cutter Capital Group, Inc. (“FCCG”) in New York state court for an indemnification claim (the “NY case”) stemming from an earlier lawsuit in Georgia regarding a certain lease portfolio formerly managed by a former FCCG subsidiary. In February 2018, SBN obtained a final judgment in the NY case for a total of $651,290, which included $225,030 in interest dating back to March 2012. SBN then obtained a sister state judgment in Los Angeles Superior Court, Case No. BS172606 (the “California case”), which included the $651,290 judgment from the NY case, plus additional statutory interest and fees, for a total judgment of $656,543. In May 2018, SBN filed a cost memo, requesting an additional $12,411 in interest to be added to the judgment in the California case, for a total of $668,954. In May 2019, the parties agreed to settle the matter for $580,000, which required the immediate payment of $100,000, and the balance to be paid in August 2019. FCCG wired $100,000 to SBN in May 2019, but has not yet paid the remaining balance of $480,000. The parties have not entered into a formal settlement agreement, and they have not yet discussed the terms for the payment of the remaining balance.

The Company is involved in other claims and legal proceedings from time-to-time that arise in the ordinary course of business, including those involving the Company’s franchisees. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on its business, financial condition, results of operations, liquidity or capital resources. As of March 28,2021, the Company had accrued an aggregate of $5.68 million for the specific matters mentioned above and claims and legal proceedings involving franchisees as of that date.

Operating Leases

The Company leases corporate headquarters located in Beverly Hills, California comprising 12,281 square feet of space, pursuant to a lease that expires on September 24, 2017,29, 2025, as well as an additional 2,915 square feet of space pursuant to a lease amendment that expires on February 29, 2024.

The Company is operating ten restaurant locations which are now being marketed as part of its refranchising efforts. Each location is subject to a real estate lease.

The Company believes that all existing facilities are in good operating condition and adequate to meet current and foreseeable needs. Additional information related to the Company’s operating leases are disclosed in Note 10.

Note 19. geographic information AND MAJOR FRANCHISEES

Revenues by geographic area are as follows (in thousands):

Revenues are shown based on the geographic location of our licensee restaurants. All Company assets are located in the United States.

During the thirteen weeks ended March 28, 2021 and March 29, 2020, no awardsindividual franchisee accounted for more than 10% of the Company’s revenues.

NOTE 20. OPERATING SEGMENTS

With minor exceptions, the Company’s operations are comprised exclusively of franchising a growing portfolio of restaurant brands. The Company’s growth strategy is centered on expanding the footprint of existing brands and acquiring new brands through a centralized management organization which provides substantially all executive leadership, marketing, training and corporate accounting services. While each brand could be considered an individual business segment, the nature of the Company’s business is consistent across our portfolio. Consequently, while management assesses the progress of its operations by brand, these operations may be aggregated into one reportable segment in the Company’s financial statements.

As part of its ongoing franchising efforts, the Company will, from time to time, make opportunistic acquisitions of operating restaurants in order to convert them to franchise locations. During the refranchising period, the Company may operate the restaurants.

The chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM reviews financial performance and allocates resources at an overall level on a recurring basis. Therefore, management has determined that the Company has one reportable segment.

NOTE 21. SUBSEQUENT EVENTS

Management has evaluated all events and transactions that occurred subsequent to March 28, 2021 through the date of issuance of these consolidated financial statements. During this period, the Company did not have any significant subsequent events except as follows:

Securitization

On April 26, 2021 (the “Closing Date”), FB Royalty completed the issuance and sale in a private offering (the “Offering” as defined in Note 1) of three tranches of fixed rate senior secured notes as follows: (i) 4.75% Series 2021-1 Fixed Rate Senior Secured Notes, Class A-2, in an initial principal amount of $97,104,000; (ii) 8.00% Series 2021-1 Fixed Rate Senior Subordinated Secured Notes, Class B-2, in an initial principal amount of $32,368,000; and (iii) 9.00% Series 2021-1 Fixed Rate Subordinated Secured Notes, Class M-2, in an initial principal amount of $15,000,000 (collectively, the “2021 Securitization Notes”).

The 2021 Securitization Notes were issued in a securitization transaction pursuant to which substantially all of the assets held by the Issuer and its subsidiaries, including the Company, were pledged as collateral to secure the 2021 Securitization Notes. On the Closing Date, FAT used a portion of the net proceeds of the Offering to repay in full the 2020 Securitization Notes (see Note 11).

The restrictions placed on the Company and other FB Royalty subsidiaries require that the 2021 Securitization Notes principal and interest obligations have first priority and amounts are segregated weekly to ensure appropriate funds are reserved to pay the quarterly principal and interest amounts due. The amount of weekly cash flow that exceeds the required weekly interest reserve is generally remitted to the FAT.

Common stock dividend

On April 20, 2021, the Board of Directors declared a cash dividend of $0.13 per share of common stock, payable on May 7, 2021 to shareholders of record as of May 3, 2021, totaling $1,590,000.

Retirement of Fog Cutter debt

In April 2021, obligations totaling approximately $12,509,000 owed by Fog Cutter Capital Group to various lenders and beneficiaries were paid in full (see Note 11).

Forgiveness of PPP Loans

On April 26, 2021, the Company received confirmation that the entire balance remaining on the PPP Loans, plus accrued interest, had been grantedforgiven under the Plan. (See Note 3 – Subsequent Events).terms of the program.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our results of operations, financial condition and liquidity and capital resources should be read in conjunction with our financial statements and related notes for the thirteen weeks ended March 28, 2021 and March 29, 2020, as applicable. Certain statements contained hereinmade or incorporated by reference in this report and certain statements contained in futureour other filings by the Company with the SEC may not be based on historical factsSecurities and are “Forward-Looking Statements”Exchange Commission, in our press releases and in statements made by or with the approval of authorized personnel constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Allamended, or the Exchange Act, and are subject to the safe harbor created thereby. Forward-looking statements reflect intent, belief, current expectations, estimates or projections about, among other thanthings, our industry, management’s beliefs, and future events and financial trends affecting us. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will” and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of historical facts containedfuture events or circumstances, including any underlying assumptions, are forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are reasonable, such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, including but not limited to, COVID-19. These differences can arise as a result of the risks described in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K filed on March 29, 2021 “Item 1A. Risk Factors” and elsewhere in this Form 10-Qreport, as well as other factors that may be forward-looking statements. Statements regardingaffect our futurebusiness, results of operations, andor financial position, business strategycondition. Forward-looking statements in this report speak only as of the date hereof, and plans and objectives of management for future operations, including, among others, statements regarding the Reorganization Transactions, expected new franchisees, brands, store openings and future capital expenditures are forward-looking statements. In some cases, you can identify forward-looking statements in documents incorporated by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these factors include, but are not limited to, the following:

These forward-looking statementsreference speak only as of the date of this Form 10 Q. Except as may bethose documents. Unless otherwise required by law, the Company does notwe undertake and specifically disclaims anyno obligation to publicly releaseupdate or revise these forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking statements contained in this report will, in fact, transpire.

COVID-19

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic, which continues to spread throughout the United States and other countries. As a result, Company franchisees temporarily closed some retail locations, reduced or modified store operating hours, adopted a “to-go” only operating model, or a combination these actions. These actions reduced consumer traffic, all resulting in a negative impact to Company revenues. While the disruption to our business from the COVID-19 pandemic is currently expected to be temporary, there is a great deal of uncertainty around the severity and duration of the disruption, and also the longer-term effects on our business and economic growth and consumer demand in the U.S. and worldwide. The effects of COVID-19 may materially adversely affect our business, results of any revisionsoperations, liquidity and ability to service our existing debt, particularly if these effects continue in place for a significant amount of time. If additional information becomes available regarding the potential impact and the duration of the negative financial effects of the current pandemic, the Company may determine that additional impairment adjustment to the recorded value of trademarks, goodwill and other intangible assets may be made to any Forward-Looking Statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.necessary.

The following discussion and analysis should be read in conjunction with the Financial Statements of FAT Brands Inc. and the notes thereto included elsewhere in this filing. References in this filing to “the Company,” “we,” “our,” and “us” refer to FAT Brands Inc. and its subsidiaries unless the context indicates otherwise.

Executive Overview

Business overview

FAT Brands Inc. is a leading multi-brand restaurant franchising company that develops, markets, and acquires predominantlyprimarily quick-service, fast casual and casual dining concepts restaurant concepts around the world. Organized in March 2017 as a wholly owned subsidiary of Fog Cutter Capital Group, Inc. (“FCCG”), we completed our initial public offering on October 20, 2017 and issued additional shares of common stock representing 20 percent of our ownership upon completion of the offering. During the fourth quarter of 2020, we completed a transaction in which FCCG merged into a wholly owned subsidiary of ours, and we became the parent company of FCCG.

As a franchisor, we generally do not own or operate restaurant locations, but rather generate revenue by charging franchisees an initial franchise fee as well as ongoing royalties. Since it requires relatively small investments in tangible assets, thisThis asset light franchisor model provides the opportunity for strong profit margins and an attractive free cash flow profile while minimizing restaurant operating company risk, such as long-term real estate commitments or capital investments. Our scalable management platform enables us to add new stores and restaurant concepts to our portfolio with minimal incremental corporate overhead cost, while taking advantage of significant corporate overhead synergies. The acquisition of additional brands and restaurant concepts as well as expansion of our existing brands are key elements of our growth strategy.

FAT Brands Inc. was formed onAs of March 21, 2017 as a wholly owned subsidiary of Fog Cutter Capital Group Inc. (“FCCG”). As described in more detail below, in connection with our initial public offering, two other subsidiaries of FCCG,28, 2021, the Company owns nine restaurant brands: Fatburger, North America, Inc. (“Fatburger”)Johnny Rockets, Buffalo’s Cafe, Buffalo’s Express, Hurricane Grill & Wings, Ponderosa and Buffalo’s Franchise Concepts, Inc. (“Buffalo’s”) were contributed to us by FCCG as operating subsidiaries on October 20, 2017. FatburgerBonanza Steakhouses, Elevation Burger and Buffalo’s were historicallyYalla Mediterranean, that have approximately 700 locations, including units under a cost-sharing and reimbursement arrangement with FCCG. After the transfer of these entities to our control, the cost-sharing and reimbursement arrangement with FCCG was terminated and all employees were moved to FAT Brands Inc. or our subsidiaries as appropriate. The historical financial statements are expected to be consistent with the new FAT Brands Inc. entity, in that reimbursement expense and direct employee costs both appear under general and administrative expenses and are expected to be materially the same amounts going forward.construction.

Operating segments

In March 2017, FCCG agreed to acquire Homestyle Dining LLC from Metromedia CompanyWith minor exceptions, our operations are comprised exclusively of franchising a growing portfolio of restaurant brands. Our growth strategy is centered on expanding the footprint of existing brands and its affiliate (“Metromedia”) pursuant toacquiring new brands through a Membership Interest Purchase Agreement, as amended,centralized management organization which provided for a cash purchase price of $10,550,000 to be paid at closing. Effective October 20, 2017, we provided approximately $10,550,000 of the net proceeds from the Offering to FCCG to consummate the acquisition of Homestyle Dining LLC. In exchange, we received full ownership in the Homestyle Dining operating subsidiaries: Ponderosa Franchising Company, Bonanza Restaurant Company, Ponderosa International Development, Inc.provides substantially all executive leadership, marketing, training and Puerto Rico Ponderosa, Inc. (collectively, “Ponderosa”). These subsidiaries conduct the worldwide franchising of the Ponderosa Steakhouse Restaurants and the Bonanza Steakhouse Restaurants.

We intend to acquire additional restaurant franchising concepts that will allow us to offer additional food categories and expand our geographic footprint.

As of October 20, 2017, we operate the Fatburger, Buffalo’s and Ponderosa restaurant concepts with 292 total locations across 25 states and 19 countries.corporate accounting services. While our existing footprint covers 18 countries in which we have franchised restaurants open and operational as of October 20, 2017, our overall footprint (including development agreements for proposed stores in new markets and nine countries where our brands previously had a presence that we intend to resell to new franchisees) covers 27 countries. For each of our current restaurant brands could be considered an individual business segment, the nature of our business is consistent across our portfolio. Consequently, while our management assesses the progress of our operations by brand, these operations may be aggregated into one reportable segment in the Company’s financial statements.

Our chief operating decision maker (“CODM”) is our Chief Executive Officer. Our CODM reviews financial performance and thoseallocates resources at an overall level on a recurring basis. Therefore, management has determined that we will seek to acquire, the ability to expand the overall concept footprint, both domestically and internationally, isCompany has one reportable segment.

Results of critical importance and a primary acquisition evaluation criterion. We believe that our restaurant concepts have meaningful growth potential and appeal to a broad base of consumers globally.Operations

We operate on a 52-week or 53-week fiscal year ending on the last Sunday of the calendar year. In a 52-week fiscal year, each quarter contains 13 weeks of operations; inoperations. In a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations, which may cause our revenue, expenses and other results of operations to be higher due to an additional week of operations.

Operating segmentsResults of Operations of FAT Brands Inc.

Effective with our initial public offering and the acquisitions that followed, our operating segments are:

Key Performance Indicators

To evaluate the performanceThe following table summarize key components of our business, we utilize a varietyconsolidated results of financialoperations for the thirteen weeks ended March 28, 2021 and performance measures, which are typically calculated on a system-wide basis. These key measures include new store openings, average unit volumes and same-store sales growth in additionMarch 29, 2020. Certain account balances from the prior period have been reclassified to the general income statement line items such as revenues, general and administrative expenses, income before income tax expense and net income.

New store openings -The number of new store openings reflects the number of stores opened during a particular reporting period. The total number of new stores per year and the timing of stores openings has, and will continueconform to have, an impact on our results.current period presentation.

Average unit volumes -Average Unit Volumes for any 12-month period consist of(In thousands)

For the average sales of all stores over that period that have been open a full year. Average unit volumes are calculated by dividing total sales from all stores open a full year by the number of stores open during that period. The measurement of AUVs allows us to assess changes in guest traffic and per transaction patterns at our stores.Thirteen Weeks Ended