Adding to the Portfolio. FAT Brands has agreed to acquire Fazoli's, an Italian QSR restaurant chain, for $130 million from Sentinel Capital Partners. The purchase will increase FAT Brands' footprint to 2,300 franchised and corporate-owned locations, with systemwide sales of more than $2.1 billion. Fazoli's is expected to add $14.5-$15.0 million of normalized EBITDA, including stores under development. FAT is financing the purchase through its securitization facility with the deal expected to close by mid-December.Who Is Fazolis? Founded in 1988, Fazoli's owns and operates nearly 220 restaurants in 28 states, with average revenue per location in the $1.5 million range. Fazoli's is the largest premium QSR Italian chain in the U.S., serving premium Italian food, Submarinos sandwiches, salads, pizza, and desserts. The Company has a development pipeline of 100 units expected to open over the next several years. Significantly, nearly all locations have drive-thru access, a key component in the COVID altered landscape.Multiples. At first glance, it appears FAT is paying about 9x projected normalized EBITDA for the chain. However, we expect operating synergies will lower the reported multiple, to say nothing about the additional cross selling opportunities available across the franchisee base.Conference Call. Management will be hosting a conference all on Thursday at 5pm ET to discuss 3Q21 results. We anticipate management will provide additional detail regarding the Fazoli's acquisition on the call. Dial in is 877-705-6003.Maintaining Outperform, $25 PT. We believe the recent acquisitions represent a new paradigm for FAT Brands and vaults the Company into the "big leagues," in our view. We are maintaining our Outperform rating and our 12-month price target of $25, which equates to 15.1 times estimated normalized 2022 EBITDA, still a discount to its peer group. Read More >>