FAT Brands gets court go-ahead for liquidation plan

By Dietrich Knauth

July 27 (Reuters) - Former restaurant franchise company FAT Brands on Monday received a bankruptcy court's approval to proceed with a wind-down plan after selling off its interests in chains like Fatburger, Johnny Rockets, Twin Peaks and Round Table Pizza.

U.S. Bankruptcy Judge Alfredo Perez approved the company's Chapter 11 plan at a court hearing in Houston, Texas, saying that the company had achieved a remarkable consensus after a rocky and litigious start to the bankruptcy in January.

Perez approved a settlement agreement in May that allowed FAT brands to sell off its restaurant portfolio, with most of the restaurant chains being sold to FAT Brands' lenders in debt-cancellation deals.

FAT Brands' liquidation plan will set up a litigation trust with $1.5 million in initial funding to pursue potential lawsuits against insiders like former FAT Brands CEO Andrew Wiederhorn.

Before the bankruptcy, Wiederhorn had been sued by shareholders and the U.S. Securities and Exchange Commission and indicted on federal charges brought by the U.S. Department of Justice over allegations that he took undisclosed loans from the company and avoided tax payments owed to the government. Wiederhorn has denied the allegations.

The DOJ dropped its charges against Wiederhorn in August 2025, citing Republican President Donald Trump's new policy of prioritizing immigration enforcement and scaling back investigations of white-collar crime.

FAT Brands and its lenders paid Wiederhorn $5 million as part of the May settlement agreement. Wiederhorn agreed to step back from management of the company during its bankruptcy, avoiding a legal battle over lenders' attempts to replace him with a Chapter 11 bankruptcy trustee, while preserving the company's potential legal claims against him for a future date.

FAT Brands filed for bankruptcy in January with $1.4 billion in debt, citing the high costs of its debt, the impacts of inflation on the restaurant business, and legal costs.

FAT Brands entered bankruptcy with 18 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Great American Cookies, Smokey Bones, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean, and Ponderosa and Bonanza Steakhouses.

Most of those brands were acquired by FAT Brands' lenders, with Twin Peaks being split off into a separate lender-owned company and Hot Dog on a Stick being sold for $8 million to an outside buyer, Amazing Brands LLC.

The case is In re FAT Brands Inc., U.S. Bankruptcy Court for the Southern District of Texas, No. 26-90126
For FAT Brands: Ray Schrock and Natasha Hwangpo of Latham & Watkins; and Tad Davidson and Ashley Harper of Hunton Andrews Kurth

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(Reporting by Dietrich Knauth in New York)