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‘We’re seeing brands go to delivery and takeout only’ amid the coronavirus: Fat Brands CEO

Fat Brands CEO Andrew Wiederhorn joins On The Move to discuss how Fat Brands is being impacted by the coronavirus as well as the state of the food industry as people stay at home instead of dining out.

Video Transcript

JULIE HYMAN: Thank you for being with us. We've been talking a lot about potential stimulus coming from Capitol Hill as Congress debates a package here. One of the industries that, in some ways, has done OK during this time because of takeout and delivery is the restaurant industry, but obviously, people are not going to eat right now. We're joined now by Andrew Wiederhorn. He is the CEO of FAT Brands. This is a franchiser with eight brands, 400 restaurants under various banners like FAT Burger, Elevation Burger, Buffalo's Cafe. And he is joining us now-- hopefully between his dog and my kids, we won't get too much noise interruption as we speak.

Andy, thank you for doing this. First of all, I do want to get to your suggestions for stimulus. But before that, talk to me about how all of this is affecting you. Have you seen restaurants closed entirely? Takeout only? How is this playing through your system?

ANDREW WIEDERHORN: Well, FAT Brands at corporate, we're fine, because we're the franchiser. So we're not as affected as our franchise partners. But across different brands in different states with different regional issues, we're seeing closures, we're seeing brands go to delivery and takeout only, of course, which is important, because it takes the pressure off grocery stores.

But you know, for some of our businesses, they're more affected than others-- the casual dining businesses and the bars that are closed or the buffet business, the steakhouse business where it's an all you can eat buffet, those are all closed. So there's, you know, a big impact on labor there and on our franchise partners.

ADAM SHAPIRO: Hey, it's Adam Shapiro. And I was curious-- you do suggest several things, and I was curious about, you know, for instance, some kind of real estate assistance program in the form of rent deferral or application to the Small Business Administration for the franchisees to help cover rent. Are you hearing anything from trade associations if that's going to be included in the stimulus package that Congress is expected to pass?

ANDREW WIEDERHORN: So I think there's two angles that are really important that are out there today, and I haven't heard about the real estate one being passed. The first one is the SBA has their own disaster recovery assistance loan program up to $2 million per business if you have $8 million or less in revenue. That works really well for our franchisees that own stores where they might do $1 or $2 million a year in sales each. Of those are, like, 30-year loans at 3.75% interest. So everyone should be applying for that SBA disaster recovery loan.

The second thing in the relief package that's in front Congress today-- and hopefully gets passed today-- does involve additional loans equal to 2.5 times one month's payroll that will be forgiven after a period of time if you maintain your employee. So those are really important and available. And if passed, I think it'll be a huge help to two business owners who have employees they need to keep employed or rehire that they may have laid off already, like a number of people have had to do in the restaurant industry.

With respect to the real estate, we've suggested that our franchisees negotiate with their landlords for a three-month rent deferral, and also that the administration's going to have to give landlords some help, because they all have mortgages to pay. So they're going to need some sort of assistance with their lenders. I haven't seen that as part of the package, but I'm hoping that people will pay attention to that.

MELODY HAHM: Hey, Andy, Melody here. Just thinking about the employees and making sure to take care of them during this tumultuous time, there's been some backlash, right, from baristas, from cafe operators, from people who work at fast food restaurants, that they should now be considered essential workers during this time-- that their help also matters, and they are kind of being pulled in many different directions. What is your response to that? How do you feel as though going forward those folks can make sure to mitigate the virus actually hitting them and their families?

ANDREW WIEDERHORN: Well, so from a health perspective, you are absolutely right. Anybody who's sick should not be coming to any restaurant to work. [INAUDIBLE] contact with customers, having delivery and takeout only, I think really mitigates that factor and allows-- look, the heroes right now are the employees working in the restaurants, the delivery service providers, and the franchisee owners who are keeping their restaurants open to service that segment of the market.

And it's really important that everyone follows all good cleanliness and safety and sanitation procedures times 10 right now. But I don't think that there's exposure, really, to retail customer flow like normal using delivery and takeout. So I think that's a pretty good balance for them.

DAN HOWLEY: Andy, Dan Howley here-- I just want to ask what are you guys seeing as far as Uber Eats, Grubhub, Seamless, Caviar, the like-- are they helping these restaurants and businesses, hurting them? Are they a better partner now? I know there's some contentiousness between restaurants and those kinds of companies. What's the relationship like right now?

ANDREW WIEDERHORN: Yeah, I think the relationship is super strong right now, because everyone's pitching in to do the best. What's critical here is that restaurants stay open, that delivery service providers provide that to go and delivery service for customers so they don't just have grocery as an option. We are seeing an uptick in delivery across our fast casual brands. We normally do 40% of our business in to-go or delivery. And today, it's up probably 10 points, which is strong.

But you know, in other brands that are more casual dining, they may have done 10% or 20% delivery. And converting to an only delivery model, they can't cash flow, they can't make it work. And so I think that the casual dining segment and anything, you know, heading off of a fast casual or QSR isn't going to be able to maintain [INAUDIBLE] very long. I think fast casual QSR can maintain it longer. But you know, there's only so much rope there. And they're going to need all the help they can get from the administration.

JULIE HYMAN: Andy, just quickly here-- yesterday, Yahoo Finance spoke to Tom Colicchio. And, obviously he's talking about restaurants that are typically higher end in terms of the ones that he is in charge of. But he said he doesn't even think restaurants should be open for takeout right now. He doesn't think that the safety risk that workers could be under are worth it. What's your take on that?

ANDREW WIEDERHORN: Well, again, I think on the fast casual and QSR-- I think all of our packaging has tamper-proof labels and stickers and stuff. So the food is sealed. We know the virus doesn't travel in food. So if it's really the employees handing it off to a driver-- or you know, you can do it with no contact, right-- you can set it out, they can pick it up. I don't think that there's really that much exposure there, and I'm in favor of it for the fast casual and QSR brands.

I think on the casual dining side of things, it's hard. And on fine dining, it's really hard to make it cash flow-- meaning that you just lose so much money even participating, it's not worth it. And that's why, you know, they can only tolerate this so long.

JULIE HYMAN: Right. Andy, thank you so much for your time. Andy Wiederhorn is the CEO of FAT Brands-- appreciate your time.

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