Andrew Wiederhorn – President and Chief Executive Officer Ron Roe – Chief Financial Officer.

James Anderson – R.F. Lafferty Adam Wyden – ADW Capital Lenny Dunn – Mutual Trust Company of America.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the FAT Brands Inc. Second Quarter 2018 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. The lines will be opened for your questions following the presentation.

Please note that this conference is being recorded today, August 7, 2018. On the call today from FAT Brands, we have Andy Wiederhorn, President and Chief Executive Officer and Ron Roe, Chief Financial Officer. I would now like to turn the call over to Mr. Ron Roe to begin..

Thank you, operator and good afternoon, everyone. By now you should all have access to our earnings release, which can be found on our Investor Relations website at ir.fatbrands.com in the press release section. Before we begin, I need to remind everyone that part of our discussion today will include forward-looking statements.

These forward-looking statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. Actual results may differ materially from those indicated by these forward-looking statements due to a number of risks and uncertainties.

We do not undertake to update these forward-looking statements at a later date and refer you to today's earnings press release and our recent SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition.

During today's call, we may discuss non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Reconciliations to comparable GAAP measures are available in today's earnings release. I would now like to turn the call over to Andy Wiederhorn, President and Chief Executive Officer.

Thank you, Ron. Good afternoon everyone and thank you all for joining the call today. Since our IPO, we have discussed the massive opportunity that FAT Brands has to grow, both organically and through acquisition. We're very pleased with the progress we have made against our asset-light growth strategy.

Early in July, we closed on our previously announced acquisition of Hurricane Grill & Wings. This concept shares our commitment to providing high quality made-to-order meals and serves as a wonderful compliment to our Buffalo’s Cafe and Buffalo’s Express brand.

The integration onto our brand platform has been smooth and Hurricane has ramped very quickly to nearly full synergies. The capital we raised over the last couple of months, not only enabled the closing of the Hurricane acquisition, but it provides dry powder for additional accretive acquisitions in the future.

We’ve developed a strong and actionable pipeline of brands for acquisition. In evaluating potential targets, we look for authentic American brands that we can credibly sell to new franchisees around the world and cross-sell to our existing franchise partners.

We look for long track records of sustainable operating performance and steady cash flow and brands with healthy franchisee relationships. We target a modest multiple of franchise level cash flow valuations to ensure the acquisitions are immediately accretive to our earnings prior to anticipated synergies, which can be significant.

We continue to believe the marketplace has many strong brands that could be turbocharged through our platforms scale and efficiency and we are actively working on additional transactions. Turning now to our results.

We are pleased with second quarter results, which demonstrated continued business momentum with positive same-store sales growth, across all of our brands.

Our Fatburger segment, which is comprised of both Fatburger and Buffalo’s Express restaurants, continued to significantly outpace the industry, achieving 9.5% system-wide same-store sales growth in the second quarter, including 4.2% transaction growth.

We saw continued strength in California, where same-store sales grew 12%, driving strong domestic same-store sales growth of 8.9% in the quarter. Our outperformance of the industry continues to be fueled by strong momentum in delivery, as well as, by increased traction of the Impossible Burger.

The plant-based Impossible Burger that smells, cooks, tastes and believes like beef has been popular with both our vegan and median guests alike, as we see acceleration in the consumer trend towards healthier and plant-based options. Our Buffalo’s Cafe segment saw strong same-store sales growth of 10.2% in the quarter.

This significant acceleration from the first quarter trend can be attributed predominately to strong results in our recently relocated, Hamilton Mill, Georgia location, which is running at twice the average unit volume of the restaurant in the old location.

Additionally, we had success in several sales driving initiatives, including our summer pork fest campaign and the recent introduction of new to-go packaging and third-party delivery.

We continue to be very pleased with the successful acquisition and integration of the Ponderosa and Bonanza Steakhouse brands, which are now operating at full synergies. During the quarter, same-store sales grew 0.9% system-wide.

The growth was driven by strength in our Puerto Rico locations, which were heavily impacted in 2017 by Hurricanes Maria and Irma. We currently have 24 stores open in Puerto Rico, with one still under construction following hurricanes. Same-store sales in our Puerto Rico restaurants were up 13.8% in the quarter.

Also driving sales in the quarter were a new media campaign test and a pilot of new to-go packaging and third-party delivery. We look forward to updating you on the progress of these tests on future calls. We have an active development pipeline across our portfolio of brands.

During the second quarter, franchisees opened four co-branded Fatburger, Buffalo’s Express locations, one in Japan, one in the Philippines, one in California and one in Canada. At the end of the quarter, we had a total of 274 restaurants across all of our brands.

Our franchisees currently have 48 restaurants in various stages of planning and construction and remain on track to open approximately 25 units in 2018 globally. We continue to actively seek development deals with both new and existing franchisees around the world.

During the quarter, we announced a new development deal with an existing franchisee, PT. Global Food Indonesia to open at least five co-branded Fatburger, Buffalo's Express locations in Bali and Jakarta. We also announced a new development deal in Singapore to open three Fatburgers.

Our robust pipeline continues to grow as we cross-sell new brands to our global franchise base and our momentum generates interests from franchisees around the world. In summary, we believe that the FAT Brands system is poised for growth.

The financing we have secured, enabled the completion of the Hurricane acquisition and provided dry powder for future accretive transactions. Our asset-light platform is highly scalable and we're actively working to evaluate a number of attractive brands to add to our system.

Our existing portfolio of brands is strong and demonstrating impressive business momentum. We have a robust and growing development pipeline and we're ready to take our growth to the next level. We don't believe it makes sense to walk you through the line items of our financials, as we don't have comparable data from the year ago period.

However, please feel free to ask any questions about our results in the Q&A. Operator, please open the line for questions..

[Operator Instructions] The first question is from James Anderson of R.F. Lafferty. Please go ahead. Mr. Anderson your line is open.

Hey Andy, congrats on the strong same-store sales growth across the franchises. I was wondering with regards to the Ponderosa and Bonanza franchises, you mentioned that they are now operating at full synergies in terms of top line progress.

How much more room do you see there being for improvement? Or do you think we are closer to a steadier state where growth is fairly incremental?.

Well, I think domestically there's plenty of room for improvement in same-store sales and top line revenue. Of course, we're experiencing very strong growth from the Puerto Rico base and that's partly a function of water and power and other things not being 100% across the island, so people go out to eat more.

But domestically there a number of initiatives that we're working on and a few that are in process and we really want to see same-store sales grow domestically as well..

Okay, great. Thank you. And you mentioned that you were looking at a number of acquisitions to continue growth in the near term. I was wondering, if you could give us any sort of color on the kind of change you might be looking at in terms of food, you know the Hurricanes acquisition had some synergies because of the existing Buffalo's footprint.

But I was wondering, if your strategy going forward would be to continue to emphasize those synergies or maybe to diversify the product base at all?.

Well, it's a really good question. I can give you a little color, but not a lot of color. There are other burger brands we’re looking at, there are pizza brands we’re looking at, there are other chicken brands we’re looking at.

The timing of any of those acquisitions is up in the air based upon our diligence, additional financing and coming to terms with the sellers.

But to say it differently, ultimately we want to be more diversified in terms of the types of food products we have in our portfolio, which would mean you'd want sandwiches, you might want pizza, you might want coffee or desert, things like that, so you have a well-rounded portfolio.

But as you point out, it's very easy to add more chicken wings concepts and to roll those up would make a lot of sense and it's easy to add more burgers, we’re in both of those businesses already. Adding more steakhouse units is a little bit more complicated because the menus are so large, but all those things are on the radar for us to look at..

Okay, great. And then one last question in terms of execution on the capital raises and on the acquisition side, you guys obviously recently closed the Hurricanes acquisition.

But it ended up taking a little bit longer than you initially forecasted and the capital raising to fund the acquisition was somewhat choppy with talks with one party you seem to reach a late stage and then not coming to completion at the very end and then following that several small raises.

How do you expect be capital -- the one the capital raising to go in the future? And how do you think you’ve improved your acquisition process, so that it can be more reliable..

I think that you'll see this be a much smoother process going forward, having done a few of these now both the financial market understands and reflects upon it as you know you see one lender do it. It's easier to get another lender to come in and either take out the first lender or participate as we grow.

So, I think that it'll be an easier experience for us going forward with our existing lenders and possible future lenders. From the acquisition standpoint, we definitely have a process that we go through now that's fairly organized.

Sometimes it's complex because there are issues that are outside of our control that the franchise owners themselves have to get organized before deal can be done.

And there's just a little bit of waiting and patience to sometimes massage everything into place and that's -- it's not quite like a real estate purchase or a simple asset purchase because you’re kind of buying a moving target with franchisees and franchise owners.

And so the timing is a little bit up in the air, but I think it will be much smoother going forward, I think you’ll see us make one or two additional acquisitions before the end of the year..

Great. Thanks for that..

The next question is from Martin Cowen [ph], a Private Investor. Please go ahead..

The question is the last time we spoke you had mentioned that there was some talk about the merger of the Fog Cutter into the FAT Brands. And I was just wondering if that's still in place? And how would that affect us, who do own a lot of Fog Cutter and some Fatburgers too..

Sure. I can't comment too much on Fog Cutter because it's not reporting to our company, but FAT Brands is in talks with Fog Cutter to work on this anticipated merger. I expect that it's something that we can bring to the shareholders in the fourth quarter.

There are some complexities both stock exchange and tax related issues that we're trying to iron out, but both boards are actively working on it and I expect that we’ll make progress before the end of this quarter and hopefully be in a position to have a shareholder vote in the fourth quarter.

There's a notice period and things like that, so if we can pull it together we'll get that done this quarter and try to tee it up for Q4, but you never know, right, things can go wrong. The regulators can say no so, we have to proceed on that basis..

So, there’s really no sense in asking the question, what would be say the Fog Cutter shares be worth at that point..

You're right. There is really no sense knocking into that question because I can’t answer it..

I understand. Anyway great job. Lots of good luck in the future..

Thank you..

The next question is from Adam Wyden of ADW Capital. Please go ahead, sir..

Hi, Andy, just couple of quick questions. So, you guys targeted an annualized revenue run rate of $19 million to $20 million and annualized your run rate of $10 million to $11 million. I think it will be helpful for me and maybe some other people to kind of bridge what you reported to kind of that number.

And I think you’re annualizing like, I don't know 3.3. I know that doesn't include Buffalo's, so maybe if you could just bridge like the each value box plus the synergies to kind of that, I think that would be helpful..

So, Adam, I think that you'll see Q3 and Q4 have you know significantly higher earnings of course, because of the Hurricane acquisition and potentially another one. But the numbers that you're talking about referenced, just with the Hurricane acquisition.

And I think you'll see a jump to closer to $2 million for Q3 and then even higher than that in Q4 just as some additional stores come online. There's a number of them in Q3 and Q4 that will open sort of back-ended for the year, approaching a good 25 stores, I think we only have eight of them open now.

So, we have just a ton of openings teed up over the next few weeks and a couple of months. And then of course, Hurricane itself having all those revenues and some new stores in their system, so it kind of jumps up significantly in Q3.

Also, a couple of things to point out; the franchise fee income recognition comes from both new store openings and also previously received revenue from territory agreements that expire or get terminated from an exclusivity standpoint and Q2 was a light on that and Q3 will be heavy on that, it'll smooth out for the year.

So, there's going to be more franchise fee income recognition in Q3 that’s certain that's already happened that will be reflected shortly in our financials for Q3 on top of additional royalties from new store openings..

So, in the second quarter, you get all this -- are you getting all the synergies from Ponderosa and all the legacy assets? I mean, what you're saying is okay, well the second quarter we annualized in 3.3, it's a little bit light on a couple of things front.

Are there still costs [ph] in the second quarter that or is that kind of fully synergized number..

There's very little incremental cost savings on the Ponderosa and Bonanza side, maybe $15,000 or $20,000 a month that we will pick up in Q3 that we didn't have in Q2, but that's it. We're down to full synergies really from a practical standpoint.

Now on the Hurricane side, it's a much, much, smoother faster cut over, nothing like Ponderosa and Bonanza were in and that was just a very complicated system to absorb. There was severance involved, there were leases to run out.

There were systems to put in place that weren’t in place before like ACH in [ph] franchisees and collecting royalties and using less staff to collect that money because it becomes automated. So, we don't -- and on the Hurricane side all those things are already in place, so it's a very quick pop to us.

We closed on the Hurricane acquisition on the first or second day of the new quarter, Q3. So, we're going to get a whole quarter's worth of revenue there, with very little expense. There will be some transition expense, but it's all pretty much eliminated by August 15th, so we really have a lot of the synergies already in place now as of today..

So, what percentage of like the incremental, you think is synergy versus new store openings to get to the 10 or 11. Like if you say like the numbers really form, you’re really annualizing $4 million today, if you're saying the number on the second quarter is a little bit light on a couple of things.

How much of the incremental 6 or 7 is really synergy versus new store openings, if you got to ask me 50-50?.

Well, it’s not just -- it’s also a new revenue because it didn't include -- the previous quarters didn’t include the Hurricane revenues.

So, you have $1 million a quarter of the Hurricane revenue and then you have $0.5 million of franchise fees and then you have another $0.5 million or so of increase in royalties, you know just sort of rounding it there. So, it's a combination of those things..

Got it. So, you feel confident that 10 to 11 is reasonable, it's not banking on a lot of new store openings, you’re saying, a lot of it is bank [ph] cost and basically revenues from bank synergies plus the actual addition of Hurricanes..

Yeah, I mean, I’m confident that the 10 to 11 is achievable. I’m confident that majority of it is in the bag already from the acquired revenue and the franchise fees that I am aware of already that have been recognized in the quarter or will be recognized in the fourth quarter from a GAAP standpoint couldn’t be recognized previously.

New store opening is just a small portion of it, but it does make up a real number and those stores are all under construction. These aren’t things that people might build at some point and open at some point. These are stores that are about to open, they’re in training already, things like that.

They're absolutely going to open, have dates that are hard on the wall for our teams to go and help open them..

Last question, can you give us like an estimate of kind of where -- I know you had a lot of financing transactions, so I’m just going to quote up [ph] can you kind of give us a sense that kind of where net debt is? And kind of what is your -- like what is your borrowing base like to do more deal? Like how much, kind of where you kind of on a net debt basis? And how much can you borrow to kind of buy other things at this juncture?.

Well, today there is approximately $5 million in cash and $16 million in debt, not including the preferred stock instrument that's out there, which is -- there’s $10 million of senior preferred stock and then there’s another $4.5 million of acquisition preferred stock.

But in terms of our dry powder for acquisitions, we think we have substantive borrowing ability, both to leverage the cash that we have on hand. Make -- some acquisitions will also be with additional what I'll call acquisition preferred stock or subordinate preferred stock. So, I think we have at least $10 million of purchasing power on hand.

And then there's the opportunity to expand our facility. So, I think we have a lot of room to go here. We will not experience the same. Let me say, differently also, we will not experience the same sort of six months lag for financing and acquisitions that we did in the first half of this year.

You know that we spend a bunch time with the lender and had to start over and that was just unfortunate and annoying.

But fortunately, we were able to get to the finish line and then we just had a few administrative things that had to be in place for the sale to be completed because it's not always up to us, sometimes the seller has to be ready and in this case there were some things that dragged on. So, I don't expect that to be the case going forward.

It was important to us to get the Hurricane acquisition completed before we got too tied up in anything else and now that's all behind us.

All those things that we said we would do, they’re done and we're very focused on squeaking out every drop of EBITDA we can from the existing portfolio, growing the revenue base and then really spreading out the acquisition opportunities that have been presented to us..

Right. So, you guys, you gave some stock, I guess, in the news release, you guys exchanged some stock for some of the original Fog Cutter debt.

What efforts have you guys been working on to kind of get the stock value, I guess, in line with other consolidators or other people that have new store openings? Do you think that there are things a company can to do to kind of narrow the valuation gap? I mean, how are you guys looking at that? And I was kind of curious about that because it seems like you guys have an opportunity to use the stock if you can get it appropriately valued..

Absolutely, that’s a goal. I think printing EBITDA, I mean, when I say printing, I mean, real EBITDA, measurable EBITDA like you’ll see in Q3 will be meaningful to third parties on the sidelines looking at how much -- how close are we at $10 million, $11 million run rate, that's important. Increasing our flow is somewhat important at the right price.

The merger anticipated with Fog Cutter will help do that to some extent. I think using preferred stock like we have for acquisitions in the interim because there's a hangover of the Fog Cutter. FAT Brands ownership position to use the tax benefits and not go below 80% for Fog Cutter.

Once that merger takes place we’ll be able to use common, but for now we've been able to use preferred stock effectively and it's worked well for – with our lenders permission as well. And so, I think that ultimately is convertible at whatever price, a premium to market for the party receiving it.

But it's definitely the right way to go about leveraging the use of our cash. Meaning that if we can purchase people with hard cash and part stock whether its preferred or common at the right price that will help ultimately us maintain a relatively low leverage balance sheet, I think that's important for people as well.

And then we need additional research coverage, just so there’s additional point of view and disability. And so exhibiting at some conferences, I think will also help to get a broader base of people looking at stock.

And we're going to try to do all those things to try to raise ourselves out of, what I often call microcap hell, it's just have been ignored because we're so small..

All right. Well keep it going. Thank you..

Thank you and congratulations..

The next question is from Lenny Dunn with Mutual Trust Company of America. Please go ahead..

Good afternoon and I'm pleased with the presentation that you’ve put out. I do have a couple of questions and one of the reasons we're in the stock and we we’ve been in for about three months now is that we're getting paid while we’re waiting and we appreciate that a lot because this could take a little while.

Everything just takes some numbers and people expect and I don't wish any bad luck on you, but the chances are that things will. So, getting paid while we're already makes it extremely attractive investments. And in previous calls that I did listen to, you said that you certainly have plan to pay the dividend, I didn't hear that this time.

So, I’d like to hear that, it would give me some peace of mind..

First of all, we do plan to continue paying the dividend absolutely, so please rest easy..

Okay. Thank you. And then the other thing is that I understand the concept of making all these acquisitions and I think that it’s smart. But I would caution you to do it in a more deliberate fashion going forward because still there will always be opportunities out there.

And if you try to do too many at one time, do you feel you have the management team in place to help all these things get set up at once. Or wouldn’t it make more sense to do, one every three months rather than trying to rush in do a whole bunch in one time..

Well, I appreciate that advice. The last acquisition we made was nine months ago, that was the Ponderosa and Bonanza chain as part of the IPO and we worked on that deal for more than a year, preparing for it. And then six months ago or seven months ago we announced the acquisition of Hurricane, which we just closed a few weeks ago.

So, we’ve really only done one a year and not one every three months. But going forward, it depends on what opportunity presents itself, but certainly we don't want to take on more than we can.

The thing that it's interesting as to one of the questions was asked earlier I think by James Anderson at Lafferty was, what type of brand might we acquire and to acquire another burger brand or to acquire another chicken wings brand or another steakhouse brand.

Those are pretty easy, right, our management team is already managing those types of businesses, so we know what the issues are, we know what to look for, it’s easy to absorb.

If we acquire something different, that's dramatically different than that will be a little bit harder to swallow and to integrate into our platform, not from a financial standpoint, but just from boots on the ground, operationally and marketing wise, making sure that that all the brand standards are met.

And that the market initiatives are being deployed effectively. So, that's good advice and it really applies when we talk about different food categories and to our advantage its one of the same food category..

No, I understand and even if to say, and there’s only so many places you can be at the same time. So, it has taken, I guess, what I'm saying is that rapid expansion should not be the priority.

The priority should be intelligent, deliberate expansion and it sounds like we're on the same page, but I’m just throwing that out there and I just don't want to see you in the situation where you’re spread out a little too thin and I think that the opportunities out there for different franchises are going to keep coming.

So, you're going to have some of in another year, and other year and other year because it’s a very difficult field. I think it that other people's failures will give you opportunities..

Understood. Thanks for the comment..

The next question is from Greg Fortuna [ph], a private investor. Please go ahead..

Hey guys how are you today..

Good thanks. Hi, Greg..

Good. How are you Andy? A couple of questions, I guess, first thing, let's just look at the earnings release.

You tightened up a couple of things, you raised your revenue estimates a tiny bit and you sort of rather than committing to the $11 million that you were coming to you widened it to $10 million to $11 million or was it just getting more comfortable with the numbers or was there something in there?.

Well, there are fewer Hurricane restaurants today than there were originally a year ago when we were negotiating with Hurricane, so that lowers the revenue and lowers the EBITDA by just a slight amount.

There's some restaurant closures, five or six over the last 12 months or so that weren't necessarily in place initially in November of 2017 played out that guidance, so, that's just changed a little bit.

There’s also the change in GAAP income recognition that was not in place at the end of last year, that is -- went into get place in January, which is just the recognition of franchise fee income.

So, adjusting for that as companies had to start reporting their revenues and their EBITDA was that amortization of franchise fees, rather than initial recognition. So, everybody switched their method of reporting that. For us, it was just a few hundred thousand on the income side.

So, that that lowers it by just a few hundred thousand and the number of stores lowers it by few hundred thousand and that's really the reason for the range. And you know look its pretty close, if it’s a few hundred thousand one way or the other, it's not going to be a big deal.

But the bottom line is it’s a very big number, it’s very positive and our same-store sales are growing nicely, so I feel very good about things. Businesses has really never been better..

Okay. Now on an annualized basis, once everything's in there and you got to that $10 million to $11 million EBITDA run rate, what do you think -- what's the free cash flow going to be..

It’s more than, I mean, it's more than half of that, if you -- your debt service, you have debt service on the preferred stock and debt service on the debt and that's about around $4 million and you have the common dividend.

And whether that’s paid, of course, it’s going to be paid in cash to all the public shareholders in another $1 million and then you have the portion payable to Fog Cutter.

So, there’s more than enough debt service coverage you pay everything in cash, but its anticipated that for now -- Fog Cutter will continue to reinvest into stock of the business, so, they take cash out of the business and that's also subject to certain requirements that the senior lender has in place.

So, there's a lot of excess debt service coverage today in the way it’s structured, we’re anywhere close to any kind of a covenant..

Well, I was just trying to figure out like balance sheet up, like so what will go to the -- like just free cash flow.

So, I couldn’t keep up with you, you were going a little fast, but so if you did $10 million and your debt service is about what do you say $4 million?.

It's about $4 million, if you are combining the senior debt and the preferred stock and acquisition stock. So, there’s a lot of cushion in there, yeah..

So, you'll have $4 million of free cash flow, $4 million to $5 million of free cash flow..

Yeah, a little bit more than that..

Okay. So, let's talk about the debt for a minute. You’ve raised the money, you and I have spoken, we both agree that the debt interest rate is extremely high. And I think the largest portion had an 18 month term, I assume you're already -- that was done for a short period because you were going to renegotiate and get cheaper debt.

Do you have any idea just on current conversations where that could go to?.

Well, the facility is a two year; facility not an 18 month facility that's in place now and the preferred stock has a five year maturity, so we have a lot of time on the preferred stock, that's more permanent capital.

The debt facility when -- first of all we have available dry powder to leverage with some stock in another acquisition and then in terms of growing that facility or letting that facility serve as a bridge loan and finding some other lender to take it out as if it doesn't grow, those are both options.

The current lender was he got a very open mind and is flexible and also looking for us to make the right, responsible decisions. And so, as we progress along here, it's only been a month as we’ve progressed along here. I think we have an open dialogue and we'll work through what’s best. There's no hurry to refinance this out.

It’s expensive, every time you go to the market, there's banker fees, there’s legal fees, there's some prepayment penalty, so there’s no hurry to do that unless there is an acquisition that presents itself or some other opportunity that presents itself where it requires that we refinance the current senior lender because either they don't have the interest to go to a different number or the capacity or don’t want to take the risk or whatever.

So, that's a little bit of a -- it's fluid, but we have very open dialog and I think we have a lot of flexibility there..

Well, I'm just more focused on the rate you're paying. It seems quite high relative to the market. So, I guess, the question really becomes what’s your plan to get that down. I mean, 5 or 6 points on the amount of money you’re borrowing brings a lot of money to the bottom line relative to the earnings at this point..

Right, I completely understand the question and as I said to you to immediately go refinance the debt means there’s prepayment penalties as well and there will be new banking fees or fees to bring that in place. If we could have completed the transaction at a lower rate, we would have completed the transaction at a lower rate.

The fact that we had to complete it where we did was just representative of being a new public company. And you know be rather small and the acquisition strategy or roll-up strategy being something that most people haven't done and executed on in the U.S. There’s, of course, MTY in Canada that has, but that's a Canadian company.

So, again, it's very much at the front of my mind, but it's also practical, just to go refinance it tomorrow means we're going to pay a lot of fees to do that and you have to factor that in..

Okay. But if you were to do another deal, if you go somewhere else to get lower fees or you're stuck with current lender? Or I mean, clearly every time you borrow money and pay your interest and prove that you have -- the numbers it should be easier to get better rates. But in any case, we could just move on with that one.

I have another question regarding the valuation, someone asked this earlier. Can you give us an idea of where we should be thinking about this as far as other comps, you mentioned MTY, but that's in Canada. So, anyone else in America that you would compare yourselves to, I know most companies are trading at a much higher EBITDA level than you are.

So, who can we look at and think about? Or who do you look at or who do you paying to achieve their level?.

So, there are quite a number of asset-light organizations, they’re just mostly pure plays. But if you look at the whole sector, either you can look at the burger guys that are asset-light, you can look at all the asset-light or franchise order driven models collectively.

They all trade in the 15x to 20x multiple and times you know at 2019 number at this point in time.

So, even if you are very conservative and you take 10x, right, you take 10x our 2019 number, which I expect will be in excess of that $10 million to $11 million where you know dollar kind of share number, you can apply -- you immediately get to at least the IPO price of $12, if you apply, 15 multiple, then its significantly higher, right, it’s an $18 share price.

So, I think there's tremendous amount of room for growth here. I think the dividend yield at the current stock price is off the charts, so it's very attractive as one of the earlier caller said, you're being paid to wait. But increasing the ability for investors to acquire the stock and ride that growth is a key focus of ours.

Showing the real EBITDA as quickly as possible is one of the things we need to do, increasing the flow is one of the things we need to do. Having a little bit more coverage, it's arguable whether that's something we need to do, but sometimes the second opinion helps. People get comfortable, so all those things are -- we're very focused on.

But I think really growing absolute EBITDA is critical.

And I think the merger where both boards are working very diligently to complete that and get that done and provided we’re able to do that I think it takes a little bit of an overhang off of the other company's growth prospects because then there’s no ceiling in terms of how much as a company Fog Cutter owns and how much the public can own.

And once that goes away then there's sort of a clear path. I think from Fog Cutter’s perspective, the Fog Cutter shareholders would be happy owning 50%, not 80% or 40%, not 80% of a much larger company, than 80% of the small company. So, I think there's a lot of focus to get that done.

It's good for everyone and that's – we’ve completed a lot in the last 12 months, obviously, the only restaurant IPO still in the last three years to get done in the U.S.

But completing the acquisitions of Ponderosa and Bonanza and now Hurricane and getting the financing done of preferred stock component done, I think it’s important and now we really want to get through the fourth quarter and get these other initiatives done. So, that there’s a very clear path to let that multiple expand on the business EBITDA..

Yeah, clearly, you said, you’re in small cap hell, there's no real fire, you're too small for the big guys and even a small guy can't really get that much stock, so it is a difficult position. Okay, one more question in your presentation, you mentioned a number of times, growth opportunities from delivery packaging and delivery.

Can you discuss just the delivery trend, where you see it going, who you are partnered with and you know that area?.

You bet. So, delivery has been a driver for us for several years. We are one of the pioneers in the delivery field. Our marketing guys got us deeply involved as a pioneer partner with Uber Eats, Postmates, Grubhub, DoorDash all those guys. And it's just -- there's several things that are really important to remember about delivery.

It makes up about 16% of sales for those brands that are on delivery and those restaurants that are actively on the platforms. But it also raises your average check by a good 25%. So, that means people who are ordering delivery spend more than people who are standing in line at the counter.

The other thing to note about delivery and something that many of you’ve heard me say on the road show before is that when you -- in the old days all these restaurant companies would make their own delivery apps and it would be a proprietary app and you’d spend $50,000 or $100,000 every six months to make an app or update your app for your customers to go and order from you.

But on the delivery service platforms that I just mentioned, the delivery service providers program the app and put it on their platform. So, they take care of all that technology and that cost.

Furthermore, the user base is not just Fatburger or Buffalo’s or Hurricane or Ponderosa and Bonanza’s customers, it's every user that's part of the delivery service.

So, for example, in Los Angeles on Uber Eats, just as an example, we have their 3 million customers looking at our menu, when they pop open the Uber Eats app instead of Fatburgers 250,000 customers that are looking at the Fatburger app and so that's one thing that delivery has done.

It’s an advertising vehicle in and of itself in terms of exposing you to a much bigger customer base and I think that that continues.

And you can make the comparison to the types of foods that travel the worst and travel the best in delivery and we all know that pizza travels the best for delivery, right, put it in a hot bag and it shows up hot and there’s not really much to it.

And, of course, the things that travel the worst in delivery are burgers, shakes and fries, and yet we’ve done the best we can to improve our packaging, the delivery services by going direct door-to-door from the restaurant to the customer. The food arrives hot, the milkshakes are still cold and the fries aren’t soggy.

And customers have a little bit of elasticity to absorb. Food that’s delivered versus sitting down eating it right at the restaurant. So, I think those things make a difference. You have to invest in packaging.

There's a lot of sponsorships you can do with the delivery companies to sort of get the algorithm to make you a more popular brand for a given promotion. You know like free delivery on certain holiday or National Burger Day or whatever to increase your awareness. But that's a real opportunity it’s a gift that’s going to continue to give.

We're also focused on CapEx now. We've had very good CapEx returns, meaning that when we’ve had franchisees reinvest in their restaurants, whether it's a facelift or a remodel, the whole spectrum there, we've seen increases between 40% and 100% for the franchisees that do that.

So, it's a big initiative for us to get our franchisees to reinvest in the restaurants and it’s proven itself over and over again. And I think that will be a big focus for us moving into 2019..

Okay.

In the delivery, you said, 16% of sales of stores that do delivery and what percentage of stores do delivery?.

Well, on the Fatburger side it's almost 100% domestically, not every market has delivery services available, but it's a large, maybe it's 90%. In the Ponderosa and Bonanza businesses we’re testing right now, it's a small number, maybe 10%. Buffalo's is also testing, and maybe half of the Buffalo’s.

And on the Hurricane side, they're just signing up for the delivery service in some markets, but in other markets it’s a 75%..

So, what percentage are you thinking like, could it be 25% next year of the sales of the stores that have it? Can it grow that much or is it sort of --?.

No, it could grow by 25%, so that would mean growing from like 16% to 20%. I don't know if it goes all the way to 25%, but look it surprises every single year. So, I'm really not sure how that -- it's just I’m just reaching to give you a number..

Okay. Thanks for your time. Keep up the good work..

Thanks for the questions..

I'm happy to be buying your stock every day. I'm excited for the future. Thanks so much..

This concludes the question-and-answer session. I'd like to turn the call back over to Andy Wiederhorn for any closing remarks..

Thank you, operator, and I'd like to thank everyone, again, for joining the call today. Please feel free to reach out, if you have any further questions. Everyone have a great afternoon..

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day..