FAT Brands Founder Faces Lender Ouster Amid Bankruptcy

FAT Brands founder Andrew Wiederhorn's control of the restaurant operator is under threat from lenders as the company navigates Chapter 11 bankruptcy. Hedge funds, including Brigade Capital Management and Taconic Capital Advisors, are seeking his removal, alleging he siphoned at least $200 million for personal gain.

Wiederhorn denies these allegations, asserting that lenders were aware of his financial dealings when they invested. A FAT Brands representative stated that government charges were dropped last year and that the lender claims are factually inaccurate. The company has faced scrutiny for using funds meant for lender repayment to cover operating expenses and for selling franchise stock without court approval.

A U.S. Bankruptcy Court judge in Houston is scheduled to rule on Tuesday whether to replace Wiederhorn with an independent trustee. This trustee would have the authority to recover any payments deemed improper.

Wiederhorn's past legal troubles include a federal investigation dating back to the early 2000s, resulting in a guilty plea for filing a false tax return and serving time in federal prison. He later returned to executive roles and built Fatburger.

FAT Brands expanded rapidly after going public in 2017, acquiring numerous franchise brands. Recent indictments from the Justice Department in May 2024 accused Wiederhorn and other executives of tax evasion on compensation loans and using company money for personal expenses. However, these Justice Department charges were dropped last year.

The company filed for Chapter 11 bankruptcy after a subsidiary of Jefferies Financial Group sued for alleged default. During bankruptcy, FAT Brands employed eight of Wiederhorn's family members in senior roles. Lenders contend that Wiederhorn failed to secure court approval for selling equity in the Twin Peaks franchise shortly after the bankruptcy filing.