Indigestion at Fatburger

The Santa Monica-based chain lost $2.3 million for the first six months of the year, while same-store sales fell 10 percent. It's already been delisted from Nasdaq, and it could go into default at any time. We're talking disaster here, and yet its CEO, a convicted felon named Andrew Wiederhorn, has been pulling in $4.6 million in salary. How on earth does the place keep going? As explained by Dorothy Pomerantz in Forbes, it's considered a cultural icon. Among the celebrity franchisees: Montel Williams, Kanye West and Queen Latifah. Other celebs are lining up. "I grew up hanging out at Fatburger," says Latifah. "So it's pretty cool to now own one."

The Fatburger chain traces its roots to 1952 South Central Los Angeles and the kitchen of Lovie Yancey. As the story goes, Yancey named her new restaurant, no more than a shack at the time, after her boyfriend, whose nickname was Mr. Fatburger. Over the next 40 years she opened 32 owned and franchised stores around Los Angeles. Yancey took a backseat in 1990 at age 78, selling a majority of Fatburger for $3 million to a British record producer. Over the next ten years he opened 15 more restaurants. Then came the celebs. Magic Johnson sponsored a $5.3 million management buyout in 2000 with help from celebrity friends Janet Jackson, David Spade, Cher and Sex and the City creator Darren Starr. Johnson proclaimed he would open an additional 100 outlets across the country. But the investment was a bust. Sales fell from a reported $33 million to $20 million in two years. In 2003 Johnson gave up and sold out to Andrew Wiederhorn.

[CUT]

In 2006 Orlando Brown, who played for the Baltimore Ravens, signed on for restaurants around D.C. Earlier this year two members of The Roots, a hip-hop group, bought a franchise in Philadelphia Hip-hop producer Pharrell Williams is partnering with Wiederhorn on restaurants in China.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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