What accounting principles must be used when preparing financial statements for a Fat Shack restaurant?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
anchisee Reports
Franchisee shall, at Franchisee's expense, provide to FSI financial and accounting reports in the manner and form FSI requires, including:
- a. Any reports, including sales reports by product category, data, information and other supporting records on such forms and at such frequency as required by FSI from time to time;
- b. Within 15 days after the end of each month, an income statement of Franchisee's FAT SHACK Restaurant for such month and for the fiscal year to date, prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied, in FSI's recommended format; and
- c. Within 90 days after the end of Franchisee's fiscal year, which shall be the calendar year, an income statement and balance sheet of Franchisee's FAT SHACK Restaurant for such fiscal year (reflecting all year-end adjustments), and a statement of changes in cash flow of the FAT SHACK Restaurant, prepared in accordance with GAAP, consistently applied, and in FSI's recommended format. FSI reserves the right to require that Franchisee have reviewed financial statements prepared on an annual basis by an accountant.
All financial statements required by this Article 16 shall be in on a form acceptable to FSI. If Franchisee fails to provide such financial statements more than two times in any 12-month period, then in addition to any other remedies, FSI may require Franchisee to use a bookkeeping service as designated by FSI.
16.2. Financial Records Use and Access
FSI reserves the right to disclose data derived from all financial and accounting reports received from Franchisee.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, franchisees must adhere to specific accounting principles when preparing financial statements. Specifically, franchisees must prepare their income statements in accordance with Generally Accepted Accounting Principles (GAAP). This standard applies to both monthly and annual financial reports. The financial statements must be consistently applied and presented in Fat Shack's recommended format.
This requirement ensures uniformity and comparability across all Fat Shack franchise locations, allowing Fat Shack to effectively monitor the financial performance of its franchisees. It also enables Fat Shack to create financial performance representations based on franchisee data. Franchisees are responsible for covering the expenses associated with these reports.
Franchisees must submit monthly income statements within 15 days after each month's end and annual financial statements, including an income statement, balance sheet, and statement of changes in cash flow, within 90 days after the fiscal year's end, which aligns with the calendar year. Fat Shack retains the right to demand that an accountant review the franchisee's annual financial statements. Failure to provide these financial statements on time more than twice in a 12-month period may result in Fat Shack requiring the franchisee to use a bookkeeping service designated by Fat Shack.
Furthermore, Fat Shack has the right to disclose and utilize the financial data submitted by franchisees. This includes using the data to prepare financial performance representations, sharing the information with other franchisees, and sharing the data with other parties as Fat Shack deems appropriate, without needing further consent from the franchisee. Franchisees are also required to maintain all financial books and records, including supporting documentation, for at least five years, ensuring compliance and auditability.