Besides conducting Fat Shack's business, can an associate have a direct or indirect interest in a Competitive Business during their affiliation?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
mation.
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- Noncompetition Covenant. Associate covenants and agrees that, during the term of his or her Affiliation, except while conducting Company's business in a manner authorized by FSI and Company, Associate shall not, either directly or indirectly through any member of Associate's immediate family, separate business entity or otherwise:
- a. have any direct or indirect interest as a disclosed or beneficial owner in a "Competitive Business," as defined below;
- b. perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business;
- c. divert or attempt to divert any business related to, or any customer or account of Company's FAT SHACK Restaurant, FSI's business, or any other FSI franchisee's business; or
- d. divert or attempt to divert the employment of any employee of Company, FSI, FSI's affiliates, or another FSI franchisee, to any Competitive Business.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack FDD, an associate is restricted from having a direct or indirect interest in a Competitive Business during their affiliation with the company, except when conducting Fat Shack's authorized business. This restriction extends to any interest held through immediate family members or separate business entities.
The term "Competitive Business" is defined as any business that operates or franchises a restaurant or other business deriving more than 10% of its gross receipts (excluding alcohol sales) from the sale of sandwiches, burgers, and wings. However, an associate is not prohibited from owning securities in a Competitive Business if those securities are listed on a stock exchange or traded over-the-counter and represent 2% or less of the outstanding securities.
These restrictions are in place to protect Fat Shack's confidential information, licensed methods, and market position. The non-compete terms prevent associates from using their knowledge of Fat Shack's operations to benefit a competing business during their affiliation. Prospective franchisees should carefully consider these limitations and how they might impact other business ventures or investment opportunities.