How does Fat Shack collect the Royalty fee?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty1 | 6% of your Gross Sales2 | Payable weekly on Tuesday of each week based on the prior week's Gross Sales | The Royalty is for the ongoing grant of the rights to use the Marks and Licensed Methods, and on-going support. We will debit your bank account for the Royalty.3 You must meet minimum Sales Quota. See Item 12. |
| Marketing and Promotion Fee1 | None, but we reserve the right to charge up to 1½% of your Gross Sales2 | Payable with the Royalty Fee | We may collect a Marketing and Promotion Fee starting upon 30 days' notice to you. Once commenced, we will debit your bank account for amounts due.3 We may reallocate all or a portion of this fee to a Regional Advertising Program if one is established in your region. You must meet minimum Sales Quota. See Item 12. |
Before you open your FAT SHACK Restaurant, you must sign and deliver to us and your bank all documents needed to permit us to debit your bank account for each week's Royalty and Marketing and Promotion Fees and other payments due under the Franchise Agreement or otherwise. If you change your account or transfer your account to a different bank, you must notify us within one day, and sign and deliver to us and your bank new documents to permit us to debit your bank account within three days. However, we may require you to pay all amounts due by means other than automatic debit whenever we deem appropriate.
"Gross Sales" are defined as sales of any kind for all services or products purchased from or through your FAT SHACK Restaurant, including sales made for cash or upon credit, or partly for cash and partly for credit, regardless of collection of charges for which credit is given, regardless of whether sales are conducted in compliance with or in violation of the terms of the Franchise Agreement, and regardless of whether sales occur at the site of your FAT SHACK Restaurant or off-site, but excluding discounts, sales taxes, or other similar taxes and credits. "Gross Sales" includes delivery fees and revenue from the redemption of FAT SHACK gift certificates, customer loyalty cards, gift cards and other prepaid cards. "Gross Sales" also includes the fair market value of any services or products you receive in barter or exchange for your products and services.
Source: Item 6 — Other Fees (FDD pages 15–18)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the royalty fee is 6% of Gross Sales, payable weekly on Tuesday. Fat Shack will debit the franchisee's bank account for the royalty fee. To facilitate this, before opening their Fat Shack restaurant, franchisees must sign and deliver documents to Fat Shack and their bank, permitting Fat Shack to debit their account weekly for royalty and other fees. If a franchisee changes banks or accounts, they must notify Fat Shack within one day and provide new debit authorization documents within three days. However, Fat Shack retains the right to require payment through other means if they deem it necessary.
Gross Sales are defined as sales of any kind for all services or products purchased from or through your FAT SHACK Restaurant, including sales made for cash or upon credit, or partly for cash and partly for credit, regardless of collection of charges for which credit is given, regardless of whether sales are conducted in compliance with or in violation of the terms of the Franchise Agreement, and regardless of whether sales occur at the site of your FAT SHACK Restaurant or off-site, but excluding discounts, sales taxes, or other similar taxes and credits. Gross Sales includes delivery fees and revenue from the redemption of FAT SHACK gift certificates, customer loyalty cards, gift cards and other prepaid cards. Gross Sales also includes the fair market value of any services or products you receive in barter or exchange for your products and services.
This automatic debit system is a fairly standard practice in franchising, designed to ensure timely and consistent payment of royalties. Franchisees should ensure they maintain sufficient funds in their account to avoid insufficient funds fees. The franchisee must also meet minimum Sales Quota, as detailed in Item 12 of the FDD. The ability for Fat Shack to change the payment method provides them with flexibility in case of issues with the automatic debit system or concerns about a franchisee's financial stability.