What is the dependency for maintaining the Protected Territory for a Fat Shack franchisee?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
Subject to the paragraph below regarding Captive Audience Venues and Special Venues and Channels noted below, you will be granted a geographic area around your Restaurant Location (the "Protected Territory") in which we will not operate, nor permit a third party to operate, a FAT SHACK Restaurant as long as you are in substantial compliance with all the provisions of the Franchise Agreement. The Protected Territory is an area encompassing a three mile radius around the FAT SHACK Restaurant as measured from the front door of the Restaurant. A FAT SHACK Restaurant at a Captive Audience Venue does not have a Protected Territory.
You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
We reserve the right, regardless of location, including a location within your Protected Territory, for us and our affiliates to market, offer, and sell, and to authorize third parties to market, offer, and sell, any and all products and services (i) through venues and channels of distribution other than franchised
and company-owned FAT SHACK Restaurants, including but not limited to grocery stores, wholesale distributors, coffee shops, restaurants that are not FAT SHACK Restaurants, offices, hospitality and food service venues, or through retail store display, catalog sales, Internet and other electronic methods, and catering (collectively, "Special Venues and Channels") and (ii) in FAT SHACK Restaurants located in captive audience venues (collectively, "Captive Audience Venue"). Examples of Captive Audience Venue locations include airports and other transportation hubs, hospitals, convention centers, grocery stores, department stores, "big box" retail centers, resorts, sports arenas and stadiums, hotels and office buildings, military installations (Army and Air Force Exchange Services), and food courts. The products and services available through Special Venues and Channels and in a FAT SHACK Restaurant located in a Captive Audience Venue may include those that are the same as or similar to those which you will offer and sell, such as our branded and exclusive "FAT sandwiches," or entirely different services and products.
Source: Item 12 — Territory (FDD pages 36–39)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, maintaining a Protected Territory depends on the franchisee's compliance with the Franchise Agreement and meeting a minimum sales quota. Specifically, Fat Shack grants a geographic area around the restaurant location, the Protected Territory, in which they will not operate, nor permit a third party to operate, a Fat Shack Restaurant as long as the franchisee is in substantial compliance with all the provisions of the Franchise Agreement. The Protected Territory is an area encompassing a three-mile radius around the Fat Shack Restaurant, measured from the front door of the Restaurant.
However, this Protected Territory is not exclusive, and franchisees may face competition from other franchisees, company-owned outlets, or other channels of distribution. Fat Shack also retains the right to market, offer, and sell products and services through various venues and channels, including grocery stores, convenience stores, and the internet, even within a franchisee's Protected Territory. Additionally, Fat Shack Restaurants located in Captive Audience Venues do not have a Protected Territory.
Besides compliance with the Franchise Agreement, franchisees must also meet a minimum Gross Sales quota. Beginning on the earlier of the opening of the Fat Shack Restaurant or one and one-half years from the date of the Franchise Agreement, and for each 12-month period thereafter (each period being a "Sales Quota Year"), the franchisee must generate a minimum in Gross Sales. The Sales Quota varies depending on the year of operation, starting at $350,000 for the first and second years, increasing to $375,000 for the third and fourth years, and then to $400,000 for the fifth year and thereafter. Failure to meet the Sales Quota for any two Sales Quota Years during the term of the Franchise Agreement gives Fat Shack the right to terminate the Franchise Agreement.
Other than meeting the Sales Quota, the continuation of the rights described in Item 12 does not depend on achieving a certain sales volume, market penetration, or other contingency. Fat Shack also retains rights to use and license others to use the Marks and Licensed Methods for the operation of a Fat Shack Restaurant at any location other than in the franchisee's Protected Area, other than a Captive Audience Venue outlets. They can also use and license the use of alternative proprietary marks or methods in connection with the operation of other businesses under names which are not the same as or confusingly similar to the Marks.