Can Fat Shack engage in activities not expressly prohibited in the agreement, even within a franchisee's Protected Area?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
FSI further retains the rights, among others, to: (1) use, and license others to use, the Marks and Licensed Methods in connection with the operation of a FAT SHACK Restaurant at any location other than in the Protected Area, other than Special Venues and Channels and Captive Audience Venue outlets; (2) 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, which businesses may be the same as, or similar to, or different from FAT SHACK Restaurants; (3) establish alternative channels of distribution for the products and services sold in a FAT SHACK Restaurant, which may include marketing and distribution of the products and services through grocery stores, convenience stores, restaurants that are not FAT SHACK Restaurants, via the Internet, catalog sales, and other direct marketing sales channels, which may or may not use the Marks; and (4) engage in any other activities not expressly prohibited in this Agreement or the Franchise Agreement, in each case, at any location, including in your Protected Area, and in each case, on any terms and conditions as FSI deems advisable, without granting Franchisee any rights in them.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, Fat Shack retains specific rights, including engaging in activities not expressly prohibited in the Franchise Agreement, even within a franchisee's Protected Area. This means that while a franchisee is granted a Protected Territory, Fat Shack can still operate or authorize others to operate in that area under certain circumstances.
Fat Shack can use and license its marks and methods for Fat Shack Restaurants outside the Protected Area, excluding Special Venues and Channels and Captive Audience Venue outlets. They can also use alternative proprietary marks for other businesses, even those similar to Fat Shack, and establish alternative distribution channels like grocery stores or internet sales, potentially competing with franchisees.
This reservation of rights means that a Fat Shack franchisee's Protected Territory is not entirely exclusive. Fat Shack can pursue other business opportunities, including those that might compete with the franchisee's restaurant, within the franchisee's Protected Area. This is a significant consideration for prospective franchisees, as it highlights the potential for competition from the franchisor itself within their designated territory.
Prospective franchisees should carefully consider these limitations on their protected territory and how Fat Shack's reserved rights could impact their business. It would be prudent to discuss with Fat Shack the specific activities they foresee engaging in within franchisees' protected areas and to assess the potential impact on the franchisee's revenue and market share.