What financial instruments potentially expose the Fat Shack company to concentration of credit risk?

According to Fat Shack's 2025 Franchise Disclosure Document, the financial instruments that potentially expose the company to concentration of credit risk primarily consist of cash and cash equivalents. As of December 31, 2024, the balances in the company's cash accounts did not exceed the Federal Deposit Insurance Company's (FDIC) insurance limit of $250,000. Fat Shack maintains its cash and cash equivalents with accredited financial institutions.

For a prospective franchisee, this means that Fat Shack's financial stability could be affected if a significant portion of their cash is held in a single financial institution that faces financial difficulties. However, the company mitigates this risk by maintaining balances within the FDIC insurance limit of $250,000 per account, ensuring that deposits are protected up to that amount. Additionally, Fat Shack uses accredited financial institutions, which are generally considered more stable and reliable.

This disclosure is important for potential franchisees to assess the financial risk associated with Fat Shack. While the company appears to manage its cash responsibly by staying within FDIC limits and using accredited institutions, franchisees should still consider this information as part of their overall due diligence. Understanding how Fat Shack manages its cash and potential credit risks can help franchisees evaluate the financial health and stability of the franchisor.