What happens if a Fat Shack franchisee does not meet the minimum sales quota?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee fails to meet the Minimum Sales Quota in any Sales Quota Year, FSI will notify Franchisee. For each of the four quarters during the then current Sales Quota Year, Franchisee must provide FSI with quarterly financial records sufficient to demonstrate that it will meet or exceed the Minimum Sales Quota for the then current Sales Quota Year. If Franchisee fails to reach a level of Gross Sales in any two of the four quarters in the then current Sales Quota Year, or fail to reach the Minimum Sales Quota for any two Sales Quota Years during the term of this Agreement, then FSI has the right to terminate this Agreement in accordance with Section 19.2.v. In lieu of terminating this Agreement, FSI may require Franchisee to pay FSI the Royalty, the Marketing and Promotion Fee, and any other applicable fees, based on the greater of the Minimum Sales Quota amounts or Franchisee's actual Gross Sales for each Sales Quota Year that Franchisee has not met its Sales Quota requirements. FSI may also require Franchisee, it's Managing Owner, and/or its General Manager to obtain additional training from FSI or any third party FSI may select, the costs of which shall be at Franchisee's sole expense, or abide by such other restrictions and requirements FSI may demand, or both. FSI has the right, in its sole discretion and on a case-by-case basis, to waive the obligation of Franchisee or any other franchisee of FSI to meet the Minimum Sales Quota requirement or to pay any fees or make expenditures calculated based on the applicable Minimum Sales Quota requirement. Franchisee acknowledges that FSI is entering into this Agreement with the expectation that it will receive the Royalty based on the greater of Franchisee's actual Gross Sales or the Minimum Sales Quota over the full term of this Agreement.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, if a franchisee fails to meet the Minimum Sales Quota in any Sales Quota Year, Fat Shack will notify the franchisee. The franchisee must then provide Fat Shack with quarterly financial records for each of the four quarters during the current Sales Quota Year, demonstrating their ability to meet or exceed the Minimum Sales Quota for that year.
If the Fat Shack franchisee fails to reach the required level of Gross Sales in any two of the four quarters in the current Sales Quota Year, or fails to reach the Minimum Sales Quota for any two Sales Quota Years during the agreement's term, Fat Shack has the right to terminate the agreement. However, instead of terminating the agreement, Fat Shack may require the franchisee to pay the Royalty, Marketing and Promotion Fee, and any other applicable fees based on the greater of the Minimum Sales Quota amounts or the franchisee's actual Gross Sales for each Sales Quota Year that the franchisee did not meet the sales quota requirements.
Fat Shack may also require the franchisee, its Managing Owner, and/or its General Manager to obtain additional training from Fat Shack or a third party selected by Fat Shack, with the franchisee bearing the costs. Additionally, Fat Shack may impose other restrictions and requirements. Fat Shack retains the right, at its sole discretion and on a case-by-case basis, to waive the obligation for any franchisee to meet the Minimum Sales Quota requirement or to pay fees based on the Minimum Sales Quota requirement. Fat Shack states that it enters into the agreement with the expectation of receiving the Royalty based on the greater of the franchisee's actual Gross Sales or the Minimum Sales Quota over the full term of the agreement.