What are the limitations on a Fat Shack franchisee's ability to operate outside the approved location, as described in Item 12, and how do these limitations relate to the franchisor's approval process for new locations, as mentioned in Item 11?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
You may operate your FAT SHACK Restaurant and use the Marks and the Licensed Methods only at the Restaurant Location that has been approved by us. You may not operate another FAT SHACK Restaurant at any site other than the Restaurant Location without first obtaining our written consent. We base our approval of your proposed Restaurant Location on a variety of factors including the viability of the location and demographics of the proposed Restaurant Location. See Item 11. If, as of the date you sign your Franchise Agreement, you do not have the Restaurant Location chosen and approved by us, we will designate, by Addendum to the Franchise Agreement, a "Target Area" within which to find a Restaurant Location. The designation of the Target Area does not in any manner grant you any continuing territorial rights in or to the Target Area. If the Addendum lists only a Target Area and not the Restaurant Location, then we and you will sign the Restaurant Location Supplement to Franchise Agreement attached as Exhibit II to the Franchise Agreement upon our later approval of the Restaurant Location.
You must obtain our prior written approval to relocate your Restaurant Location. We will generally approve the relocation of your FAT SHACK Restaurant if the new Restaurant Location is within your Protected Territory (described below) and meets our standards for your initial Restaurant Location, although we reserve the right to establish further standards.
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
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, a franchisee's ability to operate is strictly limited to the Restaurant Location that Fat Shack has approved. The franchisee cannot operate another Fat Shack Restaurant at any other site without first obtaining written consent from Fat Shack. This approval is based on factors such as the viability and demographics of the proposed location, aligning with the site selection assistance described in Item 11.
Item 12 states that if a Restaurant Location isn't chosen and approved when the Franchise Agreement is signed, Fat Shack will designate a Target Area for finding a location. However, this Target Area designation doesn't grant any territorial rights. The franchisee must also obtain prior written approval to relocate their Restaurant Location, which is generally approved if the new location is within the Protected Territory and meets Fat Shack's standards for initial locations.
Fat Shack grants a Protected Territory, typically a three-mile radius around the Restaurant, where they will not operate or permit third parties to operate another Fat Shack Restaurant, as long as the franchisee remains in substantial compliance with the Franchise Agreement. However, this Protected Territory does not apply to Captive Audience Venues. Furthermore, Fat Shack does not grant exclusive territories, meaning franchisees may face competition from other franchisees, company-owned outlets, or other distribution channels, even within their Protected Territory. Fat Shack also reserves the right to market and sell products and services through other venues and channels of distribution, regardless of location, including within a franchisee's Protected Territory.