What is the minimum cost for a Fat Shack franchisee who commits an Act of Deception?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Relocation Fee1 | 25% of the then-current Initial Franchise Fee | Before you move your FAT SHACK Restaurant | Payable if you move your FAT SHACK Restaurant from one location to another. |
| Additional Training1,4 | Tuition, if applicable, and costs associated with attending additional training programs | As incurred | We may require additional training periodically. Tuition, if any, is payable to us. All other costs are payable to third party suppliers. |
| Interest and Late Payment Charges1 | Lesser of 1½% per month or highest rate of interest allowed by law, plus a $50 late filing charge | Upon demand | Begins to accrue the day after payments are due for the Royalty Fees and Marketing and Promotion Fees. |
| Successor Franchise (Renewal) Fee1 | $6,000 | When you renew your franchise and sign the then current Franchise Agreement and Successor Franchise Rider | Payable when you renew the term of your Franchise Agreement. |
| Costs of Inspection and Audit1 | Cost of audit, underpayment amount, late payment charges and interest. Varies according to your location | 15 days after receipt of our notice to you of any underpayment | These costs are payable only if you understate your Gross Sales by more than 2%, do not submit reports to us or do not cooperate in performance of inspection and audit. |
| If you commit an Act of Deception (as defined in Section 16.5 of the Franchise Agreement), minimum of $10,000 | Payable in advance | If you commit an Act of Deception, you must pay us $10,000 immediately upon notice from us to cover the cost of the audit. Any amounts unpaid, unreported or underreported must also be paid in full. |
Source: Item 6 — Other Fees (FDD pages 15–18)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, a franchisee who commits an Act of Deception faces a minimum cost of $10,000. This fee is payable immediately upon notice from Fat Shack to cover the cost of an audit. In addition to the $10,000, the franchisee is also responsible for paying in full any amounts that were unpaid, unreported, or underreported as a result of the Act of Deception.
This fee is intended to cover the expenses Fat Shack incurs to investigate and rectify the consequences of the franchisee's deceptive actions. The term 'Act of Deception' is defined in Section 16.5 of the Franchise Agreement, which a prospective franchisee should carefully review to understand what specific actions could trigger this fee.
It's important to note that the $10,000 is a minimum, and the total cost could be significantly higher depending on the extent of the deception and the resulting underpayment or unreported amounts. Franchisees should be aware that any dishonest or misleading practices can lead to substantial financial penalties, in addition to potential legal ramifications and damage to their relationship with Fat Shack.