Does Fat Shack negotiate pricing arrangements with designated suppliers for items franchisees purchase?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
We have no purchasing or distribution cooperatives at the current time. We have negotiated a pricing arrangement with our designated supplier for those items that you will purchase pursuant to the Participation Agreement. We may establish additional pricing programs with certain suppliers based on volumes purchased in the future. Periodically, we may negotiate purchase arrangements with suppliers for the benefit of our franchisees. However, you should not rely on the continued availability of any particular pricing or distribution arrangement, or the availability of any particular product or brand in deciding whether to purchase the franchise. We have the right to receive payments, rebates, commissions, incentives, or other benefits from suppliers on account of their dealings with you and other franchisees.
We have an agreement with one of our approved suppliers of products sold to FAT SHACK Restaurants, including Franchisee Restaurants. During the fiscal year ended December 31, 2024, we received $0.22 per case as a result of franchisee purchases from that supplier. In the future, we may, in our discretion, retain credits or amounts from other suppliers based on any volume discounts, rebates, commissions, incentives, or other benefits received as a result of your purchases or contribute them to the Marketing and Promotion Fund, or pass those credits on to franchisees in such manner as we determine in our sole discretion.
ITEM 9
FRANCHISEE'S OBLIGATIONS
This table lists your principal obligations under the franchise and other agreements. It will help you find more detailed information about your obligations in these agreements and in other items of this disclosure document.
| Obligation | Section in Agreement | Item in Disclosure Document | ||
|---|---|---|---|---|
| (a) Site selection and acquisition/lease | Sections 3.1, 3.2 and Sections 6.1 through 6.4 of Franchise Agreement (“FA”) | Items 5, 7, 8 and 11 | ||
| (b) Pre-opening purchases/leases | Sections 6.5 through 6.8 and Section 11.1 of FA | Items 7 and 8 | ||
| (c) Site development and other pre- | Article 6 and Section 11.1 of FA | Items 7, 8 and 11 | ||
| opening requirements | ||||
| (d) Initial and ongoing training | Article 7 of FA | Item 11 |
| Obligation | Section in Agreement | Item in Disclosure Document | |
|---|---|---|---|
| (e) Opening | Section 6.9 of FA | Item 11 | |
| (f) Fees | Articles 4 and 5, and Sections 3.3, 6.3, 7.2, 10.1.d, 10.2, 11.4, 13.3, 14.4, 14.5, 16.4, 16.5, 17.2, 18.4, 19.4, 19.11, and 21.3 of FA; Article 2 of Development Agreement (“DA”) | Items 5, 6, 7 and 10 | |
| (g) Compliance with standards and | Articles 6 and 8 and Sections 2.2, 12.1, 13.1, | Items 8, 11 and 16 | |
| policies/Operations Manual | 14.1, 14.3, 14.4 and 14.5 of FA | ||
| (h) Trademarks and proprietary | Article 15 and Sections 21.4 and 21.5 of FA | Items 13 and 14 | |
| information | |||
| (i) Restrictions on products/services | Article 11 and Sections 12.1 and 14.3 of FA | Item 16 | |
| offered | |||
| (j) Warranty and customer service | Not Applicable | Not Applicable | |
| requirements | |||
| (k) Territorial development and sales | Section 5.2 of FA; Article 3 of DA | Item 12 | |
| quotas | |||
| (l) On-going product/service purchases | Article 11 and Sections 7.2, 10.2, and 12.1 of FA | Item 8 | |
| (m) Maintenance, appearance and | Sections 6.2, 6.5, 12.1 and 18.3 of FA | Items 7 and 11 | |
| remodeling requirements | |||
| (n) Insurance | Sections 12.1(n) and 12.1(o) of FA | Items 6 and 8 | |
| (o) Advertising | Article 13 of FA | Items 6, 7 and 11 | |
| (p) Indemnification | Section 20.3 of FA; Section 7.2 of DA | Item 6 | |
| (q) Owner’s participation/management/ | Sections 7.1, 7.2 and 12.1(c) of FA | Items 11 and 15 | |
| staffing | |||
| (r) Records and reports | Article 16 and Sections 12.1 and 19.4 of FA | Item 11 | |
| (s) Inspections and audits | Sections 14.2, 16.4 and 16. |
Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 22–26)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, Fat Shack has negotiated pricing arrangements with its designated suppliers for items franchisees are required to purchase under the Participation Agreement. Fat Shack may also establish additional pricing programs with certain suppliers based on purchase volumes in the future and may periodically negotiate purchase arrangements with suppliers for the benefit of franchisees. However, the document states that franchisees should not rely on the continued availability of any particular pricing or distribution arrangement, or the availability of any particular product or brand when deciding whether to purchase the franchise.
Fat Shack retains the right to receive payments, rebates, commissions, incentives, or other benefits from suppliers based on their dealings with franchisees. For example, during the fiscal year ended December 31, 2024, Fat Shack received $0.22 per case as a result of franchisee purchases from one supplier. In the future, Fat Shack may retain credits or amounts from other suppliers based on volume discounts, rebates, commissions, incentives, or other benefits received from franchisee purchases. These credits may be contributed to the Marketing and Promotion Fund or passed on to franchisees at Fat Shack's discretion.
All food, drink, and other products and related services sold through a Fat Shack Restaurant must meet Fat Shack's standards and specifications and must be purchased from approved suppliers. The costs of purchases from designated or approved sources may range from 46 to 75 percent of the total cost of establishing a Fat Shack Restaurant and approximately 25 to 50 percent of the total cost of operating a Fat Shack Restaurant after that time. Franchisees must get approval from Fat Shack to purchase items from suppliers who are not previously approved. Fat Shack may withhold approval of items or suppliers for any reason and can change the standards regarding any approved supplier or any products, equipment, supplies, or services with 30 days' notice.