How often is the Marketing and Promotion Fee payable by Fat Shack franchisees?

According to Fat Shack's 2025 Franchise Disclosure Document, the Marketing and Promotion Fee, if and when it is due, must be paid weekly. This payment is concurrent with the royalty payment, and both are facilitated through electronic transfer of funds, as detailed in the Authorization Agreement for preauthorized payment. Once paid, the Marketing and Promotion Fee is nonrefundable.

This weekly payment structure means that franchisees must maintain consistent cash flow to meet this obligation, as it is tied directly to their weekly gross sales. The fee can be up to a maximum of 1½ percent of the franchisee's weekly Gross Sales, as determined by Fat Shack. Franchisees receive a 30-day notice before the fee is implemented or if the percentage changes, but the fee cannot exceed the 1½ percent maximum during the term of the agreement.

Furthermore, the Marketing and Promotion Fee is subject to the same administrative fee, late charge, and interest as the royalty fee, adding another layer of financial responsibility for franchisees. The funds collected are deposited into a separate Marketing and Promotion Fund, which Fat Shack administers and uses for various advertising and promotional activities to benefit the Fat Shack brand. This fund usage includes media advertising, direct response literature, website development, and other related expenditures.

While Fat Shack aims to enhance the brand's recognition and acceptance through the Marketing and Promotion Fund, franchisees should be aware that there is no guarantee of direct or pro rata benefits from the advertising placements. Additionally, Fat Shack retains the right to terminate the Marketing and Promotion Fund at any time and has no fiduciary obligation to franchisees in connection with its operation, highlighting potential risks and the importance of understanding the terms and conditions associated with this fee.