Is a proposed transferee of a Fat Shack franchise allowed to operate a Competitive Business?

According to Fat Shack's 2025 Franchise Disclosure Document, a proposed transferee is not allowed to operate a Competitive Business. Specifically, one of the preconditions for Fat Shack's approval of a franchise transfer is that neither the transferee nor its owners or affiliates operate or have an interest in a Competitive Business, which is defined in Section 21.1 of the franchise agreement.

This restriction ensures that new Fat Shack franchisees are fully committed to the brand and do not have conflicting business interests that could detract from their focus on operating the Fat Shack franchise. It also protects Fat Shack from having its proprietary information or operational methods shared with a competing business.

The term "Competitive Business" is defined as any business operating a restaurant deriving more than 10 percent of its gross receipts from the sale of sandwiches, burgers, and wings, excluding gross receipts from alcoholic beverages. However, owning securities in a Competitive Business is permitted if the securities are listed on a stock exchange or traded over-the-counter and represent 2 percent or less of the outstanding securities.

This requirement is a standard practice in franchising to maintain brand integrity and prevent conflicts of interest. A prospective transferee should carefully review Section 21.1 of the Fat Shack franchise agreement to fully understand the scope of the competitive business restrictions and ensure they comply with these requirements before acquiring a Fat Shack franchise.