Does the restriction on Fat Shack establishing or licensing others to establish Fat Shack Restaurants in the Protected Area apply to Captive Audience Venues?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
During the term of the Development Agreement, we shall not establish, nor shall we license any other party to establish, FAT SHACK Restaurants using the Marks and Licensed Methods anywhere within the Protected Area (defined in Item 1 above) except in Captive Audience Venues. We will assist you in the selection and approval of locations for your future FAT SHACK Restaurants in accordance with the terms and conditions of the then-current Franchise Agreements.
Each FAT SHACK Restaurant opened under a Development Agreement is subject to the terms and conditions of the then-current Franchise Agreement, the terms of which are as discussed above as of the date of this Disclosure Document. Nothing in the Development Agreement prevents, prohibits, or otherwise restricts at any time the operation of any FAT SHACK Restaurants in the Protected Area which are operated under any existing franchise agreements, or the renewal of franchise rights related to such existing franchise agreements. As such, 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.
Under the Development Agreement, you will be required to enter into a separate franchise agreement for each of the FAT SHACK Restaurants to be developed by the deadlines designated in a development schedule specified in the Development Agreement. You must also maintain and continue to operate a certain number of FAT SHACK Restaurants in the Protected Area in accordance with the development schedule. If you fail to meet the development schedule, then we may terminate your Development Agreement. The termination of your Development Agreement solely for a failure to meet the development schedule will not terminate or affect your rights or obligations under any franchise agreements entered into between you and us prior to the date of termination of the Development Agreement.
Source: Item 12 — Territory (FDD pages 36–39)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the restrictions on Fat Shack establishing or licensing others to establish Fat Shack restaurants in the Protected Area do not apply to Captive Audience Venues. The document states that during the term of the Development Agreement, Fat Shack can establish or license others to establish Fat Shack Restaurants using the Marks and Licensed Methods in Captive Audience Venues within the Protected Area. This means that even if a franchisee has a Protected Area, Fat Shack can still open or allow others to open Fat Shack restaurants in locations like airports, hospitals, or stadiums within that area.
This is significant for potential Fat Shack franchisees because it clarifies the limitations of their Protected Area. While a franchisee might expect a certain level of exclusivity within their territory, Fat Shack retains the right to operate or franchise locations in Captive Audience Venues, which could potentially impact the franchisee's revenue. It is important to note that a Fat Shack Restaurant at a Captive Audience Venue does not have a Protected Territory.
Examples of Captive Audience Venue locations include airports and other transportation hubs, hospitals, convention centers, grocery stores, department stores, "big box" retail centers, resorts, sports arenas and stadiums, hotels and office buildings, military installations (Army and Air Force Exchange Services), and food courts. These venues can be in close proximity to a franchisee's Restaurant Location or Protected Territory, without any compensation to the franchisee. The products and services available at these venues may be the same or similar to those offered by the franchisee, and the prices may be higher or lower.
Prospective franchisees should carefully consider the potential impact of Captive Audience Venues on their business and factor this into their financial projections. It would be prudent to discuss with Fat Shack the specific plans for Captive Audience Venues in or near the desired territory to fully understand the competitive landscape.