What is the subject of Section 3.2 of the Fat Shack Franchise Agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
3.2. Protected Territory
Subject to Section 3.4 and Section 3.5 of this Agreement regarding Special Venues and Channels and Captive Audience Venues, Franchisee is granted a geographic area around the Restaurant Location (the "Protected Territory") in which FSI will not operate, nor permit a third party to operate, a FAT SHACK Restaurant as long as Franchisee is in substantial compliance with all the provisions of this Agreement. The Protected Territory is an area encompassing a three mile radius around the Restaurant Location as measured from the front door of the Restaurant. A FAT SHACK Restaurant at a Captive Audience Venue does not have a Protected Territory. Because there are exceptions where FSI, its affiliates or other third parties may operate a FAT SHACK Restaurant in Franchisee's Protected Territory, Franchisee's Protected Territory is not considered an exclusive territory.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, Section 3.2 of the Franchise Agreement concerns the franchisee's protected territory. This section grants the franchisee a geographic area around their restaurant location, referred to as the "Protected Territory." Within this territory, Fat Shack will not operate or permit a third party to operate another Fat Shack restaurant, provided the franchisee remains in substantial compliance with the Franchise Agreement.
The Protected Territory is defined as an area encompassing a three-mile radius around the restaurant, measured from the front door. However, Fat Shack restaurants located in Captive Audience Venues do not have a Protected Territory. The FDD states that a franchisee's protected territory is not considered an exclusive territory because there are exceptions where Fat Shack, its affiliates, or other third parties may operate a Fat Shack restaurant within the franchisee's Protected Territory.
This means that while Fat Shack aims to provide a buffer zone for franchisees, there are specific circumstances where the franchisor can still establish or allow other outlets within that zone. Prospective franchisees should carefully consider these exceptions and understand that their territory is not fully exclusive, which could impact their potential customer base and revenue.