Fat Shack Franchise Cost, Profit & Failure Rate 2024

Fast-casual restaurant chains that focus on fast food like hamburgers, sandwiches, and similar foods are generally great franchise businesses. Fat Shack is one of those chains that offer franchising, but they are not as big as many other franchised fast-food chains.

Fat Shack Franchise

You might be thinking about getting into the Fat Shack franchising before they get as big as the others and costs go up through the roof, but you might not be sure. In this article, we will talk about Fat Shack’s franchise system, its costs, its history, what you can expect, and all other details.


About Fat Shack And Fat Shack History

Fat Shack is an American fast-casual restaurant chain popular for its Fat Sandwiches, burgers, chicken wings, and Philly cheesesteaks. They were founded in 2010 and operated in a bagel shop in the evenings and at night after the bagel shop was closed.

The first actual restaurant opened in 2011 and started franchising in 2015, with its first franchised location in Denver.

Now, the company has 29 outlets, most of which are franchised. The company is still franchising and aims to expand further than its current standing. Anyone interested can apply to be a franchisee with them in the available locations.


Franchise Model Table

Cost Or FeesAmount
Initial Investment      $150,250-$419,750
FranchiseYES
Franchising Since2015
Franchise-Fee$25,000
Royalty-Fee6%
Liquidity$5,000-$15,000
Estimated Outlets29

How Much Does It Cost To Open A Fat Shack Franchise?

The total average cost to open one Fat Shack franchise is between $150,250 and $419,750. This average initial cost includes the $25,000 franchise fee and all other related startup costs like equipment, payroll, construction, real estate, and other similar costs.

These are the average numbers that previous franchisees have spent and what the franchisor came up with based on the average needs of one Fat Shack restaurant. Depending on your situation, you might be outside of this range.


Franchise Requirements Of Fat Shack

Fat Shack doesn’t openly say what kind of professional background you need or if you need anything at all. Any experience you have will be a plus, but it might be the case that you don’t need anything at all.

However, you do need to have liquidity of between $5,000 and $15,000 before you can be eligible to open a Fat Shack franchise. There seems to be no net worth requirement in the publicly available information.


Fat Shack: Profit & Revenue

According to the latest Franchise Disclosure Document of Fat Shack, the company had a total revenue of $1.5 million in 2022. Out of this $1.5 million, their net profit was $383,000 in the same year.

To calculate the Fat Shack franchise profit, we took the annual franchise revenue which is $1,566,071. This is how it is calculated:

Financial OverviewPercentage of RevenueAmount ($)
Individual Franchise Annual Revenue100%1566071.00
Rent10.62%(166395.04)
Insurance5.31%(83197.52)
Salaries21.25%(332790.09)
Franchise Royalty Fees5.31%(83197.52)
Utilities2.13%(33279.01)
Cost of Goods Sold (COGS)26.56%(415987.61)
Labor (Variable)13.81%(216313.56)
Total (Expenses)85.00%(1331160.35)
Net Profit15.00%234910.65

Note: The displayed expenses are estimates based on industry averages and standard costs. Actual expenses may vary due to factors like location, business size, and market conditions. We recommend conducting detailed research or consulting with a financial advisor for a tailored financial analysis.


Overall Sales Of Fat Shack

As the same latest Franchise Disclosure Document says, they had 18 franchised outlets in 2022 that operated for the whole 12 months. Of these 18 franchised outlets, the average overall sales per store was $890,393. 7 of these outlets reached or exceeded this average number. The highest overall sales per store were $1.3 million, and the lowest was $416,919.


Failure Rate Of Fat Shack

Franchised Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
20201318+5
20211824+6
202224240

For the Franchised outlets:

  • In 2020, the growth rate was (5)/13×100≈38.4%
  • In 2021, the growth rate was (6)/18×100≈33.3%
  • In 2022, the failure rate was (0)/24×100≈0.00%

Company-Owned Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
202024+2
202143-1
202235+2

For the Company-Owned outlets:

  • In 2020, the growth rate was (2)/2×100≈100%
  • In 2021, the failure rate was (1)/4×100≈25%
  • In 2022, the growth rate was (2)/3×100≈66.6%

Total Outlets:

YearOutlets at the Start of the YearOutlets at the End of the YearNet Change
20201522+7
20212227+2
20222729+2

For Total outlets:

  • In 2020, the growth rate was (7)/15×100≈46.6%
  • In 2021, the growth rate was (2)/22×100≈9.09%
  • In 2022, the growth rate was (2)/27×100≈7.40%

According to the above-mentioned data, we can see that the franchised outlets for Fat Shack grew from 2020 to 2021, showing a growth rate between 38.4% and 33.3%.

On the other hand, for company-owned outlets, the growth rate of Fat Shack was lying in the range between 100% and 66.6% for 2020 and 2022. The company experienced decline Iin 2021, showing a failure rate of 25%.

Overall, when we combine the data of franchise and company-owned outlets, we can see that the Fat Shack franchise has grew from 2020 to 2022, showing a growth rate between 46.6% and 7.40%.


Payback Period Of Fat Shack

With an investment of $419,750 and a yearly profit of $234,910, we can calculate the payback period Of Fat Shack.

So, to find out how long it will take to earn back the initial investment:

Payback Period = Investment / Yearly Profit = $419,750 / $234,910= 1.78 years

Based on these figures, it will take approximately 2 years to pay back the initial investment for Fat Shack. This time period could be longer or shorter depending on your sales, revenue, and profit figures.


Training and Support Of Fat Shack

Initial training is given to the franchisee or the general manager appointed by the franchisee. This training program takes place 30 days before the opening of your store. There are 5 hours of classroom and 15 hours of on-the-job training, and it lasts three to four days to finish.

This initial training and all other subsequent training courses happen at their headquarters in Fort Collins, but it could be subject to change.

They also provide support before and after your store’s opening. They give you local marketing support to get the word out there and help with reconstruction, real estate, and location choosing. They also provide additional training for your staff and managers when necessary.


Terms of Agreement and Renewal

The initial term of the franchise agreement is for seven years. Once the seven years are over, a renewal could be possible. This renewal is up to three additional 5-year terms, and you need to pay a $6,000 renewal fee.

The renewal must be approved by Fat Shack, and both sides must come to a mutual agreement for the renewal.


Obligations and Restrictions Of Fat Shack

Obligations and Restrictions Of Fat Shack

The franchisees are obligated to sell only the products and services that the Fat Shack brand approves. A Fat Shack location is also restricted from being used for any purpose other than that of a Fat Shack restaurant.

Either the general manager or the franchisee is obligated to oversee the store’s important operations and spend full-time doing so, but this person is not obligated to oversee the daily operations by being in the store all the time.

For the operations of the Fat Shack restaurant, the franchisee is obligated to follow all the standards and specifications that are mentioned in the franchise operations manual of Fat Shack.

The starting materials of the store must be purchased from Fat Shack itself, such as kitchen signage, take-out menus, certain items, small ware, and others. Also, the food and drinks products must be purchased from suppliers either the Fat Shack tells you or the suppliers that they approve in writing.


Financial Assistance

Fat Shack does not provide any kind of direct or indirect financial assistance. They are not responsible for any kind of note, lease, or anything similar. The franchisee is obligated to find their own financing.

For those looking to open a franchise in the restaurant industry, possibilities include Firehouse SubsApplebee’s FranchiseTeriyaki MadnessDel Taco Franchise, and Philly Pretzel franchise.


Fat Shack Comparison

NameFranchise FeeRoyalty FeeInitial Investment
Jimmy John’s$30,000-$35,0006%$356,200-$674,200
DP Dough$25,0004%$105,980-$329,730
Fat Shack$25,0006%$150,250-$419,750

Conclusion

In conclusion, Fat Shack is a company that is expanding steadily, growing its outlet numbers, and having good financial results. The stores are also making good money on average when we look at the overall sales. So, the brand seems healthy, and they provide good preparation to franchisees who want to join their network.

The fact that Fat Shack is relatively new in the industry might make you question how good they are, but the numbers show that it is a franchise that might be profitable to own.


FAQs

Who is the owner of Fat Shack?

Tom Armenti and Kevin Gabauer are both the founders and owners of Fat Shack.

How many Fat Shack locations are there?

Currently, there are 29 Fat Shack locations in operation. 18 of these are franchised outlets, and the rest is company-owned.

Where is the headquarters of Fat Shack?

The headquarters Of Fat Shack is located in Denver, Colorado.

Sources

https://ownadpdough.com/faq
https://www.franchisedirect.com/directory/jimmyjohns/ufoc/5713/
https://www.franchimp.com/?page=pdf&f=108025_2023.pdf
https://en.wikipedia.org/wiki/Fat_Shack
https://franchisegrade.com/franchises/fat-shack

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