Great American Cookies Franchise

Financing Details

Great American Cookies does not offer direct or indirect financing to its franchisees. However, franchisees have the option to lease cookie equipment, which is required for their operations, from GAC's affiliate, GFG Management, LLC. This lease involves total payments of approximately $1,440 over a four-year term, alongside a commitment to purchase a minimum quantity of cookie ingredients annually. While Great American Cookies does not guarantee franchisee notes or leases, it may refer franchisees to external financing sources. Additionally, the franchisor or its affiliates may engage in joint venture arrangements where they acquire an interest in a franchisee's limited liability company, contributing capital proportionally and often retaining a majority ownership stake.

Litigation Summary

GAC Franchising, LLC, primarily through its parent company FAT Brands Inc. and its affiliates, has a legal history that includes several lawsuits, some of which are ongoing or were recently concluded. Currently, there is a pending putative class action lawsuit filed in June 2024 against FAT Brands and certain executives, alleging false and misleading statements in SEC filings. Recently concluded litigation includes two putative class action lawsuits from March and April 2022 against FAT Brands and its executives, which were settled in February 2023 for $3 million. An affiliate, Fatburger North America, Inc., settled with the Commonwealth of Virginia in October 2023 over unregistered franchise sales between 2020 and 2021, agreeing to offer rescission and pay $27,000. Additionally, a complaint filed in July 2019 against Fatburger North America, Inc. regarding an international Multi-Unit Restaurant Agreement was dismissed in October 2021. Older cases include a July 2018 complaint against Buffalo's Franchise Concepts, Inc. (an affiliate) for breach of contract and fraudulent misrepresentation, which was dismissed in February 2019. Multiple securities class action lawsuits from 2018 against FAT Brands and its officers related to a stock price decline were consolidated and the remaining individual claims settled in January 2021.

Renewal Conditions

To renew their franchise agreement, Great American Cookies franchisees must meet several conditions. They need to provide written notice of their intent to renew between 6 and 12 months before the current term expires. Franchisees must be in good standing, meaning they have substantially complied with all terms of the agreement and met all monetary obligations in a timely manner. A renewal fee, equivalent to 40% of the then-current initial franchise fee, is required, and franchisees must sign a general release of claims against the franchisor. They are also obligated to renovate and modernize their restaurant premises to align with current brand standards, unless a refurbishment has already occurred within the five years prior to renewal. Furthermore, franchisees must either retain the right to occupy their current location or secure approval for a new site and lease, and they must fulfill the franchisor's current qualification and training requirements. The new franchise agreement signed at renewal may feature materially different terms and conditions.

Staffing Notes

Great American Cookies requires specific staffing for the restaurant's management. Franchisees are not required to personally supervise the restaurant; however, if they choose not to, a manager or one of their assistant managers or shift leaders who has successfully completed the franchisor's training program must directly supervise the restaurant on-premises. This manager is responsible for day-to-day operations, food preparation oversight, and personnel and accounting supervision, dedicating at least 40 hours per week to these duties. For franchisees operating multiple restaurants, an acceptable 'Operating Partner' must be designated to supervise overall operations. In cases where multiple restaurants are geographically remote, GAC Franchising, LLC may require Operating Partners to hold up to a 25% equity interest in the franchisee entity. All managers, assistant managers, and any personnel with access to confidential information must sign confidentiality and non-competition agreements. The franchisor may also require officers, directors, general partners, and individuals holding a 5% or greater interest in the franchisee, along with their spouses, to sign a personal guaranty.