Fat Shack Before Shark Tank
In 2010, Tom decided to gamble his degree and $5000 in savings on a late-night restaurant in Ramsey, New Jersey. He struck up a deal with the local bagel shop that only opened for breakfast and then closed at 3 PM, and Tom used the facility to run his business from 6 PM to 4 AM.
He got the word out on Facebook, and within a few days, the Fat Shack had attracted more than 1000 followers. On their first night, the business had over 100 orders. Tom decided to move near his relatives in Colorado and hauled everything to Fort Collins. He decided to expand to other locations with the help of his friend Kevin. Would the Sharks be impressed with his entrepreneurial spirit? Let’s take a look.
Fat Shack on Shark Tank
Tom and Kevin walked out onto the Shark Tank stage and enthusiastically introduced themselves. The two were from Fort Collins, Colorado, and their business was Fat Shack. The duo requested $250,000 in exchange for 7.5% equity in their company. With a chef’s hat, Kevin started making a perfectly healthy meal. It had flakes of seaweed, sautéed in coconut oil sprinkled with Chia seeds, all resting on a bed of crisp green kale.
Tom said their restaurant specializes in taking that healthy meal and throwing it in the trash. This got a healthy laugh out of the Sharks as Kevin took the salad he was holding and tossed it dramatically in the garbage. Tom introduced the business as Fat Shack, and the two revealed that they wore T-shirts with the same name.
As Kevin began the presentation, Tom walked across the stage and revealed all of their marketing materials. Kevin said they served everyone’s favorite foods, such as French fries, mozzarella sticks, and chicken fingers. They did it all on one sandwich. Kevin went behind the sandwich prep area they had on the stage and started building a crazy mass of the sandwich. Tom urged him to pile on more appetizers, such as jalapeno poppers. He finished it off with tons and tons of their gooey sauce.
When Kevin was finally finished filing stuff on top, he struggled to be able to close the sandwich. Eventually, he did and cut it in half, showing the Sharks. Kevin called it the perfect meal. Tom explained they also had ordinary people’s food, such as triple cheeseburgers and deep-fried funnel cake bites.
The Fat Shack was open until 4 AM, which would be perfect for a college town or a place near many bars. If a hugely successful and were ready to let their growth equal the size of the sandwiches. Tom asked the Sharks which of them were prepared to dig in and join the Fat Shack team.
Robert was clearly eager to try the sandwiches. As they got ready to pass the samples out to the Sharks, Tom answered a question from the hesitant Lori about the calorie count. He told her that each sandwich could range from 700 to 2000 calories.
This fact impressed Kevin O’Leary, shocked that a single sandwich could contain an entire day’s worth of calories. Lori picked at her sandwich and asked if they had any forks. Robert teased her, saying it wasn’t a fork kind of meal. Lori wanted to know what was in her sandwich before she started eating. She was very health conscious.
Next to her, Mr. Wonderful and Daymond were happily eating their sandwiches. Daymond exclaimed that his sandwich was perfect, and mark Cuban joked that he was having a massive heart attack while chowing down. As the Sharks joked amongst themselves, the entrepreneurs said that Lori’s sandwich included lettuce, tomato, French fries, chicken fingers, and pickles. Mr. Wonderful’s sandwich was called The Fat Donkey Lips, with French fries, chicken fingers, buffalo sauce, and blue cheese.
All of the sandwiches sounded very delicious. Daymond’s even had jalapeno poppers on it. Robert said he was incredible, while Daymond said he didn’t think the sandwich could taste that good. Still munching, Robert wanted to know how Tom had come up with the idea.
Tom said he was Fat Shack’s founder and started it in February 2010.
He and Kevin went to college together, and Tom admitted that he never had a real job and played online poker to make money while in school. After Tom graduated, he found the bagel shop owner near the college and worked out a deal. The bagel shop only operated during the day, so Tom offered to rent the place out at night to run his restaurant idea.
The Sharks were very impressed with his ingenuity. Tom let them know that he was able to start the whole thing for less than $5000 since he was using the equipment from the NJ bagel shop. The Fat Shack uses the building from 6 PM to 4 AM. Eventually, Tom moved to Colorado to be with his family and opened up his first full Fat Shack restaurant using his own equipment and building.
Daymond asked how many different locations they had open, and Kevin told him that they had 11, with three more on the way. Kevin and Tom own two stores, and the other nine are franchisees. Kevin said that since they started in 2010, their sales have totaled over $22 million, which was over eight years.
The year they appeared on Shark Tank, they made about $5.7 million. Mark Cuban wanted to know their franchise fees and advertising cost, asking through a mouthful of food. Kevin explained that their franchise fee was $16,000. They take a 6% royalty. They did not have a marketing budget as they had never needed to do any advertising.
The average revenue for each store is between $40-$45,000 worth of royalties. Robert said for the Sharks to make any money, they would need to open up a lot of franchises. Mark asked how their worst-performing store was doing concerning revenue and profitability. Tom let them know that even the worst performing store was cash positive. They would make about $50,000 on an income of $500,000 for the year.
Robert asked about the demographics of the franchisees. Tom said they will make it a point to work with younger people who’ve worked their way up from working for Tom directly. Opening up a new unit costs between $75,000 and $100,000, including the building. They have helped fund the cost for past workers.
Mr. Wonderful pointed out that they only offered 7.5% of what amounted to $140,000 after taxes. He said that the better use of his money would be to dump it into a business that would make a profit instead of risking it on them. Tom told him that five stores were almost ready to launch already.
Mark pointed out that it would be more efficient to get people who would be interested in multiple units. He wondered if they were trying to just build it organically and primarily for current or former store employees. Tom said that they were looking to expand into finding outside people. Still, they were first targeting owner-operators at the moment who knew the stores from the inside out.
Robert said that if he invested at the equity rate that they wanted, he would only stand to make about $30,000 in a year. This was not enough for him, and he wanted to know how to make $2 million from his investment. Kevin said their goal was to increase their footprint across the country. Their ultimate goal would be to become a corporation that sticks around.
Mr. Wonderful said he would make an offer with his perception of the risk. He would give them the $250,000 in exchange for 25% equity. Kevin O’Leary said it was a generous offer since it would only get him a 14% ROI. Daymond accused Kevin of looking at his notes since he had the same request. Lori went out, stating that she did not feel strongly about the business of competing with the other Sharks. Robert made an offer which was $250,000 in exchange for 17%. He said he didn’t want to take any money out for distribution until they reached a set point.
Mark Cuban said that he loved the business aspect of it but couldn’t get over how unhealthy the restaurant was. Every other food business he invested in was healthy. The entrepreneurs pointed out that their food was meant to be consumed in moderation. Both men were healthy themselves. Tom said it was an excellent cheat meal for people on a healthy living path.
Mark ended up mirroring Robert’s offer at 17%. He explained his choice by saying that their business plan was a slow burn. Tom said they would be willing to do a deal at 12%, but all of the Sharks shook their heads and told them that it wouldn’t be enough. The two entrepreneurs talked amongst themselves. They asked Mark to do the deal for 15%, and he pondered for a minute before accepting. They all shook hands.
Fat Shack Now in 2023 – The After Shark Tank Update
So how is the Fat Shack doing after getting a deal with Mark Cuban? You wouldn’t know it from looking at their inactive Twitter account, but the business is still thriving. According to an interview with the Denver channel 7, they received over 3000 new franchise requests after their Shark Tank episode aired. They have been very selective, and as of this article, they now have 29 open stores. One in Orlando, Florida, opened in mid-March of 2022. There is one store opening soon in Kansas City, MO.
One of the main goals that the two entrepreneurs expressed when presenting on Shark Tank was the desire to open more franchises. They wanted to concentrate on helping former employees become owners and operators. When they were on Shark Tank, they had 11 stores open and have since almost tripled their number of stores.
According to an article on Mashed.com, Mark Cuban has been very involved with his unhealthy investment. He has been attending weekly meetings and providing feedback. He used his connections in Texas to help them open six new locations in the Lone Star State. Since it’s known for its love of all things large and oversized, the chain is understandably popular there. Some of their new menu items include deep-fried churros and a birthday cake shake. You can find their menu on their website.
Tom has been very busy. In addition to running his Fat Shack, he has also been doing talks on entrepreneurship. He recently appeared on Infinity X to share his lessons from creating Fat Shack.