"You're hitting every line item" — When Shark Tank investor Mark Cuban agreed on a $250,000 deal with Fat Shack

Tom Armenti and Kevin Gabauer appeared on Shark Tank season 10 episode 24 in 2019. They sought a $250,000 investment for their fast-food company, Fat Shack. At the time, Fat Shack had 11 locations in three states. Tom and Kevin wanted to use the investment from the show to support these locations and expand further.

The founders mentioned on Shark Tank that since 2010, Fat Shack had generated over $22 million in sales. In the previous year, they earned around $5 million in revenue. Mark Cuban asked about the franchising fee for a new Fat Shack location. Tom and Kevin replied that it was $18,000. Additionally, Fat Shack's owners received a 6% weekly royalty from franchised locations.

During negotiations, Tom and Kevin received offers from the sharks. Kevin O'Leary and Daymond John offered $250,000 for 25% equity. Robert Herjavec offered $250,000 for 17% equity. Mark Cuban made a counteroffer of $250,000 for 17.5% equity but expressed that he was still conflicted about the product not offering anything healthy.

"The business side of me says, you're hitting every line item, right? What I can't get past is just the whole health thing. Every other food product that I have is geared towards healthy living," said Shark Tank investor Mark Cuban.

Ultimately, Tom and Kevin asked Mark Cuban to drop down the equity percentage to 15% which Mark accepted on Shark Tank.

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The journey of Fat Shack before and after Shark Tank

In 2010, Tom started Fat Shack after graduating from The College of New Jersey. He noticed that his college lacked good late-night food options. Tom saw that students at the nearby Rutgers University liked eating "fat sandwiches" from food trucks. These sandwiches had mozzarella sticks, fries, and chicken fingers. Hence, Tom decided to sell similar sandwiches at his college.

Tom began Fat Shack with $5,000. He rented a kitchen from a bagel shop and delivered sandwiches to students until 4 AM. He also put up paper menus around campus. By August 2011, Fat Shack grew much bigger for the shared kitchen. Tom moved the business to Fort Collins, Colorado, near Colorado State University.

Tom brought in his friend Kevin Gabauer to help grow the business. They opened a second location in Boulder, Colorado, within six months following the succes of the first outlet. By 2015, Fat Shack began franchising. When Tom and Kevin appeared on Shark Tank in 2019, Fat Shack had 11 locations and $22 million in sales.

After appearing on Shark Tank, Fat Shack owners Tom Armenti and Kevin Gabauer received 3,000 franchise requests. Their small team reviewed and responded to these requests. Within two years, only a few of these requests became actual Fat Shack franchises. The Fat Shack owners turned down many requests and focused on long-term growth.

After the deal with investor Mark Cuban, Fat Shack gained a following in Texas, where Mark lives. Mark Cuban's team remained involved with Fat Shack and used to exchange weekly emails with Tom and Kevin. Fat Shack managed to grow despite the trend towards healthier food options. In 2021, Restaurant Business recognized Fat Shack as a "Buzzworthy Brand".

The company had 26% average sales growth since 2018 and expanded its locations by a third in 2020. Each restaurant averaged $620,000 in sales. Today, Fat Shack has 30 locations in 13 states. The company's estimated annual revenue for 2023 is $17,543,000. Tom and Kevin attribute their success to their partnership and complementary skills.

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For fans who do not want to miss the show, ABC is currently airing season 16 of Shark Tank.