Start-ups

'Shark Tank': Mark Cuban made a 6-figure deal with franchise that sells 2,000-calorie sandwiches

Source: ABC

At 60, Mark Cuban says he works out, watches what he eats and gets his blood tested every three to six months, to help him "learn a lot about my body." And on ABC's "Shark Tank," Cuban is known for investing in good-for-you products like healthy, overnight oats, plant-based supplements and vegan dog treats.

But on Sunday's episode, Cuban did a six-figure deal with a fast food chain that offers 2,000-calorie sandwiches stuffed with everything from bacon to french fries.

Tom Armenti and Kevin Gabauer from Fort Collins, Colorado founded Fat Shack, a franchise that specializes in "late night" food. Fat Shack — which is open until 4 a.m. — sells monstrous sandwiches that range from 700 to 2,000 calories.

The Fat Jersey Sandwich, for instance, consists of cheesesteaks, chicken fingers, mozzarella sticks and french fries on a roll with honey mustard, and the Fat Cow has macaroni and cheese, bacon, french fries and mozzarella sticks with buffalo ranch dressing. (A typical 6-inch turkey sandwich at Subway is about 250 calories for comparison.) Fat Shack also sells desserts, like deep fried funnel cake bites.

Armenti founded Fat Shack back in 2010. In college in New Jersey, he played online poker to support himself, but after graduating, he knew he had to do something different. Armenti found a local bagel shop in New Jersey that closed at 3 p.m. and negotiated a deal with the owner to let him use the space to serve late night munchies from 6 p.m. to 4 a.m.

Fat Shack was born. When Armenti later moved to Fort Collins, where Colorado State University is located, he opened up his first, full-fledged Fat Shack restaurant. The store was an immediate success, the company says, and Armenti enlisted the help of his old college classmate — Gabauer — to help him build the business. After successfully opening two stores, the pair positioned Fat Shack for franchising, with the first franchise store opening in 2015 in Denver.

The Sharks sampled Fat Shack's massive sandwiches and seemed impressed. And they liked Fat Shack's $22 million in lifetime sales.

On the episode, the founders said there were 11 Fat Shack locations across three states, nine of which operated as franchise stores. And while even the least successful franchise was profitable, the entrepreneurs noted that they weren't making tons of money off the royalty fees. As an investor, in order to get his money back, Robert Herjavec said they would have to open a lot more franchise locations, and the entrepreneurs agreed.

While the Sharks were wary about the franchising profits, Kevin O'Leary offered $250,000 in exchange for a 25% stake in the business. Daymond John offered the same. Robert Herjavec offered $250,000 for a 17% stake, but with the caveat that he didn't want to take any money out of the business for distribution.

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

In response, Armenti reasoned it was time for Cuban to mix up his portfolio.

"We don't eat Fat Shack every single day, obviously," Armenti said. "It's a cheat meal for people to come in and get something really good."

Convinced, Cuban offered $250,000 for 17%. John also brought his offer down to 17%. The entrepreneurs countered Cuban's equity stake down to 15%, and they struck a deal.

"Done. Let's go get fat," Cuban said.

Don't miss: 'Shark Tank' reject returned after being told he had the 'worst pitch' ever—and got a $500,000 deal

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Disclosure: CNBC owns the exclusive off-network cable rights to ABC's "Shark Tank."

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Mark Cuban used some of his student loans to open a bar in college


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