What is the additional transfer fee for each undeveloped Fat Shack franchise right?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
orporated herein by reference.
- 5.3. In the event of any proposed sale, transfer or assignment by Franchisee as described herein, Franchisee and/or the proposed transferee shall pay to FSI the standard transfer fee for each franchise agreement to be transferred, as governed by such franchise agreement executed pursuant to this Development Agreement, plus $5,000.00 for every undeveloped franchise right for which no Subsequent Franchise Agreement has been executed. This sum shall be payable in lump sum to FSI as one of the preconditions to obtaining FSI's written consent to any proposed transfer. In the event of transfer, the transferee shall pay the remaining portions of the Initial Franchise Fees owed to FSI, when each Subsequent Franchise Agreement is signed. Transfer fees paid to FSI will not be applied to the Initial Franchise Fees due, but the transferee will receive credit for Franchisee's ea
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, a franchisee who sells, transfers, or assigns their franchise rights must pay Fat Shack a standard transfer fee for each franchise agreement being transferred. In addition to the standard transfer fee, the franchisee must also pay $5,000 for every undeveloped franchise right for which no Subsequent Franchise Agreement has been executed. This additional fee is payable in a lump sum to Fat Shack as a precondition for obtaining their written consent to the proposed transfer.
This means that if a franchisee has development rights for multiple Fat Shack locations but hasn't yet opened all of them or signed a Subsequent Franchise Agreement for each, they will incur this $5,000 fee per undeveloped location when transferring their development agreement. This fee is separate from the standard transfer fee for existing franchise agreements and is specifically tied to undeveloped rights.
For a prospective Fat Shack franchisee with a development agreement, this highlights the importance of carefully considering their development plans and financial capabilities. If they anticipate needing to transfer their rights before fully developing all locations, they should factor in this additional transfer fee as it could significantly impact the financial implications of the transfer. This fee structure incentivizes franchisees to develop all awarded locations.
It is important to note that the transfer fees paid to Fat Shack will not be applied to any outstanding Initial Franchise Fees. However, the transferee will receive credit for the original franchisee's earlier payment of the Development Fees. This distinction is crucial for understanding the overall financial obligations during a transfer.