What adjustments can FSI make to the purchase price of the Fat Shack Restaurant assets?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
The purchase price for the assets to be transferred will be the fair market value of the assets, excluding any good will associated with the Marks, as mutually determined by FSI and Franchisee, or if they are unable to mutually agree on the purchase price, by FSI and Franchisee each choosing one independent appraiser who, in turn, choose a third independent appraiser, with the third appraiser's determination being binding upon the parties. The purchase price for the assets will be adjusted by setting off any amount then owing by Franchisee to FSI, including any amounts paid by FSI to cure Franchisee's defaults with third parties such as landlords (the decision to pay such cure amounts to be in the sole and absolute discretion of FSI). FSI and Franchisee shall each pay the fees and expenses of their chosen appraisers and they shall evenly split the fees and expenses of the third appraiser. The following additional terms shall apply to FSI's exercise of this option:
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, FSI can adjust the purchase price of the restaurant assets by offsetting any amounts the franchisee owes to FSI. This includes any amounts FSI paid to cure the franchisee's defaults with third parties, such as landlords. The decision to pay these cure amounts is at the sole discretion of FSI.
This means that if a Fat Shack franchisee has outstanding debts to FSI, such as unpaid royalties or marketing fees, or if FSI has covered any of the franchisee's defaulted payments to third parties, these amounts will be deducted from the fair market value of the restaurant's assets when FSI purchases them. The fair market value excludes any goodwill associated with the Fat Shack marks.
For a prospective franchisee, this highlights the importance of maintaining good financial standing with Fat Shack and fulfilling all obligations to third parties. Failure to do so could result in a reduced payout if FSI decides to purchase the restaurant upon termination or expiration of the franchise agreement. This clause protects Fat Shack by ensuring they can recover any outstanding debts or costs incurred due to a franchisee's default.