What agreement must each of the Fat Shack franchisee's officers, directors, shareholders, partners, or members and their respective spouses sign?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
We require each of your officers, directors, shareholders, partners, or members and each of their respective spouses to sign an agreement (Exhibit V to the Franchise Agreement) personally assuming and agreeing to perform all obligations of the franchisee and to be bound by the terms of the Franchise Agreement, whichever is applicable.
If Franchisee is a corporation, partnership, limited liability company or other business entity, the following additional conditions must be met, along with any other conditions as may be established by FSI for entity franchisees:
- a. Contemporaneously with the business entity acquiring the franchise rights, thereafter upon the issuance or transfer of any ownership interests in the business entity or the appointment or election of any person as director, officer, member or manager of the business entity, and at any other time requested by FSI, the shareholders, members, partners, other owners, directors, officers, managers (as applicable), and any other individuals as designated by FSI will execute the Guaranty and Assumption of Franchisee's Obligations attached hereto as Exhibit V and incorporated herein by reference, personally guaranteeing full payment and performance of Franchisee's obligations to FSI and individually undertaking to be bound, jointly and severally, by all the terms of this Agreement.
Source: Item 15 — Obligation to Participate in the Actual Operation of the Franchise Business (FDD pages 41–42)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, if the franchisee is a corporation, limited liability company, partnership, or other entity, each of the franchisee's officers, directors, shareholders, partners, or members, and their respective spouses, must sign an agreement. This agreement (Exhibit V to the Franchise Agreement) requires them to personally assume and agree to perform all of the franchisee's obligations and to be bound by the terms of the Franchise Agreement, as applicable. This requirement ensures that individuals associated with the franchisee entity are personally liable for the franchise's performance and adherence to the Franchise Agreement.
This requirement is further reinforced by stipulations regarding entity franchisees. Contemporaneously with the business entity acquiring the franchise rights, and thereafter upon the issuance or transfer of any ownership interests, or the appointment of any person as director, officer, member, or manager, these individuals must execute the Guaranty and Assumption of Franchisee's Obligations. This document, attached as Exhibit V, ensures they personally guarantee full payment and performance of the franchisee's obligations to Fat Shack Inc. and individually undertake to be bound, jointly and severally, by all the terms of the agreement.
This requirement is more stringent than typical non-compete agreements, as it involves a full assumption of the franchisee's obligations rather than just restrictions on future competitive activities. Prospective Fat Shack franchisees should carefully review Exhibit V to fully understand the scope of personal liability they and their associated parties will be undertaking. Franchisees should consult with legal counsel to fully understand the implications of this agreement.