What conditions must be met for the assignment of the Fat Shack lease to be effective?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
| day of, 202 by and between | THIS CONDITIONAL ASSIGNMENT OF LEASE ("Assignment") is made as of this , a |
|---|---|
| ("Assignor"), FAT SHACK INC., a Delaware corporation ("Assignee") and , a ("Landlord"). WHEREAS, Assignor is a tenant of certain property generally known as , located in the City of , State | |
| of Assignor, dated | ("Property"), pursuant to a lease by and between Landlord and , 202 (the "Lease"); WHEREAS, Assignor desires to construct, or have constructed by Landlord (whichever is applicable), and thereafter operate a FAT SHACK Restaurant under a certain franchise agreement between Assignor and Assignee (the "Franchise Agreement"); and WHEREAS, as a condition to the grant of rights under the Franchise Agreement to Assignor, Assignee requires that Assignor enter into this Assignment. NOW, THEREFORE, for and in consideration of the sum of Ten Dollars and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: |
| 1. | Assignor hereby assigns all of its right, title and interest in and to the Lease and the FAT |
| SHACK Restaurant to Assignee. | |
| 2. | With the exception of Assignee's rights under paragraph 3 below and Assignor's and Landlord's respective obligations, representations and covenants under paragraphs 3, 4, 8, 9 and 10 below, the Conditional Assignment of lease contemplated hereunder is expressly conditioned upon, and shall not be effective and Assignee shall have no right to pursue any remedy hereunder unless and until: |
| (a) | Default by Assignor under the terms of the Lease, which default (i) is not cured by Assignor within the time limits provided therein or (ii) results in a demand for performance by Assignee under any guaranty of the Lease; or |
| (b) | Default by Assignor under the terms of the Franchise Agreement or under any document or instrument securing the Franchise Agreement, which default is not cured by Assignor within the time limits provided therein; or |
| (c) | Voluntary institution of any insolvency or bankruptcy proceedings as a debtor or involuntary insolvency or bankruptcy proceedings brought against Assignor which are not dismissed within 60 days of the filing thereof; or |
| (d) | Discontinuation by the Assignor of operation of the FAT SHACK Restaurant to be located on the Property, whether voluntarily or involuntarily; or |
| (e) | Nonrenewal by Assignor of the Franchise Agreement; or |
| (f) | Nonrenewal by Assignor of the Lease. |
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the assignment of the lease is conditional and will only become effective under certain circumstances. The conditional assignment of the lease is expressly conditioned upon certain events and will not be effective until these conditions are met. Fat Shack, as the Assignee, has no right to pursue any remedy until these conditions are satisfied.
The conditions that must be met for the assignment of the lease to be effective include: default by the Assignor (the franchisee) under the terms of the lease that is not cured within the specified time limits or results in a demand for performance by Fat Shack under any guaranty of the lease; default by the Assignor under the terms of the Franchise Agreement or any document securing it, which is not cured within the provided time limits; the voluntary or involuntary institution of insolvency or bankruptcy proceedings against the Assignor that are not dismissed within 60 days; discontinuation of the Fat Shack Restaurant's operation by the Assignor, whether voluntary or involuntary; nonrenewal of the Franchise Agreement by the Assignor; or nonrenewal of the lease by the Assignor.
These conditions protect Fat Shack by ensuring that the lease assignment only occurs when the franchisee is in significant breach of their obligations or is unable to continue operating the business. This arrangement allows Fat Shack to step in and take over the lease to maintain the operation of a Fat Shack Restaurant at that location, mitigating potential losses and maintaining brand presence. A prospective franchisee should understand these conditions, as they outline the circumstances under which they could lose control of their lease and, potentially, their franchise.