What constitutes a default that could lead to termination of the Fat Shack Development Agreement by FSI?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
- (i) Franchisee defaults on any term or condition of this Development Agreement, including without limitation, the failure to execute the required Franchise Agreements or maintain the number of FAT SHACK Restaurants required by the Development Schedule, and fails to cure such default after 30 days written notice to Franchisee; or
- (ii) Franchisee is in default under any of the Franchise Agreements executed in furtherance of this Development Agreement or any other agreement between FSI or any of FSI's affiliates and Franchisee or any of Franchisee's affiliates and fails to cure such default within the time periods specified in such other agreements.
- 4.4. If this Development Agreement is terminated due solely to a failure by Franchisee to meet the Development Schedule, FSI and Franchisee agree that such termination shall not constitute a default or result in a termination of any Franchise Agreements executed between Franchisee and FSI in effect as of the date of termination of this Development Agreement. In that case, those Franchise Agreements shall continue in full force and effect notwithstanding the termination of this Development Agreement. FSI and Franchisee agree that any statements to the contrary in the Franchise Agreements executed by them, including any cross-default and cross-termination provisions, will be inapplicable in the situation of a termination of this Development Agreement based solely on Franchisee's failure to meet the Development Schedule. If this Development Agreement is terminated due to any other default under Section 4.3 above, all Franchise Agreements executed in furtherance of this Development Agreement and all other agreements between FSI and Franchisee or any of Franchisee's affiliates may, at FSI's sole option, be terminated.
- 4.5. In the event of termination or expiration of this Development Agreement for any reason, Franchisee shall not be entitled to any refund of any portion of the fees paid hereunder. Franchisee shall remain subject to the provisions of Article 6 of this Development Agreement regarding nondisclosure and covenants not to compete, in addition to the terms and conditions of any and all franchise agreements executed in furtherance of this Development Agreement which have not also been terminated or expired. No right or remedy herein conferred upon or reserved by FSI is exclusive of any other right or remedy provided or permitted by law or equity.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, FSI can terminate the Development Agreement if the franchisee defaults on any term or condition of the agreement. This includes failing to execute the required Franchise Agreements or not maintaining the number of Fat Shack restaurants as required by the Development Schedule. To trigger termination, Fat Shack must provide 30 days written notice, and the franchisee must fail to cure the default within that period.
Additionally, a franchisee's default under any Franchise Agreements executed to further the Development Agreement, or any other agreement between FSI (or its affiliates) and the franchisee (or their affiliates), can lead to termination. The cure period for such defaults will be specified in those other agreements. However, if the Development Agreement is terminated solely because the franchisee failed to meet the Development Schedule, existing Franchise Agreements will remain in effect, and cross-default or cross-termination provisions in those Franchise Agreements will not apply.
If the Development Agreement is terminated for any other reason, Fat Shack has the option to terminate all Franchise Agreements executed under the Development Agreement and any other agreements between FSI and the franchisee or their affiliates. Upon termination or expiration of the Development Agreement, the franchisee is not entitled to any refund of fees paid and remains subject to non-disclosure and non-compete obligations. These termination conditions are significant for prospective franchisees as they highlight the importance of adhering to the Development Schedule and fulfilling all contractual obligations to avoid potential termination and loss of investment.