What constitutes a default under the Fat Shack Development Agreement that can lead to termination?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
id hereunder under any circumstances.
- 4.3. Franchisee shall be deemed in default and this Development Agreement may be terminated by FSI, at its option, in the following circumstances:
- (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.
5. ASSIGNMENT
- 5.1. FSI may transfer or assign its rights under this Development Agreement at any time upon notice to Franchisee.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, there are several circumstances under which a franchisee may be deemed in default of the Development Agreement, potentially leading to its termination by Fat Shack Inc. (FSI). These include failing to meet the terms and conditions of the Development Agreement, such as not executing the required Franchise Agreements or failing to maintain the number of Fat Shack restaurants as per the Development Schedule. The franchisee has 30 days after written notice to correct such failures.
Another cause for default is if the franchisee is in default under any of the Franchise Agreements executed in furtherance of the Development Agreement, or any other agreement between FSI (or its affiliates) and the franchisee (or their affiliates). The time period to cure such a default will be specified in those other agreements. However, if the Development Agreement is terminated solely because the franchisee failed to meet the Development Schedule, any existing Franchise Agreements remain in effect, overriding any conflicting cross-default or cross-termination provisions in those Franchise Agreements.
It's important to note that if the Development Agreement is terminated due to any default other than failing to meet the Development Schedule, Fat Shack has the option to terminate all Franchise Agreements executed under the Development Agreement, as well as any other agreements between FSI and the franchisee or their affiliates. In the event of termination or expiration of the Development Agreement for any reason, the franchisee is not entitled to a refund of any fees paid and remains bound by non-disclosure and non-compete obligations. A prospective franchisee should carefully review the Development Agreement and related documents to fully understand the implications of a default and the potential consequences.