Does a default by an Associate under the Fat Shack Franchise Agreement automatically constitute a default of all agreements between Company and FSI?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
24.14. Cross-Default and Cross Termination
- a. A default by Franchisee under this Agreement will be deemed a default of all agreements between Franchisee and/or any company(ies) affiliated with Franchisee, on the one hand, and FSI and/or any company(ies) affiliated with FSI, on the other hand (the "Other Agreements"). A default by Franchisee and/or any company(ies) affiliated with Franchisee under any of the Other Agreements will be deemed a default under this Agreement. A default by any guarantor(s) of this Agreement or of any of the Other Agreements will be deemed a default of this Agreement.
- b. If this Agreement is terminated as a result of a default by Franchisee, FSI may, at its option, elect to terminate any or all of the Other Agreements. If any of the Other Agreements is terminated as a result of a default by Franchisee and/or any company(ies) affiliated with Franchisee, FSI may, at its option, elect to terminate this Agreement. It is agreed that an incurable or uncured default under this Agreement or any of the Other Agreements will be grounds for termination of this Agreement and/or any and all of the Other Agreements without additional notice or opportunity to cure.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, a default by a Fat Shack franchisee under the Franchise Agreement can trigger a default across all agreements between the franchisee and Fat Shack. Specifically, section 24.14(a) states that a default by the franchisee under the Franchise Agreement is considered a default of all other agreements between the franchisee (and any affiliated companies) and FSI (and any affiliated companies).
Furthermore, section 24.14(a) also clarifies that a default by any guarantor of the Franchise Agreement or other agreements is also considered a default of the Franchise Agreement itself. This cross-default provision means that if the franchisee or their affiliated companies fail to meet their obligations under any agreement with Fat Shack, it can lead to the termination of all agreements, including the Franchise Agreement.
Fat Shack retains the option to terminate any or all other agreements if the Franchise Agreement is terminated due to a franchisee default, as stated in section 24.14(b). Similarly, if any of the other agreements are terminated because of a default by the franchisee or their affiliates, Fat Shack can choose to terminate the Franchise Agreement. This clause also specifies that an incurable or uncured default under any agreement allows Fat Shack to terminate all agreements without additional notice or opportunity to cure, which could have significant repercussions for the franchisee's investment and business operations.