What is the dependency related to transfer fees for a Fat Shack franchise?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
orporated herein by reference.
- 5.3. In the event of any proposed sale, transfer or assignment by Franchisee as described herein, Franchisee and/or the proposed transferee shall pay to FSI the standard transfer fee for each franchise agreement to be transferred, as governed by such franchise agreement executed pursuant to this Development Agreement, plus $5,000.00 for every undeveloped franchise right for which no Subsequent Franchise Agreement has been executed. This sum shall be payable in lump sum to FSI as one of the preconditions to obtaining FSI's written consent to any proposed transfer. In the event of transfer, the transferee shall pay the remaining portions of the Initial Franchise Fees owed to FSI, when each Subsequent Franchise Agreement is signed. Transfer fees paid to FSI will not be applied to the Initial Franchise Fees due, but the transferee will receive credit for Franchisee's earlier payment of the Development Fees.
- 5.4. A condition of FSI's approval of a transfer of this Development Agreement is that Franchisee must transfer all of its interest under this Development Agreement, and shall not be permitted to transfer any portion of this Development Agreement separate and apart from the remainder of this Development Agreement. Any transfer shall include the rights to all Franchise Agreements entered into between FSI and Franchisee hereunder. Franchisee and the transferee shall comply with the requirements under each Franchise Agreement entered into between FSI and Franchisee for the transfer of each such Franchise Agreement, including the payment of the applicable transfer fee for each Franchise Agreement.
- 5.5. Franchisee may transfer one or more of the individual Franchise Agreements or any interest in those Franchise Agreements, or all or a substantial portion of the assets of the FAT SHACK Restaurants associated with such Franchise Agreements without a transfer of its interest under this Development Agreement in accordance with the terms of each such Franchise Agreement, provided that the FAT SHACK Restaurant(s) associated with the Franchise Agreement(s) being transferred are open and operating as of the date of the transfer (a "Franchise Transfer").
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, a franchisee's ability to transfer their franchise is contingent upon paying the standard transfer fee, as well as $5,000 for each undeveloped franchise right if a Subsequent Franchise Agreement hasn't been executed. This payment is a prerequisite for obtaining Fat Shack's written consent for the transfer. The transferee is also responsible for paying any remaining initial franchise fees when each Subsequent Franchise Agreement is signed. However, the transfer fees paid won't be applied towards these initial franchise fees, although the transferee will receive credit for the original franchisee's earlier payment of the Development Fees.
Fat Shack requires that any transfer of the Development Agreement includes all of the franchisee's interest under it. This means a franchisee can't transfer only a portion of the agreement. Any transfer must also include the rights to all Franchise Agreements entered into between Fat Shack and the franchisee. Both the franchisee and the transferee must meet all requirements for transferring each individual Franchise Agreement, including paying the applicable transfer fee for each one.
However, a franchisee can transfer individual Franchise Agreements or the assets of a Fat Shack restaurant without transferring their entire interest in the Development Agreement. This is allowed as long as the Fat Shack restaurant associated with the Franchise Agreement being transferred is open and operating at the time of the transfer. In any transfer scenario, Fat Shack retains a 30-day right of first refusal to purchase the rights or assets on the same terms and conditions as the proposed transfer agreement.
These transfer conditions are fairly standard in franchising, as franchisors want to ensure that any new franchisee meets their standards and that all outstanding financial obligations are settled. The right of first refusal is also a common clause, allowing Fat Shack to maintain control over its brand and network.