Who does the Fat Shack Development Agreement bind and benefit?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
on of Development Fee paid hereunder.
3. DEVELOPMENT OBLIGATIONS
- 3.1. Franchisee will be bound by and strictly follow the schedule for developing the FAT SHACK Restaurants in the Protected Area set forth in the Addendum (the "Development Schedule"). Time is of the essence. By the date set forth under the Development Schedule for each applicable FAT SHACK Restaurant, Franchisee must exercise its development rights by entering into a Franchise Agreement with FSI for that FAT SHACK Restaurant. Further, Franchisee shall itself continuously maintain in operation at least the number of FAT SHACK Restaurants set forth on the Development Schedule.
- 3.2. Franchisee will exercise its right for development of each FAT SHACK Restaurant by giving FSI written notice of its intention to develop such FAT SHACK Restaurant at least 90 days in advance of the deadline set forth in the Development Schedule for executing each Subsequent Franchise Agreement. Subject to FSI's approval, Franchisee must execute the then-current form of Franchise Agreement for the particular FAT SHACK Restaurant and pay the balance of the Initial Franchise Fee, together with all other initial fees and deposits set forth in the applicable Subsequent Franchise Agreement by the deadline set forth in the Development Schedule. FSI will execute a Franchise Agreement with Franchisee only if Franchisee is in compliance with all requirements and obligations of this Development Agreement and all other agreements between the parties, including the individual Franchise Agreements between FSI and Franchisee. Franchisee acknowledges and agrees that FSI will have the right to refuse to offer Franchisee the right to enter into a Subsequent Franchise Agreement if FSI believes, in its discretion, that Franchisee does not have sufficient financial resources or other ability to properly develop and operate the proposed subsequent FAT SHACK Restaurant. The Subsequent
Franchise Agreement for the second and each subsequent FAT SHACK Restaurant will be executed within 10 days after FSI's approval of the particular FAT SHACK Restaurant location.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the Development Agreement primarily binds and benefits Fat Shack Franchising Systems International (FSI) and the franchisee. The agreement grants the franchisee the right to develop and establish Fat Shack restaurants within a specific geographic area, known as the Protected Area, using Fat Shack's trademarks and methods. In return, the franchisee is obligated to develop and operate the restaurants in compliance with Fat Shack's standards, with each restaurant operating under a separate Franchise Agreement.
Fat Shack benefits from the Development Agreement through the expansion of its brand and the collection of fees. The franchisee pays a Development Fee of $5,000 for each additional Fat Shack restaurant to be opened, in addition to the initial franchise fee. Fat Shack also retains rights to market and sell products and services through other venues and channels, and in captive audience venues, even within the franchisee's protected area. This ensures Fat Shack can explore alternative revenue streams without being restricted by the Development Agreement.
The franchisee is bound by a development schedule and must exercise their development rights by entering into a Franchise Agreement with FSI for each restaurant. The franchisee must also maintain continuous operation of the number of Fat Shack restaurants as set forth in the Development Schedule. Failure to comply with these obligations can result in termination of the Development Agreement. The franchisee also agrees to indemnify and hold Fat Shack harmless against any claims arising out of the Development Agreement or the operation of any Fat Shack restaurants.