Does the Fat Shack Disclosure Document include a Conditional Assignment of Lease?

Yes, according to Fat Shack's 2025 Franchise Disclosure Document, a standard form of Conditional Assignment of Lease is included as Attachment D. The lease agreement between the franchisee and the landlord must grant Fat Shack certain rights as the franchisor. These rights include the ability to assume the franchisee's occupancy rights and assign or sublet the premises if the franchisee defaults on the lease or Franchise Agreement, or if either agreement is terminated. The franchisee is responsible for obtaining the landlord's consent to this conditional assignment.

The Conditional Assignment of Lease ensures that Fat Shack has the option to take over the lease under certain circumstances, protecting their interests and the continuity of the Fat Shack business at that location. This is a common practice in franchising, as it provides the franchisor with a mechanism to maintain control over the location and brand presence, even if the original franchisee is unable to continue operating the business. The franchisee's lease is conditionally assigned to Fat Shack as security for the franchisee's performance of their obligations under the Franchise Agreement.

The document outlines specific conditions that trigger the Conditional Assignment of Lease, such as default by the franchisee under the terms of the lease or Franchise Agreement, institution of insolvency or bankruptcy proceedings, discontinuation of operation of the Fat Shack Restaurant, or nonrenewal of either the Franchise Agreement or the lease. The franchisee must obtain the landlord's consent to the conditional assignment, adding a layer of complexity to the lease negotiation process. Prospective franchisees should carefully review the Conditional Assignment of Lease and discuss it with their attorney to fully understand their obligations and the potential consequences of default or termination.