Where in the Fat Shack FDD can I find information about 'Cross-Default and Cross Termination'?
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, information regarding cross-default and cross-termination can be found in section 24.14. This section outlines the conditions under which a default in one agreement can trigger a default in other agreements between the franchisee, its affiliates, Fat Shack, and its affiliates. Specifically, a default by the franchisee under the Franchise Agreement will be considered a default across all agreements between the franchisee (or affiliated companies) and Fat Shack (or affiliated companies). Similarly, a default by the franchisee (or its affiliates) under any other agreement will be considered a default under the Franchise Agreement. A default by any guarantor of the agreements also constitutes a default of the Franchise Agreement.
Furthermore, section 24.14 details the potential consequences of such cross-defaults. If the Franchise Agreement is terminated due to a franchisee default, Fat Shack has the option to terminate any or all other agreements. Conversely, if any other agreement is terminated because of a default by the franchisee (or its affiliates), Fat Shack can choose to terminate the Franchise Agreement. The document emphasizes that an uncured default under any agreement serves as grounds for terminating all related agreements without additional notice or opportunity to cure the default.
This cross-default and cross-termination provision has significant implications for prospective Fat Shack franchisees. It means that the franchisee's financial stability and compliance across all dealings with Fat Shack and its affiliates are crucial. A default in one area, such as a failure to pay royalties or comply with operational standards, could lead to the termination of not only the Franchise Agreement but also any other agreements in place. This could include loan agreements, supply contracts, or development agreements, potentially resulting in a complete loss of the franchisee's investment and business operations. Franchisees should carefully review all agreements and ensure they can meet all obligations to avoid triggering these cross-default provisions.