What is a 'Franchise Transfer' in the context of a Fat Shack franchise?

According to Fat Shack's 2025 Franchise Disclosure Document, a 'Franchise Transfer' refers to the transfer of one or more individual Franchise Agreements, or any interest in those agreements, or all or a substantial portion of the assets of the Fat Shack Restaurants associated with such Franchise Agreements, without transferring interest under the Development Agreement. Essentially, this means a franchisee can sell their existing Fat Shack restaurant(s) to a new operator without giving up their broader development rights or agreement with Fat Shack. However, the Fat Shack restaurant(s) being transferred must be open and operating at the time of the transfer.

This type of transfer has specific implications under the Development Agreement. The Fat Shack restaurant(s) involved in the Franchise Transfer continue to count towards the franchisee's development obligations. The Franchise Agreements associated with the transfer remain part of the cumulative number of Fat Shack restaurants required to be opened and continuously operated in the Protected Area, regardless of whether the agreement is transferred to the new operator or a new agreement is executed. The exclusive rights granted to the franchisee in the Development Agreement are modified to allow the new operator to operate in the Protected Area. Furthermore, any default by the new operator under the Franchise Agreement related to the Franchise Transfer can be grounds for declaring a default under the original Development Agreement.

Before a Fat Shack franchisee can transfer their franchise, the Fat Shack restaurant must be open for business. Fat Shack will not approve a transfer if the franchisee is not in full compliance with the agreement. The proposed new franchisee must be of good moral character and meet Fat Shack's standards for franchisees. All outstanding payments owed by the franchisee to Fat Shack or its affiliates must be paid in full. The franchisee must submit all required reports and statements. The franchisee must not have violated any provision of the agreement, the restaurant's lease, or any other agreement with Fat Shack during the 60-day period before requesting consent to the transfer or during the period between the request and the transfer date. The new franchisee must agree to operate the Fat Shack restaurant as a Fat Shack restaurant, sign the current franchise agreement, and complete the initial training program. The franchisee must provide written notice to Fat Shack at least 30 days before the proposed transfer date, including detailed information to allow Fat Shack to evaluate the terms and conditions of the proposed transfer, including a written offer from the proposed new franchisee.