Is the Fat Shack franchisee required to execute the Initial Franchise Agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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. Franchisee's failure to execute any Subsequent Franchise Agreement or its default in any term of any Subsequent Franchise Agreement may, at the option of FSI, be deemed a default under this Development Agreement and shall entitle FSI to terminate this Development Agreement as further provided in Article 4 below.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, franchisees who enter into a Development Agreement are obligated to adhere to a schedule for developing Fat Shack restaurants within their protected area. To fulfill their development rights for each restaurant, franchisees must enter into a Franchise Agreement with Fat Shack Inc. (FSI).
Specifically, franchisees must notify FSI in writing of their intent to develop a restaurant at least 90 days before the deadline for executing each Subsequent Franchise Agreement. Subject to FSI's approval, the franchisee must then execute the current Franchise Agreement form and pay the remaining Initial Franchise Fee, along with any other initial fees and deposits outlined in the Subsequent Franchise Agreement. FSI will only execute a Franchise Agreement if the franchisee complies with all requirements and obligations of the Development Agreement and other agreements, including individual Franchise Agreements.
Failure to execute any Subsequent Franchise Agreement or defaulting on any term within it may be considered a default under the Development Agreement, potentially leading to termination of the agreement at FSI's discretion. This clause ensures that Fat Shack maintains control over the pace and quality of development within a franchisee's territory, protecting the brand's reputation and market presence.