Can a Fat Shack franchisee transfer the assets of FAT SHACK Restaurants without transferring the Development Agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee may transfer one or more of the individual Franchise Agreements or any interest in those Franchise Agreements, or all or a substantial portion of the assets of the FAT SHACK Restaurants associated with such Franchise Agreements without a transfer of its interest under this Development Agreement in accordance with the terms of each such Franchise Agreement, provided that the FAT SHACK Restaurant(s) associated with the Franchise Agreement(s) being transferred are open and operating as of the date of the transfer (a "Franchise Transfer").
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, a franchisee can transfer the assets of their Fat Shack restaurant(s) without transferring the Development Agreement under specific conditions. This is permissible if the Fat Shack restaurant associated with the Franchise Agreement being transferred is open and operating at the time of the transfer. This type of transfer is referred to as a "Franchise Transfer."
However, even if the Development Agreement is not transferred, the Fat Shack restaurant associated with the transfer will still be counted towards the development requirements under the original Development Agreement. The Franchise Agreement associated with the transfer will continue to be included in the cumulative number of restaurants required to be opened and operated in the protected area. Furthermore, the exclusive rights granted to the franchisee in the Development Agreement will be modified to allow the transferee to operate in the protected area.
It's important to note that if the transferee defaults on the Franchise Agreement related to the Franchise Transfer, it can be considered a default under the original Development Agreement. This means that while a franchisee can transfer individual restaurant assets, the performance of the transferred restaurant can still impact the original franchisee's obligations under the Development Agreement. Franchisees should carefully consider these implications before transferring assets without transferring the entire Development Agreement.