Can a Fat Shack franchisee transfer individual Franchise Agreements without transferring the Development Agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
- 5.5.
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").
In that event, (i) the FAT SHACK Restaurant(s) associated with the Franchise Transfer shall continue to be counted as FAT SHACK Restaurant(s) to be developed under this Development Agreement, (ii) the Franchise Agreement(s) associated with the Franchise Transfer shall continue to be included in the cumulative number of FAT SHACK Restaurants required to be opened and continuously operated in the Protected Area, regardless of whether the applicable Franchise Agreement is transferred to the transferee or the transferee executes a new Franchise Agreement, (iii) the exclusive rights granted to Franchisee in this Development Agreement shall be modified to permit the transferee of the Franchise Transfer to operate in the Protected Area, and (iv) a default by the transferee of the Franchise Agreement related to a Franchise Transfer shall constitute grounds for a default to be declared under this Development Agreement pursuant to Section 4.3 hereof.
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 individual Franchise Agreements without transferring the entire Development Agreement under specific conditions. The Fat Shack franchisee can transfer one or more individual Franchise Agreements, or the assets of the Fat Shack restaurants associated with those agreements, without transferring their interest in the Development Agreement. However, the Fat Shack restaurant(s) associated with the Franchise Agreement(s) being transferred must be open and operating at the time of the transfer. This type of transfer is referred to as a "Franchise Transfer."
If a Franchise Transfer occurs, the Fat Shack restaurant(s) involved will still count towards the development requirements under the Development Agreement. The Franchise Agreements associated with the transfer will continue to be included in the cumulative number of Fat Shack restaurants required to be opened and operated in the Protected Area, regardless of whether the agreement is transferred to the new franchisee or a new agreement is executed. The exclusive rights granted to the original franchisee in the Development Agreement will be modified to allow the new franchisee to operate in the Protected Area.
Furthermore, a default by the new franchisee (transferee) under the Franchise Agreement related to the Franchise Transfer can be grounds for declaring a default under the original Development Agreement. This means that the original franchisee's Development Agreement could be at risk if the new franchisee fails to meet their obligations. This clause protects Fat Shack by ensuring that all restaurants within a development area meet brand standards, even after a transfer.