What may happen if a Fat Shack franchisee defaults in any term of any Subsequent Franchise Agreement?

According to the 2025 Fat Shack Franchise Disclosure Document, a franchisee's failure to execute any Subsequent Franchise Agreement or defaulting on any term of any Subsequent Franchise Agreement may be considered a default under the Development Agreement, at Fat Shack's discretion. If this occurs, Fat Shack has the option to terminate the Development Agreement.

This means that if a franchisee has a Development Agreement to open multiple Fat Shack locations, failing to meet the obligations for one location can jeopardize the entire agreement. This could lead to the loss of rights to develop further Fat Shack restaurants in the protected area.

This clause highlights the importance of fulfilling all obligations under both the Development Agreement and each individual Franchise Agreement. Prospective franchisees should carefully review these agreements and ensure they have the financial and operational capabilities to meet the development schedule and maintain compliance across all locations. This also means that Fat Shack has the right to refuse to offer a Subsequent Franchise Agreement if they believe the franchisee lacks sufficient financial resources or the ability to properly develop and operate the subsequent Fat Shack Restaurant.