If applicable, what document must a Fat Shack franchisee execute in favor of FSI?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is a corporation, partnership, limited liability company or other business entity, the following additional conditions must be met, along with any other conditions as may be established by FSI for entity franchisees:
- a. Contemporaneously with the business entity acquiring the franchise rights, thereafter upon the issuance or transfer of any ownership interests in the business entity or the appointment or election of any person as director, officer, member or manager of the business entity, and at any other time requested by FSI, the shareholders, members, partners, other owners, directors, officers, managers (as applicable), and any other individuals as designated by FSI will execute the Guaranty and Assumption of Franchisee's Obligations attached hereto as Exhibit V and incorporated herein by reference, personally guaranteeing full payment and performance of Franchisee's obligations to FSI and individually undertaking to be bound, jointly and severally, by all the terms of this Agreement.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, if the franchisee is a business entity (corporation, partnership, LLC, etc.), certain individuals associated with the entity must execute a Guaranty and Assumption of Franchisee's Obligations. These individuals include shareholders, members, partners, other owners, directors, officers, managers, and any other individuals designated by Fat Shack Inc. (FSI). This document is attached as Exhibit V to the FDD.
The Guaranty and Assumption of Franchisee's Obligations ensures that these individuals personally guarantee the franchisee's full payment and performance of all obligations to FSI under the Franchise Agreement. They also individually agree to be bound, jointly and severally, by all the terms of the agreement. This means that FSI can seek recourse directly from these individuals if the franchisee entity fails to meet its obligations.
This requirement is common in franchising, as it provides the franchisor with an additional layer of security, especially when the franchisee is a newly formed entity with limited assets or operating history. It is important for prospective Fat Shack franchisees operating as business entities to understand this requirement and ensure that all relevant individuals are willing to sign the Guaranty and Assumption of Franchisee's Obligations. Franchisees should carefully review Exhibit V to understand the full scope of the obligations being guaranteed.