If a receiver is appointed for a Fat Shack franchisee, can FSI terminate the franchise agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee or any of its guarantors becomes insolvent or is adjudicated a bankrupt; or any action is taken by Franchisee or a guarantor, or by others against Franchisee or a guarantor under any insolvency, bankruptcy or reorganization act (this provision may not be enforceable under federal bankruptcy law, 11 U.S.C. §§ 101 et seq.), or if Franchisee or a guarantor makes an assignment for the benefit of creditors, or a receiver is appointed by Franchisee or a guarantor.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, Fat Shack can terminate the franchise agreement if a receiver is appointed for the franchisee.
Specifically, if a receiver is appointed for the Fat Shack franchisee, Fat Shack has the right to terminate the agreement, effective immediately upon notice to the franchisee. This falls under the conditions for termination by FSI without opportunity to cure, meaning Fat Shack does not have to give the franchisee a chance to fix the situation before terminating the agreement.
This provision protects Fat Shack from potential mismanagement or financial instability of a franchise location, which could negatively impact the brand's reputation. For a prospective franchisee, this highlights the importance of maintaining financial stability and avoiding circumstances that could lead to the appointment of a receiver.