If a Fat Shack restaurant is transferred, how does it affect the development requirements under the Development Agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
he 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.
- 5.6. In the event of any proposed sale, transfer or assignment of its rights under this Development Agreement or any interest in it or all or any part of the franchise development rights, or assets directly or indirectly related to the franchise development rights, Franchisee agrees to grant FSI a 30-day right of first refusal to purchase such rights or assets on the same terms and conditions as are contained in the Initial Franchise Agreement.
6. RESTRICTIVE COVENANTS
6.1.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, if a Fat Shack restaurant is transferred under a Development Agreement, the transferred restaurant continues to count towards the development requirements outlined in the agreement. This means the Fat Shack restaurant associated with the transfer will still be considered as one of the restaurants to be developed under the original Development Agreement. The franchise agreement tied to the transfer remains part of the cumulative number of restaurants required to be opened and operated within the protected area, regardless of whether the agreement is transferred to a new owner or a new agreement is executed.
Furthermore, the exclusive rights granted to the original franchisee in the Development Agreement are modified to allow the new owner to operate within the protected area. This ensures that the transfer does not disrupt the operational requirements within the designated territory. Additionally, any default by the new owner under the franchise agreement related to the transfer can be considered a default under the original Development Agreement.
In the event of a transfer, the franchisee and/or the proposed transferee must pay Fat Shack the standard transfer fee for each franchise agreement being transferred, as specified in the franchise agreement executed under the Development Agreement. An additional fee of $5,000 is required for each undeveloped franchise right for which no Subsequent Franchise Agreement has been executed. This sum is payable in a lump sum to Fat Shack as a precondition for obtaining written consent for the transfer. The transferee is also responsible for paying any remaining portions of the Initial Franchise Fees owed to Fat Shack when each Subsequent Franchise Agreement is signed, although they will receive credit for the original franchisee's payment of the Development Fees.