For Fat Shack notes receivable loans, what collateral is required from the franchisee?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee hereby grants FSI a security interest ("Security Interest") in all of the furniture, fixtures, equipment, signage, and realty (including Franchisee's interests under all real property and personal property leases) of the FAT SHACK Restaurant, together with all similar property now owned or hereafter acquired, additions, substitutions, replacements, proceeds and products thereof, wherever located and used in connection with the FAT SHACK Restaurant. All items in which a security interest is granted hereby are referred to as the "Collateral." FSI hereby agrees to subordinate this security interest to any lender of franchisee if the loan is guaranteed by the Small Business Administration.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, franchisees grant Fat Shack a security interest in specific assets to secure their debt. This security interest applies to all furniture, fixtures, equipment, signage, and realty associated with the Fat Shack restaurant. Realty includes the franchisee's interests in both real property and personal property leases.
This security interest extends to all similar property the franchisee currently owns or acquires in the future, including any additions, substitutions, replacements, proceeds, and products related to the Fat Shack restaurant, regardless of its location. All of these items collectively constitute the "Collateral" for the security interest.
However, Fat Shack agrees to subordinate its security interest to any lender of the franchisee if the loan is guaranteed by the Small Business Administration. This means that if a franchisee obtains a loan backed by the SBA, the SBA lender would have priority over Fat Shack in terms of claims on the collateral in case of default.