What rights does a Fat Shack franchisee have regarding termination under state law?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
irty Days' Notice
FSI shall have the right to terminate this Agreement (subject to any state laws to the contrary, where state law shall prevail), effective upon 30 days written notice to Franchisee, if Franchisee breaches any other provision of this Agreement and fails to cure such breach within the 30-day period. Neither Section 19.2 nor this Section 19.3 shall be deemed to extend the cure period provided in any material agreement for the FAT SHACK Restaurant or any other agreement between FSI and Franchisee. So long as financing from the United States Small Business Administration remains outstanding, Franchisee will be given the same opportunity to cure defaults under any agreement between FSI or its affiliates and Franchisee, as Franchisee is given under this Agreement. Notwithstanding the foregoing, if the breach is curable, but is of a nature which cannot be reasonably cured within the applicable cure period and Franchisee has commenced and is continuing to make good faith efforts to cure the breach during such period, Franchisee shall be given an additional reasonable period of time to cure the same, and this Agreement shall not terminate.
19.4. Failure to Comply with Reporting Requirements
If Franchisee fails to prepare and submit any statement or report as required under Article 16, then FSI shall have the right to treat Franchisee's failure as good cause for termination of this Agreement. In addition to all other remedies available to FSI, in the event that Franchisee fails to prepare and submit
any statement or report required under Article 16 for two consecutive reporting periods, FSI shall be entitled to make an audit, at the expense of Franchisee, of Franchisee's books, records and accounts, including Franchisee's bank accounts. The statements or reports not previously submitted shall be prepared by or under the direction and supervision of an independent certified public accountant selected by FSI.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, the standard termination terms within the franchise agreement are subject to state laws, which may provide additional rights to the franchisee. Specifically, Section 19.2 and 19.3 of the agreement state that the franchisor's right to terminate the agreement is 'subject to any state laws to the contrary, where state law shall prevail.'
To clarify the interplay between the franchise agreement and state law, Fat Shack includes state-specific addenda as Exhibit VI to the franchise agreement. For example, the New York Rider to the Franchise Agreement explicitly states that the franchisee may terminate the agreement upon any grounds available by law. This means that New York franchisees have all termination rights granted to them under New York state law, regardless of what the standard Fat Shack franchise agreement says.
Similarly, the Indiana addendum modifies certain sections of the franchise agreement to comply with the Indiana Franchises Act. It specifies that franchisees in Indiana do not waive any rights under Indiana statutes regarding prior representations made by Fat Shack. Furthermore, any claims or actions related to the franchise agreement or the franchisee's operation must be commenced within the time period specified in Indiana law. These state addenda ensure that Fat Shack franchisees receive the protections mandated by their respective state laws, which may offer more favorable terms than the standard franchise agreement.
Prospective Fat Shack franchisees should carefully review Exhibit VI of the Franchise Disclosure Document to understand the specific state law addendum, if any, that applies to their state. They should also consult with a legal professional to fully understand their rights and obligations under both the franchise agreement and applicable state laws, as state laws can significantly impact the termination and renewal terms of the franchise agreement.