What is the role of a 'Designated Manager' as defined in the Franchise Agreement for Fat Shack?
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)
Based on the 2025 Fat Shack Franchise Disclosure Document, if the franchisee is a business entity such as a corporation, partnership, or limited liability company, Fat Shack may designate individuals who must execute a Guaranty and Assumption of Franchisee's Obligations. These individuals can include shareholders, members, partners, owners, directors, officers, and managers. By signing this guarantee, they personally guarantee the franchisee's full payment and performance of all obligations to Fat Shack, becoming jointly and severally bound by the terms of the Franchise Agreement.
This requirement ensures that Fat Shack has recourse to the personal assets of key individuals associated with the franchisee entity, providing an additional layer of security for the franchisor. It is a common practice in franchising to seek personal guarantees from individuals associated with business entity franchisees, as it mitigates the risk of the entity becoming insolvent or failing to meet its obligations.
For a prospective Fat Shack franchisee operating through a business entity, this means that they, along with other designated individuals, will be personally liable for the franchise's financial and operational performance. This personal guarantee remains in effect even if ownership interests in the business entity change, requiring new or transferring owners, directors, officers, members, or managers to also execute the Guaranty and Assumption agreement. Therefore, potential franchisees should carefully consider the implications of this personal liability before entering into a franchise agreement with Fat Shack.