What section of the Fat Shack franchise agreement must an entity transferee comply with when an individual franchisee transfers their franchise to a business entity they own?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
s Agreement.
- b. No shares in the capital of such corporation or other interest in the business entity shall be issued nor shall Franchisee directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, sell, assign, transfer, convey, donate, pledge, mortgage or otherwise encumber any such shares or other interest or other interest or offer or attempt to do so or permit the same to be done without FSI's prior written consent. Such actions shall be deemed a transfer, as defined in Section 17.1, and subject to the requirements of Article 17 below.
- c. The business entity shall maintain stop transfer instructions against the transfer of ownership on its records subject to the restrictions of this Agreement and shall have all outstanding certificates of ownership endorsed with the following legend printed conspicuously upon the face of each certificate:
The transfer of the shares represented by this certificate is subject to the terms and conditions of a certain Franchise Agreement with Fat Shack Inc..
d.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, when a franchisee transfers their franchise to a business entity they own, they must comply with the provisions outlined in Article 17 of the franchise agreement. Specifically, Section 17.1 defines such actions as a transfer and subjects them to the requirements of Article 17. This implies that any transfer of ownership, even to an entity owned by the franchisee, is treated as a standard transfer under the agreement.
Article 17 likely contains various conditions and procedures that must be followed to gain Fat Shack's approval for the transfer. These preconditions could include paying outstanding amounts, submitting required reports, ensuring the transferee meets Fat Shack's standards, and having the transferee sign the current franchise agreement. The franchisee must provide advance written notice to Fat Shack with detailed information about the proposed transfer and obtain Fat Shack's approval of the transferee's qualifications.
Additionally, the franchisee must ensure that the business entity adheres to specific requirements, such as having its owners execute a guaranty, restricting the transfer of ownership interests without Fat Shack's consent, and maintaining stop transfer instructions on its records. The entity's governing documents must also confine its business exclusively to operating the Fat Shack restaurant. Failure to comply with these provisions could result in an unauthorized transfer, potentially leading to a breach of the franchise agreement.