Does Fat Shack have sole discretion in granting or withholding consent for a franchisee to transfer the franchise agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
17.2. Pre-Conditions to Franchisee's Transfer
Franchisee agrees that there may be no transfers before the FAT SHACK Restaurant has opened for business. FSI will not approve a proposed transfer in any case where Franchisee (and its owners) is not in full compliance with this Agreement. The proposed transferee and its owners must be individuals of good moral character and otherwise meet FSI's then applicable standards for franchisees. In the event of a transfer, all of the following conditions must be met before or concurrently with the effective date of the transfer:
- a. All amounts due and owing pursuant to this Agreement or otherwise by Franchisee to FSI, its affiliates or to third parties whose debts or obligations FSI has guaranteed on behalf of Franchisee, if any, are paid in full;
- b. Franchisee has submitted all required reports and statements;
- c. Franchisee has not violated any provision of this Agreement, the FAT SHACK Restaurant's lease, or any other agreement with FSI during the 60-day period before Franchisee requested FSI's consent to the transfer or during the period between Franchisee's request and the effective date of the transfer:
- d. The proposed transferee agrees to operate the FAT SHACK Restaurant as a FAT SHACK Restaurant, signs the then-current form of franchise agreement, the provisions of which may differ materially from any and all of those contained in this Agreement, and satisfactorily completes the initial training program;
- e. Franchisee provides written notice to FSI at least 30 days prior to the proposed effective date of the transfer, and includes information reasonably detailed to enable FSI to evaluate the
terms and conditions of the proposed transfer, and which at a minimum includes a writ
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, Fat Shack does not have sole discretion in granting or withholding consent for a franchisee to transfer the franchise agreement. While Fat Shack must approve any transfer, the FDD outlines specific, objective conditions that the franchisee and transferee must meet.
These conditions include ensuring that the Fat Shack restaurant has already opened for business and that the franchisee is in full compliance with the franchise agreement. The proposed transferee must also be of good moral character and meet Fat Shack's standards for franchisees. Furthermore, the franchisee must settle all outstanding debts to Fat Shack and submit all required reports. The transferee needs to agree to operate the Fat Shack restaurant under the current franchise agreement and complete the initial training program.
Additionally, the franchisee must provide Fat Shack with written notice at least 30 days before the proposed transfer date, including detailed information about the transfer terms and a written offer from the proposed transferee. The franchisee and/or the proposed transferee must also pay Fat Shack the standard transfer fee for each franchise agreement being transferred, along with $5,000 for every undeveloped franchise right without a Subsequent Franchise Agreement. These preconditions suggest that while Fat Shack's approval is necessary, it is based on meeting specific criteria rather than solely on Fat Shack's discretion.