What does the term 'transfer' include in the context of the Fat Shack Development Agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event of any proposed sale, transfer or assignment of its rights under this Development Agreement or any interest in it or all or any part of the franchise development rights, or assets directly or indirectly related to the franchise development rights, Franchisee agrees to grant FSI a 30-day right of first refusal to purchase such rights or assets on the same terms and conditions as are contained in the Initial Franchise Agreement.
- 5.3.
In the event of any proposed sale, transfer or assignment by Franchisee as described herein, Franchisee and/or the proposed transferee shall pay to FSI the standard transfer fee for each franchise agreement to be transferred, as governed by such franchise agreement executed pursuant to this Development Agreement, plus $5,000.00 for every undeveloped franchise right for which no Subsequent Franchise Agreement has been executed.
This sum shall be payable in lump sum to FSI as one of the preconditions to obtaining FSI's written consent to any proposed transfer.
In the event of transfer, the transferee shall pay the remaining portions of the Initial Franchise Fees owed to FSI, when each Subsequent Franchise Agreement is signed.
Transfer fees paid to FSI will not be applied to the Initial Franchise Fees due, but the transferee will receive credit for Franchisee's earlier payment of the Development Fees.
- 5.4.
A condition of FSI's approval of a transfer of this Development Agreement is that Franchisee must transfer all of its interest under this Development Agreement, and shall not be permitted to transfer any portion of this Development Agreement separate and apart from the remainder of this Development Agreement.
Any transfer shall include the rights to all Franchise Agreements entered into between FSI and Franchisee hereunder.
- 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;
- 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;
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, a transfer under the Development Agreement encompasses various scenarios. It includes any proposed sale, transfer, or assignment of the franchisee's rights under the Development Agreement, any interest in it, or all or any part of the franchise development rights, or assets directly or indirectly related to the franchise development rights. This broad definition ensures that Fat Shack retains control over who develops franchises within the protected area.
If a Fat Shack franchisee proposes such a transfer, Fat Shack Inc. (FSI) has a 30-day right of first refusal to purchase those rights or assets under the same terms and conditions as the Initial Franchise Agreement. This allows Fat Shack to maintain control over development in the area. The franchisee must transfer all of its interest under the Development Agreement; partial transfers are not permitted. Any transfer must include the rights to all Franchise Agreements entered into between FSI and the franchisee.
Furthermore, the franchisee and/or the proposed transferee must pay Fat Shack the standard transfer fee for each franchise agreement to be transferred, as governed by the franchise agreement, plus $5,000.00 for every undeveloped franchise right for which no Subsequent Franchise Agreement has been executed. This sum is payable in a lump sum to Fat Shack as a precondition to obtaining written consent for the transfer. The transferee will also need to pay any remaining portions of the Initial Franchise Fees owed to Fat Shack when each Subsequent Franchise Agreement is signed; however, the transferee will receive credit for the franchisee's earlier payment of the Development Fees.
Fat Shack also stipulates pre-conditions to the transfer. There can be no transfers before the Fat Shack Restaurant has opened for business, and Fat Shack will not approve a transfer if the franchisee is not in full compliance with the Development Agreement. The proposed transferee must be of good moral character and meet Fat Shack's standards for franchisees. All outstanding amounts owed by the franchisee to Fat Shack or its affiliates must be paid, and the franchisee must have submitted all required reports and statements. The transferee must agree to operate the Fat Shack Restaurant as a Fat Shack Restaurant, sign the current form of franchise agreement, and complete the initial training program.