Are there any circumstances where Fat Shack can repurchase a franchisee's business without the franchisee's consent in Washington?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
19.11. Assumption of Management
FSI has the right (but not the obligation), under the circumstances described below, to enter the FAT SHACK Restaurant premises and assume the FAT SHACK Restaurant's management for a period not to exceed 90 days. If FSI assumes the FAT SHACK Restaurant's management, Franchisee must pay FSI (in addition to the Royalty and Marketing and Promotion Fee) 3 percent of the FAT SHACK Restaurant's Gross Sales, plus FSI's direct out-of-pocket costs and expenses, during this time. If FSI assumes the FAT SHACK Restaurant's management, Franchisee acknowledges that FSI will have a duty to utilize only reasonable efforts and will not be liable to Franchisee or its owners for any debts, losses, or obligations the FAT SHACK Restaurant incurs, or to any of Franchisee's creditors for any supplies or services the FAT SHACK Restaurant purchases, while FSI manages it. FSI may renew its management of the FAT SHACK Restaurant up to three times for an additional 90 days in each case. FSI will meet with franchisee or its representatives (if available) to discuss the status with franchisee prior to any grant of successor franchise rights.
FSI may assume the FAT SHACK Restaurant's management under the following circumstances:
- a. if Franchisee abandons the FAT SHACK Restaurant; or
- b. if Franchisee fails to comply with any provision of this Agreement and does not cure the failure within the time period FSI specifies in its notice to Franchisee.
The exercise of FSI's rights under subparagraphs a. and b. above will not affect FSI's right to terminate this Agreement.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
Based on the 2025 Fat Shack Franchise Disclosure Document, there are specific circumstances under which Fat Shack can assume management of a restaurant, but the document does not explicitly state that Fat Shack can repurchase a franchisee's business without consent. However, Fat Shack has the right to assume management of a Fat Shack restaurant for up to 90 days under certain conditions. These conditions include if the franchisee abandons the restaurant or fails to comply with the franchise agreement and does not correct the failure within the specified time frame. Fat Shack can renew its management of the Fat Shack Restaurant up to three times for an additional 90 days in each case. FSI will meet with franchisee or its representatives (if available) to discuss the status with franchisee prior to any grant of successor franchise rights. During this period, the franchisee is obligated to pay Fat Shack 3% of the restaurant's gross sales, in addition to the royalty and marketing and promotion fees, as well as Fat Shack's direct out-of-pocket costs and expenses.
It is important to note that while Fat Shack manages the restaurant, their duty is to utilize only reasonable efforts, and they will not be liable for any debts, losses, or obligations the restaurant incurs during this time. This includes any liabilities to the franchisee's creditors for supplies or services purchased. The FDD states that the right to assume management does not affect Fat Shack's right to terminate the agreement.
Prospective franchisees should carefully consider these conditions and their implications. While Fat Shack taking over management is not a repurchase, it does represent a significant intervention in the franchisee's business. It would be prudent for potential franchisees to seek clarification from Fat Shack regarding the specific conditions that could lead to the assumption of management and the potential long-term consequences for their franchise. Furthermore, understanding the circumstances under which Fat Shack might seek to terminate the franchise agreement is crucial, as this could ultimately lead to the loss of the business.