What is the timeframe for dismissing involuntary insolvency or bankruptcy proceedings against the Assignor to avoid triggering the Conditional Assignment of Lease for Fat Shack?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
| day of, 202 by and between | THIS CONDITIONAL ASSIGNMENT OF LEASE ("Assignment") is made as of this , a |
|---|---|
| ("Assignor"), FAT SHACK INC., a Delaware corporation ("Assignee") and , a ("Landlord"). WHEREAS, Assignor is a tenant of certain property generally known as , located in the City of , State | |
| of Assignor, dated | ("Property"), pursuant to a lease by and between Landlord and , 202 (the "Lease"); WHEREAS, Assignor desires to construct, or have constructed by Landlord (whichever is applicable), and thereafter operate a FAT SHACK Restaurant under a certain franchise agreement between Assignor and Assignee (the "Franchise Agreement"); and WHEREAS, as a condition to the grant of rights under the Franchise Agreement to Assignor, Assignee requires that Assignor enter into this Assignment. NOW, THEREFORE, for and in consideration of the sum of Ten Dollars and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: |
| 1. | Assignor hereby assigns all of its right, title and interest in and to the Lease and the FAT |
| SHACK Restaurant to Assignee. | |
| 2. | With the exception of Assignee's rights under paragraph 3 below and Assignor's and Landlord's respective obligations, representations and covenants under paragraphs 3, 4, 8, 9 and 10 below, the Conditional Assignment of lease contemplated hereunder is expressly conditioned upon, and shall not be effective and Assignee shall have no right to pursue any remedy hereunder unless and until: |
| (a) | Default by Assignor under the terms of the Lease, which default (i) is not cured by Assignor within the time limits provided therein or (ii) results in a demand for performance by Assignee under any guaranty of the Lease; or |
| (b) | Default by Assignor under the terms of the Franchise Agreement or under any document or instrument securing the Franchise Agreement, which default is not cured by Assignor within the time limits provided therein; or |
| (c) | Voluntary institution of any insolvency or bankruptcy proceedings as a debtor or involuntary insolvency or bankruptcy proceedings brought against Assignor which are not dismissed within 60 days of the filing thereof; |
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, if involuntary insolvency or bankruptcy proceedings are brought against the Assignor, they must be dismissed within 60 days of filing to avoid triggering the Conditional Assignment of Lease. This means that if a third party initiates bankruptcy proceedings against the Assignor (the franchisee in this case), the franchisee has a 60-day window to resolve the issue and have the proceedings dismissed. Failure to do so will result in the assignment of the lease to Fat Shack Inc.
This condition is in place to protect Fat Shack's interest in maintaining control over the restaurant location. If a franchisee faces severe financial difficulties leading to bankruptcy, Fat Shack wants to ensure that the lease can be transferred to them to maintain continuous operation of the restaurant. This protects the brand and avoids potential disruptions in service.
For a prospective Fat Shack franchisee, this highlights the importance of maintaining financial stability. It also emphasizes the need to address any involuntary bankruptcy filings promptly to avoid losing control of the lease. The franchisee should consult with legal counsel immediately if such a situation arises to explore options for dismissing the proceedings within the stipulated timeframe.