Can Fat Shack transfer or assign its rights under the Development Agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
be incorporated herein by reference.
- 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. Franchisee and the transferee shall comply with the requirements under each Franchise Agreement entered into between FSI and Franchisee for the transfer of each such Franchise Agreement, including the payment of the applicable transfer fee for each Franchise Agreement.
- 5.5. Franchisee may transfer one or more of the individual Franchise Agreements or any interest in those Franchise Agreements, or all or a substantial portion of the assets of the FAT SHACK Restaurants associated with such Franchise Agreements without a transfer of its interest under this Development Agreement in accordance with the terms of each such Franchise Agreement, provided that the FAT SHACK Restaurant(s) associated with the Franchise Agreement(s) being transferred are open and operating as of the date of the transfer (a "Franchise Transfer").
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, a franchisee can transfer or assign their rights under the Development Agreement, but with specific conditions. Fat Shack requires a 30-day right of first refusal to purchase the rights or assets on the same terms and conditions as the Initial Franchise Agreement. This means that before a franchisee can sell their development rights to a third party, Fat Shack has the opportunity to buy those rights themselves.
If the franchisee proceeds with a transfer to a third party, they and/or the proposed transferee must pay Fat Shack a standard transfer fee for each franchise agreement to be transferred, as dictated by the franchise agreement, along with an additional $5,000 for every undeveloped franchise right for which no Subsequent Franchise Agreement has been executed. This payment is a prerequisite for obtaining Fat Shack's written consent to the transfer. The transferee will also be responsible for paying 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 that any transfer of the Development Agreement must include all of the franchisee's interest under the agreement; partial transfers are not permitted. This means a franchisee cannot transfer a portion of their development rights while retaining others. Furthermore, any transfer must include the rights to all Franchise Agreements entered into between Fat Shack and the franchisee. Both the franchisee and the transferee must comply with the requirements outlined in each Franchise Agreement for the transfer of each such agreement, including the payment of applicable transfer fees. The franchisee can transfer individual Franchise Agreements without transferring the Development Agreement if the Fat Shack restaurants associated with those agreements are open and operating at the time of transfer.