When transferring a Fat Shack Development Agreement, can a franchisee transfer only a portion of the agreement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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 the 2025 Fat Shack Franchise Disclosure Document, a franchisee is not permitted to transfer only a portion of the Development Agreement. The Fat Shack franchisee must transfer all of its interest under the Development Agreement. Any transfer must include the rights to all Franchise Agreements entered into between Fat Shack and the franchisee under the Development Agreement.
However, the Fat Shack 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 transferring its interest under the Development Agreement. The Fat Shack Restaurants associated with the Franchise Agreement being transferred must be open and operating as of the date of the transfer.
In the event of a transfer, 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 executed under the Development Agreement, plus $5,000 for every undeveloped franchise right for which no Subsequent Franchise Agreement has been executed. The sum is payable in a lump sum to Fat Shack as one of the preconditions to obtaining Fat Shack's written consent to any proposed transfer. The transferee will also pay the remaining portions of the Initial Franchise Fees owed to Fat Shack when each Subsequent Franchise Agreement is signed. Transfer fees paid to Fat Shack will not be applied to the Initial Franchise Fees due, but the transferee will receive credit for the franchisee's earlier payment of the Development Fees.