Under what condition can a Fat Shack franchisee transfer individual Franchise Agreements without transferring the Development Agreement?

According to Fat Shack's 2025 Franchise Disclosure Document, a franchisee can transfer one or more individual Franchise Agreements, or interests in them, or all or a substantial portion of the assets of the Fat Shack Restaurants associated with those agreements, without transferring their interest in the Development Agreement. However, this is only allowed if the Fat Shack Restaurants associated with the Franchise Agreements being transferred are open and operating as of the date of the transfer. This type of transfer is referred to as a "Franchise Transfer."

If a Franchise Transfer occurs, the Fat Shack Restaurant(s) involved will still be counted towards the development obligations under the Development Agreement. The Franchise Agreements associated with the transfer will continue to be included in the cumulative number of Fat Shack Restaurants required to be opened and continuously operated in the Protected Area, regardless of whether the agreement is transferred to the new operator or a new agreement is executed. The exclusive rights granted to the franchisee in the Development Agreement will be modified to allow the transferee to operate in the Protected Area.

Furthermore, if the transferee defaults on the Franchise Agreement related to a Franchise Transfer, it can be considered grounds for a default under the original Development Agreement. This means that the original franchisee's Development Agreement could be at risk if the new operator fails to meet their obligations. This clause protects Fat Shack by ensuring that all restaurants in a development area meet brand standards, even after a transfer.