Under what conditions can the Fat Shack Development Agreement be terminated due to a franchisee default?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
- (i) Franchisee defaults on any term or condition of this Development Agreement, including without limitation, the failure to execute the required Franchise Agreements or maintain the number of FAT SHACK Restaurants required by the Development Schedule, and fails to cure such default after 30 days written notice to Franchisee; or
- (ii) Franchisee is in default under any of the Franchise Agreements executed in furtherance of this Development Agreement or any other agreement between FSI or any of FSI's affiliates and Franchisee or any of Franchisee's affiliates and fails to cure such default within the time periods specified in such other agreements.
- 4.4. If this Development Agreement is terminated due solely to a failure by Franchisee to meet the Development Schedule, FSI and Franchisee agree that such termination shall not constitute a default or result in a termination of any Franchise Agreements executed between Franchisee and FSI in effect as of the date of termination of this Development Agreement. In that case, those Franchise Agreements shall continue in full force and effect notwithstanding the termination of this Development Agreement. FSI and Franchisee agree that any statements to the contrary in the Franchise Agreements executed by them, including any cross-default and cross-termination provisions, will be inapplicable in the situation of a termination of this Development Agreement based solely on Franchisee's failure to meet the Development Schedule. If this Development Agreement is terminated due to any other default under Section 4.3 above, all Franchise Agreements executed in furtherance of this Development Agreement and all other agreements between FSI and Franchisee or any of Franchisee's affiliates may, at FSI's sole option, be terminated.
- 4.5. In the event of termination or expiration of this Development Agreement for any reason, Franchisee shall not be entitled to any refund of any portion of the fees paid hereunder. Franchisee shall remain subject to the provisions of Article 6 of this Development Agreement regarding nondisclosure and covenants not to compete, in addition to the terms and conditions of any and all franchise agreements executed in furtherance of this Development Agreement which have not also been terminated or expired. No right or remedy herein conferred upon or reserved by FSI is exclusive of any other right or remedy provided or permitted by law or equity.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the Development Agreement can be terminated if the franchisee defaults on any term or condition of the agreement. This includes failing to execute the required Franchise Agreements or not maintaining the number of Fat Shack restaurants as required by the Development Schedule. Fat Shack will provide a 30-day written notice to allow the franchisee to correct the default. If the franchisee fails to cure the default within this period, Fat Shack has the option to terminate the agreement.
Additionally, if the franchisee is in default under any of the Franchise Agreements executed in furtherance of the Development Agreement, or any other agreement between Fat Shack (or its affiliates) and the franchisee (or its affiliates), and fails to correct the default within the time periods specified in those other agreements, Fat Shack can terminate the Development Agreement. However, if the termination is solely due to the franchisee's failure to meet the Development Schedule, any existing Franchise Agreements remain in effect, and cross-default or cross-termination provisions in those agreements will not apply.
If the Development Agreement is terminated for any other default, Fat Shack has the option to terminate all Franchise Agreements executed under the Development Agreement and any other agreements between Fat Shack and the franchisee or its affiliates. In the event of termination or expiration of the Development Agreement for any reason, the franchisee is not entitled to a refund of any fees paid. The franchisee remains subject to nondisclosure and non-compete covenants, as well as the terms of any franchise agreements that have not been terminated or expired.