Under what conditions can modifications to the Fat Shack franchise agreement be considered effective?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
24. MISCELLANEOUS PROVISIONS
24.1. Modification
- a. This Agreement may only be modified upon execution of a written agreement between FSI and Franchisee or, at FSI's option, upon notice of the approval of a Super-Majority as defined in Section 24.1.b below. Unless prohibited by law or waived by FSI, Franchisee must provide a general release of any and all claims against FSI if Franchisee requests and FSI consents to modify any provisions of this Agreement after it has been signed.
- b. This Agreement may be modified by FSI at its option whenever FSI and a Super-Majority, as hereinafter defined, of franchisees of FSI agree to the modification. A "Super-Majority" of FSI franchisees shall consist of the owners of at least 75 percent of all FAT SHACK Restaurants, or, if only a portion of FAT SHACK Restaurants are affected by the modification, at least 75 percent of those FAT SHACK Restaurants affected by the modification. Whenever a modification is approved by a Super-Majority, FSI may elect to treat the modification as effective to all franchisees or the applicable group thereof, including Franchisee, to the same extent and in the same manner as if the modification was unanimously approved by all applicable Franchisees, and regardless of whether Franchisee may or may not desire to be
bound by the modification. FSI shall provide Franchisee with notice of any modification to this Agreement based on a Super-Majority approval at least 60 days prior to the date such modification is to be effective. By signing this Agreement, Franchisee appoints the officers of FSI as its attorneys in fact with irrevocable power and authority to execute any such modification so approved.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, modifications to the franchise agreement can be effective under specific conditions. Firstly, a written agreement executed by both Fat Shack and the franchisee is a valid method for modifying the agreement. This ensures that both parties are in accord with the changes made. Alternatively, Fat Shack has the option to implement modifications based on the approval of a Super-Majority of franchisees, defined as owners of at least 75% of all Fat Shack Restaurants, or, if the modification affects only a portion of restaurants, at least 75% of those affected restaurants.
When a Super-Majority approves a modification, Fat Shack can elect to apply the modification to all franchisees or the relevant group, regardless of individual franchisee preferences. This means that even if a franchisee does not agree with the modification, they may still be bound by it if the Super-Majority has approved it. Fat Shack is required to provide franchisees with at least 60 days' notice before any modification based on Super-Majority approval becomes effective. By signing the franchise agreement, the franchisee appoints the officers of Fat Shack as their attorneys in fact, granting them the authority to execute any such modification approved by the Super-Majority.
These stipulations have significant implications for prospective Fat Shack franchisees. While individual negotiation and written agreements are possible, the Super-Majority clause means that franchisees could be subject to changes they did not personally approve. The 60-day notice period provides some time to prepare for changes, but the franchisee is still bound by the decision of the Super-Majority. This arrangement is not uncommon in franchising, where franchisors often seek to maintain uniformity and adapt to market changes efficiently. However, it underscores the importance of understanding the terms of the agreement and the potential for changes during the franchise term.