Does the Fat Shack agreement create a fiduciary relationship between FSI and the franchisee?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
The parties agree that each of them are independent businesspersons, their only relationship is by virtue of this Agreement and that no fiduciary relationship is created hereunder. Neither party is liable or responsible for the other's debts or obligations, nor shall either party be obligated for any damages to any person or property directly or indirectly arising out of the operation of the other party's business authorized by or conducted pursuant to this Agreement. FSI and Franchisee agree that neither of them will hold themselves out to be the agent, employer or partner of the other and that neither of them has the authority to bind or incur liability on behalf of the other. Neither this Agreement nor the course of conduct between FSI and Franchisee is intended, nor may anything in this Agreement (or the course of conduct) be construed, to state or imply that FSI is the employer of Franchisee's Authorized Representatives, or vice versa. Notwithstanding any other provisions in this Agreement, FSI shall not be responsible for supervising the activities of Franchisee's FAT SHACK Restaurant or ensuring that the FAT SHACK Restaurant is operated in compliance with applicable laws.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the franchise agreement explicitly states that no fiduciary relationship is created between Fat Shack (FSI) and the franchisee. The agreement specifies that the parties are independent businesspersons, with their relationship defined solely by the franchise agreement itself. This means that neither party has the legal responsibilities of a fiduciary to the other, such as acting in the other's best interest or managing assets on their behalf.
This delineation of the business relationship has several implications for a prospective Fat Shack franchisee. It reinforces that the franchisee is an independent contractor responsible for their own business decisions and operations. Fat Shack is not liable for the franchisee's debts or obligations, and vice versa. This independence extends to how each party conducts their business, with neither having the authority to bind the other or incur liability on their behalf.
The franchise agreement also clarifies that Fat Shack is not the employer of the franchisee's representatives, further emphasizing the arms-length nature of the relationship. Fat Shack is not responsible for supervising the franchisee's restaurant operations or ensuring compliance with applicable laws. This is a common arrangement in franchising, where franchisees operate independently under the franchisor's brand and system, but are ultimately responsible for their own business's performance and legal adherence.
This explicit disclaimer of a fiduciary relationship is a standard practice in franchising to ensure clarity and avoid potential legal disputes. Prospective franchisees should understand that they are entering into a business relationship where they are responsible for their own success and compliance, with Fat Shack providing the brand, system, and support outlined in the franchise agreement, but without the obligations of a fiduciary.