Who is considered a 'Bound Party' and subject to the post-termination covenant not to compete for a Fat Shack franchise?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
eement.
6. RESTRICTIVE COVENANTS
6.1. During the term of this Development Agreement, Franchisee and its officers, partners, directors, agents or employees who have completed FSI's training programs or had access to the
Operations Manual, as described in the Initial Franchise Agreement, and/or the beneficial owners of a 5 percent or greater interest in Franchisee and their respective immediate families, shall be subject to all restrictive covenants as set forth in the Initial Franchise Agreement and in any Nondisclosure and Noncompetition Agreements executed in conjunction with the Initial Franchise Agreement, which covenants by this reference are incorporated herein. Upon termination or expiration of this Development Agreement, Franchisee and its officers, partners, directors, agents or employees who have completed FSI's training programs or had access to the Operations Manual, as described in the Initial Franchise Agreement, and/or the beneficial owners of a 5 percent or greater interest in Franchisee and their respective immediate families, shall be subject to all restrictive covenants as set forth in the franchise agreement related to the last FAT SHACK Restaurant being operated by Franchisee, and in any Nondisclosure and Noncompetition Agreements executed in conjunction with such franchise agreement.
7. BUSINESS RELATIONSHIPS
- 7.1.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, the post-termination covenant not to compete applies not only to the franchisee but also to 'Bound Parties.' While the FDD excerpts provided do not explicitly define 'Bound Party' within the section regarding post-termination covenants, it is referenced in the context of restrictive covenants within the Development Agreement.
Specifically, during the term of the Development Agreement, the restrictive covenants apply to the franchisee and its officers, partners, directors, agents, or employees who have completed Fat Shack's training programs or had access to the Operations Manual. It also extends to the beneficial owners of a 5 percent or greater interest in the franchisee and their respective immediate families. Upon termination or expiration of the Development Agreement, these same parties remain subject to the restrictive covenants outlined in the franchise agreement related to the last Fat Shack Restaurant operated by the franchisee, as well as any Nondisclosure and Noncompetition Agreements associated with that franchise agreement.
To fully understand who is considered a 'Bound Party' and subject to the post-termination covenant not to compete for a Fat Shack franchise, a prospective franchisee should consult the Initial Franchise Agreement and any related Nondisclosure and Noncompetition Agreements. It is essential to clarify the exact definition and scope of 'Bound Party' with the franchisor to assess the full extent of the post-termination obligations.