What costs are Fat Shack franchisees required to cover under the Indemnification Under Franchise Agreement fee?

According to Fat Shack's 2025 Franchise Disclosure Document, the Indemnification Under Franchise Agreement fee requires franchisees to reimburse Fat Shack if the company is held liable for claims resulting from the franchisee's Fat Shack restaurant. The amount of this fee will vary depending on the nature of the claim against Fat Shack. This fee is incurred as needed.

This means that if a customer or employee is injured or otherwise harmed at the franchisee's location and Fat Shack is sued as a result, the franchisee will be responsible for covering Fat Shack's legal costs and any damages awarded. This is a common provision in franchise agreements, as it protects the franchisor from liabilities arising from the franchisee's operation of the business.

Prospective Fat Shack franchisees should carefully consider this potential cost and ensure they have adequate insurance coverage to protect themselves from such claims. It would be prudent to discuss with an insurance broker the appropriate levels of general liability and other relevant insurance to mitigate this risk. Understanding the types of claims that could trigger this indemnification and taking proactive steps to prevent incidents at their Fat Shack restaurant is also crucial.