Does the Fat Shack Development Agreement create an agency or partnership relationship between the franchisee and FSI?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
- 7.1. During the term of this Development Agreement, Franchisee shall be an independent contractor and shall in no way be considered as an agent, partner or employee of FSI. It is understood and agreed that no agency or partnership is created by this Development Agreement. As such, Franchisee has no authority of any nature whatsoever to bind FSI or incur any liability for or on behalf of FSI or to represent itself as anything other than an independent contractor. Notwithstanding any other provisions in this Development Agreement, FSI shall not be responsible for supervising the activities of Franchisee under this Development Agreement.
- 7.2. Franchisee shall indemnify, release, defend and hold FSI, its subsidiaries and affiliates, and its respective shareholders, directors, officers, employees, agents, successors and assignees (the "Indemnified Parties") harmless against, and to reimburse them for all Claims, defined below, any and all third party obligations of Franchisee, and any and all claims, obligations and liabilities directly or indirectly arising out of this Development Agreement or the operation of any FAT SHACK Restaurants. For purposes of this indemnification, "Claims" means all obligations, actual and consequential damages and costs reasonably incurred in the defense of any claim against the Indemnified Parties, including, without limitation, reasonable accountants', attorneys' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses. FSI will have the right to defend any such Claim against it. This indemnity will continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Development Agreement.
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 explicitly states that the franchisee is an independent contractor and not an agent, partner, or employee of FSI (Fat Shack International). This means the Development Agreement does not establish any agency or partnership. The franchisee has no authority to bind FSI or incur liabilities on its behalf, and cannot represent themselves as anything other than an independent contractor. FSI is not responsible for supervising the franchisee's activities under the Development Agreement.
This arrangement is typical in franchising, where franchisees operate independently while adhering to the franchisor's system and standards. The franchisee is responsible for their own business operations and liabilities. This independence allows the franchisee to manage their business according to their own strategies, within the framework set by Fat Shack.
The franchisee is required to indemnify, release, defend, and hold harmless FSI and its affiliates from any claims, obligations, and liabilities arising out of the Development Agreement or the operation of any Fat Shack Restaurants. This indemnification covers all obligations, damages, and costs, including legal fees, incurred in defending against any claim against FSI. This clause emphasizes the franchisee's responsibility for their actions and protects FSI from potential liabilities related to the franchisee's business operations.
This independent contractor relationship is a critical aspect of the Development Agreement, clarifying the distinct roles and responsibilities of both parties and ensuring that the franchisee operates their Fat Shack restaurants as a separate business entity.