What is the duration of the post-termination covenant not to compete for a Fat Shack franchise?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
venant Not to Compete
For a period of two years from termination or expiration of this Agreement for any reason, or the date on which Franchisee ceases to conduct business, whichever is later, neither Franchisee nor any Bound Party shall have any direct or indirect interest as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative or agent or in any other capacity in any Competitive Business located or operating within a 10-mile radius of the former Restaurant Location or within a 10-mile radius of any other franchised or company-owned FAT SHACK Restaurant. If Franchisee or any other Bound Party breaches this section, the two-year period shall start on the date that such person is enjoined from competing or stops competing, whichever is later. Franchisee and the Bound Parties expressly acknowledge that they possess skills and abilities of a general nature and have other opportunities for exploiting such skills. Consequently, enforcement of the covenants made in this section will not deprive them of their personal goodwill or ability to earn a living.
21.3. Additional Remedies for Breach
In addition to any other remedies or damages allowed hereunder, if Franchisee breaches the covenants set forth in Sections 21.1 or 21.2, Franchisee shall pay FSI a fee equal to FSI's then-current Initial Franchise Fee for each Competitive Business opened in violation of the covenants, plus 6 percent of such Business' Gross Sales until expiration of the noncompetition period.
21.4.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the post-termination covenant not to compete lasts for two years. This restriction applies to the franchisee and any 'Bound Party,' preventing them from having a direct or indirect interest in a Competitive Business. The two-year period starts from the termination or expiration of the Franchise Agreement, or the date the franchisee ceases to conduct business, whichever is later.
A 'Competitive Business' is defined as any business that operates a restaurant or grants franchises for a restaurant deriving more than 10 percent of its gross receipts (excluding alcohol sales) from selling sandwiches, burgers, and wings. This restriction applies within a 10-mile radius of the former Fat Shack Restaurant location or any other franchised or company-owned Fat Shack Restaurant.
If the franchisee or any Bound Party breaches this covenant, the two-year period restarts from the date they are either legally stopped from competing or voluntarily cease competing, whichever occurs later. Fat Shack emphasizes that this restriction will not deprive the franchisee of their ability to earn a living, as they possess general skills and abilities applicable to other opportunities. This non-compete agreement ensures that former franchisees do not directly leverage Fat Shack's confidential information and brand recognition to unfairly compete against the franchise system after their agreement ends.