In the event of termination of the Fat Shack Development Agreement, are the non-compete clauses still in effect?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
4.5. In the event of termination or expiration of this Development Agreement for any reason, Franchisee shall not be entitled to any refund of any portion of the fees paid hereunder. Franchisee shall remain subject to the provisions of Article 6 of this Development Agreement regarding nondisclosure and covenants not to compete, in addition to the terms and conditions of any and all franchise agreements executed in furtherance of this Development Agreement which have not also been terminated or expired. No right or remedy herein conferred upon or reserved by FSI is exclusive of any other right or remedy provided or permitted by law or equity.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, if the Development Agreement is terminated, the non-compete clauses remain in effect. Specifically, the franchisee remains subject to the provisions outlined in Article 6 of the Development Agreement, which addresses nondisclosure and covenants not to compete. This obligation continues even after the termination or expiration of the Development Agreement. This is in addition to the terms and conditions of any and all franchise agreements executed in furtherance of this Development Agreement which have not also been terminated or expired.
This means that even if the Development Agreement ends, the franchisee is still legally bound to not disclose confidential information and to adhere to the non-compete restrictions. These restrictions are designed to protect Fat Shack's business interests and prevent franchisees from using proprietary information or competing with the brand after the agreement concludes.
For a prospective Fat Shack franchisee, this highlights the importance of carefully reviewing and understanding Article 6 of the Development Agreement, which contains the specifics of the non-disclosure and non-compete obligations. Franchisees should be aware that these obligations extend beyond the term of the Development Agreement, potentially impacting their future business activities should the agreement be terminated.