To what extent is a Fat Shack franchisee obligated to indemnify the franchisor for losses or liabilities?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee agrees to indemnify, defend and hold harmless FSI, its subsidiaries and affiliates, and their respective shareholders, directors, members, managers, officers, managers, members, employees, agents, successors and assigns (the "Indemnified Parties") against, and to reimburse them for all claims, obligations and damages described in this Section 20.3, any and all third party obligations described in Section 20.2, any amounts that FSI spends curing any default of Franchisee under this Agreement or any third party agreement if FSI, in its sole discretion, elects to cure such default, and any and all claims and liabilities directly or indirectly arising out of the operation of the FAT SHACK Restaurant, the use of the Marks and Licensed Methods in any manner, or the violation of any laws including labor and employment laws in the FAT SHACK Restaurant, unless (and then only to the extent) caused by the Indemnified Party's negligence. This indemnity includes any claims arising from the acts or omissions of Franchisee's Authorized Representatives. For purposes of this indemnification, "claims" shall mean and include 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. Each Indemnified Party shall have the right to defend any such claim against it at Franchisee's expense and agree to settlements or any other actions. This indemnity shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, a franchisee has extensive obligations to indemnify Fat Shack and its related parties. The franchisee must indemnify, defend, and hold harmless Fat Shack Inc. (FSI), its subsidiaries and affiliates, and their respective shareholders, directors, members, managers, officers, managers, members, employees, agents, successors, and assigns (the "Indemnified Parties"). This means the franchisee is responsible for protecting Fat Shack from various claims, obligations, and damages.
The franchisee's indemnification extends to all claims, third-party obligations, and any amounts Fat Shack spends to correct a franchisee's default under the Franchise Agreement or any third-party agreement. It also covers claims and liabilities arising directly or indirectly from the operation of the Fat Shack restaurant, the use of Fat Shack's marks and licensed methods, or any violation of laws, including labor and employment laws. The only exception is to the extent the claim is caused by the negligence of the Indemnified Party.
The definition of "claims" for indemnification purposes is broad, including all obligations, actual and consequential damages, and costs reasonably incurred in defending against any claim. This includes reasonable accountants', attorneys', and expert witness fees, costs of investigation, court costs, litigation expenses, and travel and living expenses. Fat Shack has the right to defend any claim against it at the franchisee's expense and can agree to settlements or other actions. This indemnification obligation remains in effect even after the Franchise Agreement expires or terminates. As a note, individuals signing a Guaranty and Assumption of Franchisee's Obligations agree to be personally bound by these terms.