What financial obligations to third parties must a Fat Shack franchisee fulfill upon termination?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
- g.
Franchisee shall promptly pay when due all taxes and other obligations owed to third parties, including without limitation, all federal, state, county and local taxes, and any and all accounts payable or other indebtedness incurred by Franchisee in operating the FAT SHACK Restaurant.
- h.
Franchisee shall comply with all agreements with third parties related to the FAT SHACK Restaurant including, in particular, all provisions of any lease for the Restaurant Location.
20.3. Indemnification
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 the 2025 Fat Shack Franchise Disclosure Document, upon termination or expiration of the franchise agreement, a franchisee is obligated to pay all outstanding amounts owed to Fat Shack or its affiliates. Additionally, Fat Shack franchisees are responsible for paying all taxes and other obligations owed to third parties, including federal, state, county, and local taxes, as well as any accounts payable or other indebtedness incurred while operating the Fat Shack Restaurant. Franchisees must also comply with all agreements with third parties related to the Fat Shack Restaurant, including all provisions of any lease for the Restaurant Location.
Furthermore, the franchisee is responsible for indemnifying Fat Shack and its affiliates against any third-party obligations and claims arising from the operation of the Fat Shack Restaurant. This includes any amounts that Fat Shack spends to cure any default of the franchisee under any third-party agreement. This indemnification extends to all obligations, damages, and costs, including legal fees, incurred in defending against any claims. This obligation remains in effect even after the termination or expiration of the franchise agreement.
In practical terms, this means that a franchisee must ensure all financial obligations, such as vendor payments, lease payments, and tax liabilities, are current at the time of termination. Failure to meet these obligations could result in legal action from third parties, for which the franchisee is solely responsible. The indemnification clause further protects Fat Shack from any liabilities arising from the franchisee's operations, even after the franchise agreement ends, adding another layer of financial responsibility for the franchisee.