Does the Fat Shack franchise agreement address the confidentiality of proprietary information?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
oncompetition period.
21.4. Confidentiality of Proprietary Information
Franchisee shall treat all information it receives which comprises the Licensed Methods (including without limitation the Operations Manual, the information on and comprising FSI's intranet system, recipes, FSI's distinctive business format, plans, methods, processes, data, marketing systems, formulas, techniques, electronic communications systems, designs, layouts, operating procedures, trademarks, proprietary marks, information and know-how) as proprietary and confidential and will not use such information in an unauthorized manner or disclose the same to any unauthorized person without first obtaining FSI's written consent. Franchisee agrees that all such material is the sole property of FSI. Franchisee acknowledges that the Marks and the Licensed Methods have valuable goodwill attached to them, that the protection and maintenance thereof is essential to FSI and that any unauthorized use or disclosure of the Marks and Licensed Methods will result in irreparable harm to FSI. All ideas, concepts, techniques, or materials concerning a FAT SHACK Restaurant, whether or not protectable intellectual property and whether created by or for Franchisee or its owners or employees, must be promptly disclosed to FSI and will be deemed FSI's sole and exclusive property, part of the FAT SHACK Licensed Methods and works made-for-hire for FSI. To the extent any item does not qualify as a "work made-forhire" for FSI, Franchisee assigns ownership of that item, and all related rights to that item, to FSI and agrees to sign whatever assignment or other documents FSI requests to show ownership or to help FSI obtain intellectual property rights in the item.
21.5. Confidentiality Agreement
FSI reserves the right to require that Franchisee cause each of its officers, directors, partners, shareholders, and General Manager (and, if applicable, the spouse of a General Manager) to execute a Nondisclosure and Noncompetition Agreement containing the above restrictions, in a form approved by FSI. Franchisee will provide to FSI a copy of each Nondisclosure and Noncompetition Agreement signed by any such individual immediately following its execution and thereafter upon FSI's request.
21.6. Claims Are Not Defenses To Covenants
Franchisee expressly agrees that the existence of any claim it may have against FSI, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by FSI of the covenants of this Article 21. Franchisee further agrees that FSI shall be entitled to set off from any amount owed by FSI to Franchisee any loss or damage to FSI resulting from Franchisee's breach of this Article 21.
22. ARBITRATION
22.1. Arbitration
All controversies, disputes, claims, causes of action and/or alleged breaches or failures to perform between FSI, and its subsidiaries and affiliated companies and/or its or their shareholders, members, managers, officers, directors, agents, employees and attorneys, in their representative capacity (collectively, the "FSI Affiliates"), on the one side, and Franchisee, and its affiliated companies and/or its or their Managing Owner, General Manager, employees, officers, directors, owners, or guarantors
(collectively, the "Franchisee Affiliates"), on the other side, if applicable, arising out of or related to: (1) this Agreement; (2) the relationship of the parties; (3) the validity 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, the franchise agreement places significant emphasis on protecting the confidentiality of Fat Shack's proprietary information. The agreement requires franchisees to treat all information related to the Licensed Methods as proprietary and confidential. This includes, but is not limited to, the operations manual, intranet system information, recipes, the distinctive business format, plans, methods, processes, data, marketing systems, formulas, techniques, electronic communications systems, designs, layouts, operating procedures, trademarks, proprietary marks, information, and know-how. Franchisees are prohibited from using this information in any unauthorized manner or disclosing it to unauthorized individuals without Fat Shack's prior written consent. All such material is considered the sole property of Fat Shack.
Fat Shack emphasizes the importance of its Marks and Licensed Methods, highlighting the valuable goodwill attached to them. The agreement states that protecting and maintaining this goodwill is essential to Fat Shack, and any unauthorized use or disclosure of the Marks and Licensed Methods will result in irreparable harm to Fat Shack. Furthermore, any ideas, concepts, techniques, or materials concerning a Fat Shack Restaurant, whether or not they are protectable intellectual property and regardless of who creates them, must be promptly disclosed to Fat Shack and will be deemed Fat Shack's sole and exclusive property as part of the Licensed Methods.
The agreement also includes clauses regarding creative ownership, stating that all copyrightable works created by the franchisee or their personnel in connection with the Fat Shack Restaurant become the sole property of Fat Shack. Franchisees are required to assign all proprietary rights, including copyrights, to Fat Shack without additional compensation and to execute any additional documents necessary to effectuate this assignment. This extends to all intellectual property, inventions, copyrights, and trade secrets developed in relation to the Fat Shack Restaurant during the term of the agreement. Franchisees must promptly disclose any such creations or confidential information to Fat Shack and maintain a written record of them.
In practical terms, this means a Fat Shack franchisee must be extremely careful in handling any information related to the business. They must ensure that employees are also aware of and adhere to these confidentiality requirements. The broad scope of what is considered confidential, combined with the strict penalties for unauthorized disclosure, underscores the importance Fat Shack places on protecting its proprietary information and maintaining its competitive edge. Prospective franchisees should carefully review these clauses and understand their obligations to avoid potential legal issues.