Does the Fat Shack franchise agreement waive punitive or consequential damages?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as specifically permitted elsewhere in this Agreement, neither FSI or any of the FSI Affiliates, on the one side, nor Franchisee or any of the Franchisee Affiliates, on the other side, shall be liable to the other for punitive or other damages not measured by the other party's actual damages, except as may be required by statute, in any action between the parties, whether of the type subject to mandatory arbitration under Section 22.1 or otherwise, and whether such action is brought in arbitration, litigation, or any other legal proceeding.
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 includes a mutual waiver of punitive or consequential damages. Specifically, Fat Shack and its affiliates, as well as the franchisee and their affiliates, agree that neither party will be liable to the other for damages beyond actual damages. This waiver applies to any action between the parties, regardless of whether it is subject to mandatory arbitration or brought in arbitration, litigation, or any other legal proceeding. However, this waiver does not apply if such damages are required by statute.
This provision means that a Fat Shack franchisee is generally limited to recovering only direct, actual losses in any legal dispute with the franchisor. They cannot seek additional damages intended to punish the franchisor (punitive damages) or indirect losses that result from the dispute (consequential damages), unless a statute specifically allows for such damages. This type of clause is relatively common in franchise agreements, as it aims to limit the potential financial exposure of both parties in the event of a dispute.
For a prospective Fat Shack franchisee, this waiver has significant implications. It caps the potential financial recovery in case Fat Shack breaches the franchise agreement or otherwise causes harm to the franchisee's business. While it also protects the franchisee from similar claims by Fat Shack, the practical impact is often greater on the franchisee, who may suffer significant consequential losses if the business is negatively impacted. Franchisees should carefully consider this limitation and consult with legal counsel to understand the full extent of the waiver and its potential impact on their rights and remedies.