For Fat Shack franchisees, for how long after ceasing to operate a Fat Shack Restaurant are they prohibited from having an interest in a competitive business?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
venant Not to Compete
For a period of two years from termination or expiration of this Agreement for any reason, or the date on which Franchisee ceases to conduct business, whichever is later, neither Franchisee nor any Bound Party shall have any direct or indirect interest as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative or agent or in any other capacity in any Competitive Business located or operating within a 10-mile radius of the former Restaurant Location or within a 10-mile radius of any other franchised or company-owned FAT SHACK Restaurant. If Franchisee or any other Bound Party breaches this section, the two-year period shall start on the date that such person is enjoined from competing or stops competing, whichever is later. Franchisee and the Bound Parties expressly acknowledge that they possess skills and abilities of a general nature and have other opportunities for exploiting such skills.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack FDD, franchisees are subject to a post-termination covenant not to compete, which restricts their involvement in a competitive business for a specified period. This covenant applies for two years from either the termination or expiration of the Franchise Agreement, or the date the franchisee ceases to conduct business, whichever is later. This restriction applies to the franchisee and any Bound Party, which includes their officers, directors, shareholders, managers, members, partners, and immediate family members.
The term "Competitive Business" includes any business that operates a restaurant or grants franchises to operate a restaurant that derives more than 10% of its gross receipts (excluding alcohol sales) from selling sandwiches, burgers, and wings. This restriction applies if the Competitive Business is located within a 10-mile radius of the former Fat Shack Restaurant location or within a 10-mile radius of any other franchised or company-owned Fat Shack Restaurant.
If a franchisee or any Bound Party breaches this non-compete clause, the two-year period restarts from the date they are either legally stopped from competing or voluntarily cease competing, whichever occurs later. The FDD acknowledges that franchisees possess general skills and abilities and have other opportunities to earn a living, so enforcing these covenants will not deprive them of their personal goodwill or ability to earn a living. This clause aims to protect Fat Shack's business interests and market presence by preventing former franchisees from directly competing in the same geographical areas shortly after leaving the franchise system.
For franchisees in Indiana, the FDD includes a state-specific addendum. The summary column of Item 17.r in the FDD, which addresses the non-compete agreement, is modified to state that there is "No interest in Competitive Business for 2 years within 10 miles of the former Restaurant Location."