Does the Fat Shack franchisee's obligation to indemnify FSI continue after the Development Agreement expires or terminates?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
- 7.2. Franchisee shall indemnify, release, defend and hold FSI, its subsidiaries and affiliates, and its respective shareholders, directors, officers, employees, agents, successors and assignees (the "Indemnified Parties") harmless against, and to reimburse them for all Claims, defined below, any and all third party obligations of Franchisee, and any and all claims, obligations and liabilities directly or indirectly arising out of this Development Agreement or the operation of any FAT SHACK Restaurants. For purposes of this indemnification, "Claims" means 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. FSI will have the right to defend any such Claim against it. This indemnity will continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Development Agreement.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the franchisee's obligation to indemnify FSI does indeed continue even after the expiration or termination of the Development Agreement. This means that even after the agreement ends, the franchisee remains responsible for protecting FSI from certain claims and liabilities.
The franchisee is required to indemnify, release, defend, and hold harmless FSI, its subsidiaries, affiliates, shareholders, directors, officers, employees, agents, successors, and assignees (collectively known as the "Indemnified Parties"). This protection extends to all claims, third-party obligations of the franchisee, and any liabilities arising from the Development Agreement or the operation of any Fat Shack Restaurants. The term "Claims" encompasses all obligations, actual and consequential damages, and costs reasonably incurred in defending against any claim against the Indemnified Parties. These costs include, but are not limited to, reasonable accountants', attorneys', and expert witness fees, costs of investigation, court costs, litigation expenses, and travel and living expenses.
Fat Shack retains the right to defend any claim against it. The continuation of this indemnity obligation after the Development Agreement's expiration or termination is a significant point for prospective franchisees. It implies that liabilities stemming from the franchisee's actions during the agreement period could still result in financial responsibility even after the formal business relationship has ended. This extended liability is a critical factor to consider when evaluating the risks and obligations associated with the Fat Shack franchise.