What are Franchisee's obligations regarding indemnification of FSI and related parties under the Fat Shack Development Agreement?
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 has specific obligations regarding indemnification of FSI (Fat Shack, Inc.) and related parties under the Development Agreement. The franchisee must 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 indemnification extends to all Claims, which include obligations, actual and consequential damages, and costs reasonably incurred in defending against any claim against the Indemnified Parties. These costs specifically include reasonable accountants', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses. The franchisee is also responsible for reimbursing the Indemnified Parties for all third-party obligations of the franchisee and any claims, obligations, and liabilities directly or indirectly arising out of the Development Agreement or the operation of any Fat Shack Restaurants.
Fat Shack retains the right to defend any claim against it. This indemnification obligation remains in effect even after the Development Agreement expires or is terminated. This means that even after the franchise relationship ends, the franchisee may still be liable for claims arising from their operation of the Fat Shack restaurant.
In practical terms, this clause means a Fat Shack franchisee could be financially responsible for legal and other costs incurred by Fat Shack due to the franchisee's actions or the actions of their employees. This is a significant obligation that could have substantial financial implications for the franchisee. Prospective franchisees should carefully consider this indemnification clause and seek legal counsel to fully understand its scope and potential impact.