If a Fat Shack franchisee is required to indemnify the franchisor, what is the exception to this requirement?

According to the 2025 Fat Shack Franchise Disclosure Document, a franchisee generally agrees to indemnify Fat Shack Inc. (FSI) and its affiliates against claims and liabilities arising from the operation of the Fat Shack restaurant, the use of its marks and methods, or any violation of laws. This indemnification extends to third-party obligations and any costs FSI incurs to correct a franchisee's default. It also covers claims arising from the actions of the franchisee's representatives. The definition of "claims" includes all obligations, damages, costs, and fees, such as accountant and attorney fees. Fat Shack has the right to defend any claim at the franchisee's expense. This obligation remains even after the franchise agreement ends.

However, a key exception exists: the franchisee is not required to indemnify FSI for liabilities that arise as a result of FSI's breach of the Franchise Agreement or other civil wrongs committed by FSI. This means that if Fat Shack's own actions or negligence lead to a claim or liability, the franchisee is protected from having to cover those costs.

This exception is significant for prospective Fat Shack franchisees because it provides a degree of protection against potential liabilities stemming directly from the franchisor's actions. It is important to carefully review the franchise agreement and understand the circumstances under which indemnification is required, as well as the specific protections afforded by this exception. Franchisees should consult with legal counsel to fully understand their rights and obligations under the agreement.