Does the indemnification obligation of the Franchisee to FSI under the Fat Shack Development Agreement continue after the expiration or termination of the 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's obligation to indemnify FSI (Fat Shack International) continues even after the Development Agreement expires or is terminated. This means that even after the agreement ends, the franchisee remains responsible for covering certain claims, obligations, and liabilities related to the Development Agreement or the operation of any Fat Shack restaurants.
The indemnification covers claims, obligations, and liabilities that directly or indirectly arise from the Development Agreement or the operation of Fat Shack restaurants. This includes all obligations, actual and consequential damages, and costs reasonably incurred in defending against any claim against the indemnified parties. These costs can include accountants', attorneys', and expert witness fees, investigation costs, court costs, litigation expenses, and travel and living expenses.
Fat Shack retains the right to defend any claim against it, and the franchisee is obligated to reimburse Fat Shack for all related expenses. This provision ensures that Fat Shack is protected from financial losses resulting from the franchisee's actions or the operation of the restaurants, even after the Development Agreement has ended. This extended liability is a significant consideration for potential franchisees, as it means potential financial exposure can continue well beyond the term of the agreement.