Does Fat Shack have an obligation to defend or indemnify franchisees against claims of infringement?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement does not contain any provisions under which we are required to defend or indemnify you against any claims of infringement or unfair competition arising out of your use of the Marks. However, we may take action to protect you against claims of infringement or unfair competition involving the Marks, when you are using the Marks in compliance with your Franchise Agreement, if, in the opinion of our counsel, the circumstances justify our intervention. If we decide to protect you, we will reimburse you for your costs, including attorney's fees and court costs, associated with any litigation we commence or defend on your behalf to protect the licensed Marks and your rights to use them, from amounts we recover in the litigation (if any), which are in excess of our costs. You are obligated to fully cooperate with us in any litigation we commence or defend related to the Marks. If we do not elect to protect you against claims of infringement or unfair competition, you may take steps to protect yourself at your own expense. We will control all proceedings and litigation involving the Marks, except that you will control your defense if we have elected not to protect you against claims of infringement or unfair competition.
Source: Item 13 — Trademarks (FDD pages 39–40)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, Fat Shack is not obligated to defend or indemnify franchisees against claims of infringement or unfair competition related to the use of their trademarks. However, Fat Shack may choose to take action to protect a franchisee if they are using the marks in compliance with the Franchise Agreement and if their counsel believes intervention is justified.
If Fat Shack decides to protect a franchisee, they will reimburse the franchisee for costs, including attorney's fees and court costs, associated with any litigation they commence or defend on the franchisee's behalf. This reimbursement comes from amounts recovered in the litigation, if any, that exceed Fat Shack's costs. The franchisee is obligated to fully cooperate with Fat Shack in any litigation related to the marks.
If Fat Shack chooses not to protect a franchisee against such claims, the franchisee can take steps to protect themselves at their own expense. Fat Shack retains control over all proceedings and litigation involving the marks, except when they have elected not to protect the franchisee, in which case the franchisee controls their own defense. This means a Fat Shack franchisee could potentially incur significant legal expenses defending themselves against trademark infringement claims if Fat Shack declines to intervene.