Are provisions requiring Fat Shack franchisees to waive exemplary or punitive damages considered void?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
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22.6. No Punitive or Consequential Damages
Except as specifically permitted elsewhere in this Agreement, neither FSI or any of the FSI Affiliates, on the one side, nor Franchisee or any of the Franchisee Affiliates, on the other side, shall be liable to the other for punitive or other damages not measured by the other party's actual damages, except as may be required by statute, in any action between the parties, whether of the type subject to mandatory arbitration under Section 22.1 or otherwise, and whether such action is brought in arbitration, litigation, or any other legal proceeding.
22.7. No Recourse Against Others
Franchisee agrees that its sole recourse for claims (whether in contract or in tort, in law or in equity, or granted by statute) arising between the parties shall be against FSI or its successors and assigns. Franchisee agrees that the shareholders, directors, members, managers, officers, employees, and agents of FSI and its affiliates (the "Nonparty Affiliates") shall not be personally liable nor named as a party in any action between FSI and Franchisee.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, Section 22.6 addresses punitive or consequential damages. It states that neither Fat Shack nor the franchisee will be liable for punitive damages or damages exceeding the actual losses of the other party. An exception exists where such damages are mandated by statute. This waiver applies to any legal action between Fat Shack and the franchisee, whether it's through arbitration, litigation, or any other legal proceeding.
In simpler terms, this means that as a Fat Shack franchisee, you generally cannot seek punitive damages from Fat Shack, and Fat Shack cannot seek punitive damages from you, unless a specific law requires such damages to be paid. Punitive damages are intended to punish a party for egregious behavior, and this clause limits the ability to claim them. Instead, claims are typically limited to actual, measurable losses.
However, the New York Rider to the Franchise Agreement modifies these terms for franchisees operating in New York. Specifically, it states that all rights and causes of action arising from Article 33 of the General Business Law of the State of New York remain in force. This ensures that the non-waiver provisions of General Business Law, Section 687.4 and 687.5, are satisfied, meaning that Fat Shack franchisees in New York do not waive certain rights to sue or recover damages as provided under New York law.