Does the Security Interest for a Fat Shack franchise extend to future liabilities and obligations of the franchisee to FSI or third parties, even those that are contingent or indirect?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
Indebtedness Secured
The Security Interest is to secure payment of the following (the "Indebtedness"):
- a. All amounts due under this Agreement or otherwise by Franchisee;
- b. All sums which FSI may, at its option, expend or advance for the maintenance, preservation and protection of the Collateral, including without limitation, payment of rent, taxes, levies, assessments, insurance premiums and discharge of liens, together with interest, or in any other propert
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, the security interest granted to FSI by the franchisee extends to securing the payment of indebtedness. This indebtedness includes all amounts due under the Franchise Agreement, any extensions, modifications, or renewals of the agreement, and all other obligations of the franchisee to FSI. This encompasses not only current debts but also any future liabilities or obligations that the franchisee may incur to Fat Shack.
Furthermore, the security interest covers any sums advanced by Fat Shack for the franchisee's benefit, along with any expenses, losses, or damages incurred by Fat Shack due to the franchisee's default. This implies that if Fat Shack pays to resolve a franchisee's debt to a third party, those amounts are also secured by the security interest. The collateral subject to this security interest includes all furniture, fixtures, equipment, signage, and realty related to the Fat Shack restaurant.
In practical terms, this means a Fat Shack franchisee's assets are at risk not only for direct debts to Fat Shack but also for any indirect liabilities or obligations arising from their business operations. This could include covering amounts Fat Shack pays to cure the franchisee's defaults with third parties, such as landlords. The security interest is broad, covering both present and future obligations, which could significantly impact a franchisee's financial exposure and risk.