Who is subject to the post-termination covenant not to compete for a Fat Shack franchise?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
venant Not to Compete
For a period of two years from termination or expiration of this Agreement for any reason, or the date on which Franchisee ceases to conduct business, whichever is later, neither Franchisee nor any Bound Party shall have any direct or indirect interest as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative or agent or in any other capacity in any Competitive Business located or operating within a 10-mile radius of the former Restaurant Location or within a 10-mile radius of any other franchised or company-owned FAT SHACK Restaurant. If Franchisee or any other Bound Party breaches this section, the two-year period shall start on the date that such person is enjoined from competing or stops competing, whichever is later. Franchisee and the Bound Parties expressly acknowledge that they possess skills and abilities of a general nature and have other opportunities for exploiting such skills. Consequently, enforcement of the covenants made in this section will not deprive them of their personal goodwill or ability to earn a living.
21.3. Additional Remedies for Breach
In addition to any other remedies or damages allowed hereunder, if Franchisee breaches the covenants set forth in Sections 21.1 or 21.2, Franchisee shall pay FSI a fee equal to FSI's then-current Initial Franchise Fee for each Competitive Business opened in violation of the covenants, plus 6 percent of such Business' Gross Sales until expiration of the noncompetition period.
21.4.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, both the franchisee and any 'Bound Party' are subject to the post-termination covenant not to compete. This means that after the franchise agreement terminates or expires, these parties cannot have a direct or indirect interest in a Competitive Business.
A 'Competitive Business' is defined as any business that derives more than 10% of its gross receipts (excluding alcohol sales) from the sale of sandwiches, burgers, and wings. The restriction applies for two years from the date of termination or expiration, or the date the franchisee ceases to conduct business, whichever is later.
The non-compete restriction applies within a 10-mile radius of the former Fat Shack Restaurant location or within a 10-mile radius of any other franchised or company-owned Fat Shack Restaurant. If the franchisee or any other Bound Party breaches this covenant, the two-year period restarts from the date they are legally stopped from competing or when they voluntarily stop competing, whichever occurs later. This ensures Fat Shack can protect its market and brand integrity after a franchise agreement ends.