Is there an exception to the non-competition covenant if the Fat Shack associate is conducting Company's business in a manner authorized by FSI and Company?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
mation.
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- Noncompetition Covenant. Associate covenants and agrees that, during the term of his or her Affiliation, except while conducting Company's business in a manner authorized by FSI and Company, Associate shall not, either directly or indirectly through any member of Associate's immediate family, separate business entity or otherwise:
- a. have any direct or indirect interest as a disclosed or beneficial owner in a "Competitive Business," as defined below;
- b. perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business;
- c. divert or attempt to divert any business related to, or any customer or account of Company's FAT SHACK Restaurant, FSI's business, or any other FSI franchisee's business; or
- d. divert or attempt to divert the employment of any employee of Company, FSI, FSI's affiliates, or another FSI franchisee, to any Competitive Business.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to the 2025 Fat Shack Franchise Disclosure Document, there is an exception to the non-competition covenant for associates. During the term of their affiliation, associates are permitted to engage in activities that would otherwise be considered competitive if they are conducting Fat Shack's business in a manner authorized by both FSI (Fat Shack Inc.) and the Company (the franchisee).
Specifically, the non-competition covenant states that associates cannot have a direct or indirect interest in a competitive business or perform services for one. They are also prohibited from diverting business or employees from Fat Shack to a competitive business. However, these restrictions do not apply when the associate is acting within the scope of their authorized duties for Fat Shack.
This exception acknowledges that associates will necessarily be involved in activities that could be seen as competitive, such as working in a Fat Shack restaurant that competes with other businesses. As long as these activities are part of their job and authorized by Fat Shack, they do not violate the non-competition agreement. This ensures that associates can perform their jobs without fear of violating the covenant, while still protecting Fat Shack's interests by preventing them from using their position to directly benefit a competitor outside of their authorized role.