Are there any exceptions to the Fat Shack franchisee's obligation to reimburse FSI for taxes?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall promptly pay when due all taxes and other obligations owed to third parties, including without limitation, all federal, state, county and local taxes, and any and all accounts payable or other indebtedness incurred by Franchisee in operating the FAT SHACK Restaurant.
Franchisee agrees to indemnify, defend and hold harmless FSI, its subsidiaries and affiliates, and their respective shareholders, directors, members, managers, officers, managers, members, employees, agents, successors and assigns (the "Indemnified Parties") against, and to reimburse them for all claims, obligations and damages described in this Section 20.3, any and all third party obligations described in Section 20.2, any amounts that FSI spends curing any default of Franchisee under this Agreement or any third party agreement if FSI, in its sole discretion, elects to cure such default, and any and all claims and liabilities directly or indirectly arising out of the operation of the FAT SHACK Restaurant, the use of the Marks and Licensed Methods in any manner, or the violation of any laws including labor and employment laws in the FAT SHACK Restaurant, unless (and then only to the extent) caused by the Indemnified Party's negligence.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, franchisees are generally responsible for paying all taxes related to the operation of their Fat Shack restaurant. Specifically, the franchisee must promptly pay all federal, state, county, and local taxes when due.
However, there is an exception to the franchisee's obligation to indemnify FSI (Fat Shack International) for claims. The franchisee is not required to indemnify FSI for claims caused by the Indemnified Party's negligence, but only to the extent of the negligence. This means that if FSI's own actions or negligence lead to a claim or liability, the franchisee is not responsible for covering FSI's losses to the degree that FSI was at fault.
In practical terms, this means a Fat Shack franchisee needs to ensure they operate their business in compliance with all tax laws and regulations. However, they are not fully responsible for FSI's negligence. It would be prudent for a prospective franchisee to consult with a legal professional to fully understand the scope of this indemnification clause and its potential implications.