Under the Fat Shack agreement, is FSI responsible for the debts or obligations of the franchisee?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
ement.
7. BUSINESS RELATIONSHIPS
- 7.1. During the term of this Development Agreement, Franchisee shall be an independent contractor and shall in no way be considered as an agent, partner or employee of FSI. It is understood and agreed that no agency or partnership is created by this Development Agreement. As such, Franchisee has no authority of any nature whatsoever to bind FSI or incur any liability for or on behalf of FSI or to represent itself as anything other than an independent contractor. Notwithstanding any other provisions in this Development Agreement, FSI shall not be responsible for supervising the activities of Franchisee under this Development Agreement.
- 7.2. Franchisee shall indemnify, release, defend and hold FSI, its subsidiaries and affiliates, and its respective shareholders, directors, officers, employees, agents, successors and assignees (the "Indemnified Parties") harmless against, and to reimburse them for all Claims, defined below, any and all third party obligations of Franchisee, and any and all claims, obligations and liabilities directly or indirectly arising out of this Development Agreement or the operation of any FAT SHACK Restaurants. For purposes of this indemnification, "Claims" means all obligations, actual and consequential damages and costs reasonably incurred in the defense of any claim against the Indemnified Parties, including, without limitation, reasonable accountants', attorneys' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses. FSI will have the right to defend any such Claim against it. This indemnity will continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Development Agreement.
8. MISCELLANEOUS
- 8.1. The parties agree that any dispute between the parties arising out of the terms of this Development Agreement shall be governed by the applicable provisions of the most recent Franchise Agreement entered hereunder, which terms and conditions are by this reference incorporated herein, and which shall apply regardless of whether the applicable Franchise Agreement remains in full force and effect at the time of the dispute.
- 8.2. This Development Agreement shall be binding upon and inure to the benefit of each of the parties' respective heirs, successors, assigns and personal representatives.
- 8.3. Except to the extent governed by United States Federal law, this Development Agreement shall be governed by and construed in accordance with the laws of the State of Colorado.
- 8.4. Franchisee acknowledges that it had a copy of this Development Agreement in its possession for a period of time not fewer than fourteen (14) full calendar days, during which time
Franchisee has had the opportunity to submit the same for professional review and advice of Franchisee's choosing prior to freely executing this Development Agreement.
- 8.5.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, generally, Fat Shack International (FSI) is not responsible for the debts or obligations of the franchisee. As stated in section 7.1 of the Development Agreement, the franchisee operates as an independent contractor and is not considered an agent, partner, or employee of FSI. This arrangement means the franchisee has no authority to bind FSI or incur any liability on its behalf.
Furthermore, the franchisee is required to indemnify and hold FSI harmless from any third-party obligations or claims arising from the Development Agreement or the operation of any Fat Shack restaurants. This indemnification includes all damages, costs, and fees incurred in defending against any claim. This obligation remains in effect even after the Development Agreement expires or terminates.
However, there is an exception where FSI assumes management of the Fat Shack restaurant under specific circumstances, such as abandonment by the franchisee or failure to comply with the agreement. In such cases, FSI is not liable to the franchisee or its owners for any debts, losses, or obligations the restaurant incurs while under FSI's management, and FSI is only required to utilize reasonable efforts. This limited assumption of management does not make FSI generally responsible for the franchisee's debts.