Under what circumstances is a Fat Shack franchisee NOT required to indemnify the Indemnified Parties?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
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. This indemnity includes any claims arising from the acts or omissions of Franchisee's Authorized Representatives. For purposes of this indemnification, "claims" shall mean and include 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. Each Indemnified Party shall have the right to defend any such claim against it at Franchisee's expense and agree to settlements or any other actions. This indemnity shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, a franchisee is generally required to indemnify the Indemnified Parties (FSI, its subsidiaries, affiliates, and their respective shareholders, directors, members, managers, officers, managers, members, employees, agents, successors, and assigns) against claims, obligations, and damages arising from the operation of the Fat Shack restaurant, the use of the Marks and Licensed Methods, or the violation of any laws. This indemnification extends to claims arising from the actions of the franchisee's Authorized Representatives. However, there is an exception to this requirement.
The Fat Shack franchisee is not required to indemnify the Indemnified Parties to the extent that the claims, obligations, or damages are caused by the Indemnified Party's own negligence. This means that if the Indemnified Parties themselves are negligent and their negligence leads to a claim, the franchisee is not responsible for covering the costs associated with that claim, but only to the extent of the negligence.
This exception is important for prospective Fat Shack franchisees because it limits their liability in situations where Fat Shack's corporate actions or negligence contribute to a claim. However, the franchisee still bears the burden of proof to demonstrate that the Indemnified Party's negligence was the cause of the claim. Franchisees should seek legal counsel to fully understand the scope of this indemnification clause and its potential implications.