Under what condition does a Fat Shack franchisee have no obligation to indemnify the franchisor?
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 the 2025 Fat Shack Franchise Disclosure Document, a franchisee is generally required to indemnify Fat Shack and its related parties against claims and liabilities arising from the operation of the Fat Shack restaurant, the use of its marks and licensed methods, or any violation of laws. This indemnification extends to claims arising from the actions of the franchisee's representatives and includes all damages and costs incurred in defending against such claims.
However, the franchisee's obligation to indemnify Fat Shack is limited. The franchisee is not required to indemnify Fat Shack to the extent that the claims, obligations, or damages are caused by the negligence of the indemnified party (i.e., Fat Shack itself). This means that if Fat Shack's own negligence leads to a claim or liability, the franchisee will not be responsible for covering Fat Shack's losses.
This exception to the indemnification requirement is important for prospective Fat Shack franchisees. It clarifies that while franchisees bear responsibility for their own actions and the operation of their restaurants, they are not liable for losses resulting from Fat Shack's negligence. Franchisees should carefully review the franchise agreement to fully understand the scope of their indemnification obligations and the circumstances under which they may be excused from those obligations.