What happens if a judgment is entered against Angry Chickz due to the franchisee's operation?
Angry_Chickz Franchise · 2025 FDDAnswer from 2025 FDD Document
d holders shall reexecute a written guaranty in a form prescribed by Company.
ARTICLE 14 DEFAULT AND TERMINATION
- 14.1 General. Company shall have the right to terminate this Agreement only for "cause". "Cause" is hereby defined as a default of this Agreement. Company shall exercise its right to terminate this Agreement in the following circumstances and manners.
- 14.2 Automatic Termination Without Notice. Subject to Applicable Laws of the jurisdiction in which the Franchised Business is operated to the contrary, Franchisee shall be deemed to be in default under this Agreement, and all rights granted herein shall at Company's election automatically terminate without notice to Franchisee if: (i) Franchisee shall be adjudicated bankrupt or judicially determined to be insolvent (subject to any contrary provisions of Applicable Law), shall admit to its inability to meet its financial obligations as they become due, or shall make a disposition for the benefit of its creditors; (ii) a judgment against Franchisee in the amount of more than $25,000 remains unsatisfied for a period of more than 30 days (unless an appeal bond has been filed); (iii) the Franchised Business, the Premises, or any of the Assets are seized, taken over or foreclosed by a government official in the exercise of its duties, or seized, taken over, or foreclosed by a creditor or lienholder provided that a final judgment against the Franchisee remains unsatisfied for 30 days (unless an appeal bond has been filed); (iv) a levy of execution or attachment has been made upon the license granted by this Agreement or upon any of the Assets, and it is not discharged within 5 days of such levy or attachment; (v) Franchisee permits any recordation of a notice of mechanics lien against the Franchised Business or
Source: Item 22 — CONTRACTS (FDD page 54)
What This Means (2025 FDD)
According to the 2025 Angry Chickz Franchise Disclosure Document, if a franchisee allows or permits any judgment to be entered against Angry Chickz or any of its affiliates, arising out of or relating to the operation of the franchised business, it can lead to automatic termination of the franchise agreement without notice, subject to applicable laws.
This means that if a customer or employee sues an Angry Chickz franchisee and obtains a judgment that also names Angry Chickz as liable due to the franchisee's actions, Angry Chickz has the right to immediately terminate the franchise agreement. This is a significant risk for franchisees, as they could lose their franchise due to circumstances beyond their direct control if the judgment impacts Angry Chickz.
This type of clause is not uncommon in franchise agreements, as franchisors want to protect their brand and reputation from liabilities arising from franchisee operations. Prospective Angry Chickz franchisees should understand this risk and ensure they have adequate insurance coverage and legal counsel to protect themselves and the franchisor from potential lawsuits. Franchisees should also ensure they are operating their business in compliance with all applicable laws and regulations to minimize the risk of lawsuits.