Is Angry Chickz permitted to engage in a public offering of its securities without liability to the Developer?
Angry_Chickz Franchise · 2025 FDDAnswer from 2025 FDD Document
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- 7.3.2 Developer shall not, directly, or indirectly, pledge, encumber, hypothecate or otherwise grant any third party a security interest in this Agreement in any manner whatsoever without the prior express written consent of Company. To the extent that the foregoing prohibition may be ineffective under Applicable Law, Developer shall provide not less than 10 days prior written notice (which notice shall contain the name and address of the secured party and the terms of such pledge, encumbrance, hypothecation or security interest) of any pledge, encumbrance, hypothecation or security interest in this Agreement.
- 7.3.3 Securities, partnership or other ownership interests in Developer may not be offered to the public under the Securities Act of 1933, as amended, nor may they be registered under the Securities Exchange Act of 1934, as amended, or any comparable federal, state or foreign law, rule or regulation. Such interests may be offered by private offering or otherwise only with the prior written consent of Company, which consent shall not be unreasonably withheld. All materials required for any such private offering by federal or state law shall be submitted to Company for a limited review as discussed below prior to being filed with any governmental agency; and any materials to be used in any exempt offering shall be submitted to Company for such review prior to their use. No such offering by Developer shall imply that Company is participating in an underwriting, issuance or offering of securities of Developer or Company, and Company's review of any offering materials shall be limited solely to the subject of the relationship between Franchise and Company and its Affiliates. Company may, at its option, require Developer's offering materials to contain a written statement prescribed by Company concerning the limitations described in the preceding sentence. Developer, its Owners and the other participants in the offering must fully defend and indemnify Company, and its Affiliates, their respective partners and the officers, directors, manager(s) (if a limited liability company), shareholders, members, partners, agents, representatives, independent contractors, servants and employees of each of them, from and against any and all losses, costs and liability in connection with the offering and shall execute
Source: Item 23 — RECEIPTS (FDD pages 54–260)
What This Means (2025 FDD)
According to Angry Chickz's 2025 Franchise Disclosure Document, the Developer is restricted from offering securities, partnership, or other ownership interests to the public under the Securities Act of 1933 or registering them under the Securities Exchange Act of 1934.
However, the Developer may offer these interests through a private offering, but only with Angry Chickz's prior written consent, which will not be unreasonably withheld. Before filing with any governmental agency, all materials required for a private offering under federal or state law must be submitted to Angry Chickz for review. Similarly, materials for any exempt offering must be submitted for review before use.
The offering by the Developer must not imply that Angry Chickz is participating in the underwriting, issuance, or offering of securities, and Angry Chickz's review of offering materials is limited to the relationship between the franchise and Angry Chickz and its affiliates. Angry Chickz may require the Developer's offering materials to include a written statement clarifying these limitations.
The Developer must also pay Angry Chickz a nonrefundable fee of $10,000 for each proposed offering, in addition to any transfer fee under the Franchise Agreement, or a greater amount to cover Angry Chickz's reasonable costs and expenses for reviewing the offering, including legal and accounting fees. The Developer must provide Angry Chickz with written notice at least thirty (30) days before starting any offering or transaction covered by this section and must fully defend and indemnify Angry Chickz and its affiliates against any losses, costs, and liability related to the offering.