What activities are prohibited by Section 15 of the Browns Chicken agreement that would disqualify a transferee?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
The proposed transferee or its owner must be an individual of good moral character, must not be engaged in any activity which would be prohibited by Section 15 of this Agreement, and otherwise meet Brown's then applicable standards for Brown's franchisees.
Franchisee acknowledges and agrees that Brown would be unable to protect the Confidential Information against unauthorized use and disclosure and would be unable to encourage a free exchange of ideas and information among BROWN'S Stores if owners of BROWN'S Stores and members of their immediate families were permitted to hold interests in or perform services for competitive businesses. Brown has entered into this Agreement with Franchisee on the express condition that with respect to the operation of a retail food service business which offers cooked chicken, pasta, or sandwiches. Franchisee (and its owners and members of their respective immediate families) will deal exclusively with Brown. Franchisee therefore agrees that during the term of this Agreement, except for the Store and other BROWN'S Stores operated under franchise agreements with Brown: (1) neither Franchisee, nor any shareholder or partner of Franchisee (in the event Franchisee, is a corporation or partnership), nor any member of the immediate family of Franchisee or any shareholder or partner of Franchisee, shall have any direct or indirect interest as a disclosed or beneficial owner of any retail food service business wherever located, that offers cooked chicken, pasta or sandwiches, or any direct or indirect interest in any entity which is granting franchises or licenses to others to operate retail food service businesses that offer cooked chicken, pasta or sandwiches; and (2) neither Franchisee nor any partner or shareholder of Franchisee shall perform services as a director, officer, manager, employee, consultant, lessor, lender, representative, agent or otherwise for any retail food service business wherever located, that offers cooked chicken, pasta or sandwiches; provided that the restrictions of this Section 15 shall not be applicable to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the- counter market that represent one percent (1%) or less of the number of shares of that class of securities issued and outstanding.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, a proposed transferee cannot be engaged in any activity prohibited by Section 15 of the franchise agreement to be approved. Section 15 outlines the exclusive relationship Browns Chicken requires of its franchisees, owners, and their immediate families.
Specifically, during the term of the agreement, franchisees (and their owners and immediate family members) are restricted from having any direct or indirect interest in any retail food service business that offers cooked chicken, pasta, or sandwiches, regardless of location. This includes owning an interest in entities that grant franchises or licenses for similar retail food service businesses.
Furthermore, franchisees, partners, or shareholders are prohibited from performing services as a director, officer, manager, employee, consultant, lessor, lender, representative, agent, or in any other capacity for any retail food service business offering cooked chicken, pasta, or sandwiches, irrespective of location. An exception exists for owning shares of a class of securities listed on a stock exchange or traded over-the-counter, provided the ownership represents one percent (1%) or less of the outstanding shares.