Do the confidentiality obligations of the Browns Chicken franchisee survive the termination or expiration of the agreement?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
1 is deemed unenforceable by virtue of its scope in terms of area or length of time or activity restrained, but may be made enforceable by reduction of any or all thereof, Franchisee and Brown agree that the same shall be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction in which enforcement is sought.
F. Continuing Obligations.
All obligations of Brown and Franchisee which expressly or by their nature survive the expiration or termination of this Agreement shall continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied in full or by their nature expire.
G. Brown's Option to Purchase.
(1) If this Agreement expires (without renewal) or is terminated by Brown in accordance with its provisions or by Franchisee without cause, then Brown shall have the option, exercisable by giving written notice thereof within sixty (60) days from the date of such expiration or termination, to purchase from Franchisee any or all the tangible assets (including, without limitation, inventory of saleable products, equipment, fixtures, furniture, signs, cash registers, modems, fax machines, computers, leasehold improvements and any other assets of the Store owned by Franchisee, but excluding any unamortized portion of the initial franchise fee, cash, goodwill, short-term investments and accounts receivable) of the Store (collectively, the "Purchased Assets") and to an assignment of Franchisee's lease for (a) the premises of the Store (or, if an assignment is prohibited, a sublease for the full remaining term and on the same terms and conditions as Franchisee's lease) and (b) any other tangible assets used in connection with the Store. Brown may exclude from the assets purchased any items that Brown determines are not reasonably necessary (in function or quality) to the Store's operation or that Brown has not approved as meeting its standards for BROWN's Stores, and the purchase price will reflect these exclusions.Brown shall have the unrestricted right to assign this option to
purchase and assignment of leases separate and apart from the remainder of this Agreement.
- (2) The purchase price for the Store (except for the signage, the purchase price of which is $100) shall be either, at Brown's option: (a) the Book Value (as defined below) of the Purchased Assets, or (b) the fair market value of the Purchased Assets, as determined by a neutral appraiser. Both Brown and the Franchisee shall select an appraiser, whose sole function would be to select a third, neutral appraiser, who would determine the fair market value of the Purchased Assets. The fees and costs of the neutral appraiser shall be shared equally by Brown and Franchisee. "Book Value" shall mean the net book value of the Purchased Assets, as disclosed by the balance sheet of the last monthly statement of the Store required to have been submitted to Brown pursuant to Paragraph 12.B. hereof prior to such termination or expiration, provided, however, that: (1) each depreciable asset shall be valued as if it had been depreciated on a "straight-line" basis from the date of its acquisition over its Useful Life (defined below) without provision for salvage value;
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the confidentiality obligations of the franchisee extend beyond the termination or expiration of the franchise agreement. Section 14C of the agreement states that the franchisee agrees to maintain the absolute secrecy and confidentiality of Browns Chicken's Confidential Information during and after the term of the agreement. This means that even after the franchise relationship ends, the franchisee is legally bound to protect Browns Chicken's proprietary information.
Specifically, the franchisee must not use the confidential information in any other business or capacity, must maintain its secrecy, and must not make unauthorized copies of written confidential information. The franchisee also has an ongoing obligation to implement procedures to prevent unauthorized use or disclosure of this information, including ensuring employees with access to confidential information sign non-disclosure or non-competition agreements.
Furthermore, Section 21F states that all obligations of Browns Chicken and the franchisee that expressly or by their nature survive the expiration or termination of the agreement will continue in full force and effect until they are satisfied or naturally expire. This reinforces the continuing nature of the confidentiality obligations and other duties that are meant to extend beyond the active term of the franchise agreement. Browns Chicken also retains ownership of the customer list, which the franchisee must turn over upon termination or expiration of the agreement and can no longer use for any purpose.