If assignment of the lease is prohibited, what alternative arrangement will Browns Chicken accept when purchasing a Browns Chicken franchise?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
(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.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to the 2025 Browns Chicken FDD, if the assignment of a lease is prohibited, Browns Chicken will accept a sublease for the full remaining term and on the same terms and conditions as the franchisee's lease. This alternative arrangement is available to Browns Chicken if the franchise agreement expires (without renewal), is terminated by Browns Chicken, or is terminated by the franchisee without cause.
This sublease option ensures that Browns Chicken can continue operating a location even if the original franchisee's lease cannot be directly transferred. It allows Browns Chicken to maintain control over the premises and continue serving customers without interruption. The terms of the sublease must mirror the original lease, protecting both Browns Chicken and the landlord.
For a prospective Browns Chicken franchisee, this clause offers a degree of security. If they decide to leave the franchise or if Browns Chicken terminates the agreement under certain conditions, Browns Chicken has a mechanism to take over the location, potentially preserving the business's value. However, it's important for franchisees to understand the conditions under which this option can be exercised and to negotiate lease terms that are favorable and sustainable for their business. Franchisees should seek legal counsel to fully understand their rights and obligations under the lease and franchise agreement.