How are the royalty fees and advertising contributions determined in the new franchise agreement for a Browns Chicken franchise transfer?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
If the transfer is of the Franchise or a controlling interest in Franchisee, or is one of a series of transfers which in the aggregate constitute the transfer of the Franchise or a controlling interest in Franchisee, all of the following conditions must be met prior to or concurrently with, the effective date of the transfer: (1) the transferee must have sufficient business experience, aptitude and financial resources to operate the Store; (2) Franchisee must pay such royalty fees, advertising contributions, amounts owed for purchases by Franchisee from Brown and its affiliates and all other amounts owed to Brown or its affiliates, which are then due and unpaid; (3) the transferee and/or its personnel must agree to complete Brown's training to Brown's satisfaction; (4) the transferee must agree to execute and be bound by all terms and conditions of Brown's then-current form of standard franchise agreement (which shall be modified as necessary to provide for the same royalty fees and advertising contributions provided herein and for a term equal to the remaining term of this Agreement);
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, when a franchise is transferred, the transferee must agree to execute Browns Chicken's current form of standard franchise agreement. This new agreement will be modified to provide for the same royalty fees and advertising contributions as the original agreement, and it will cover the remaining term of the original agreement.
Specifically, the standard royalty fee is 5% of the Gross Sales of the store, with a higher royalty fee of 10% for revenue from Video Gaming. The advertising fund contribution is determined by Browns Chicken, but it will not exceed 4% of the Gross Sales of the store. These fees are paid weekly via electronic transfer or automatic debit.
This means a prospective franchisee acquiring an existing Browns Chicken location through a transfer will likely maintain the same financial obligations for royalties and advertising as the previous franchisee. However, Browns Chicken retains the right to modify these rates in a new franchise agreement, so it is important to confirm the specific terms during the transfer process.