Who is subject to the non-competition covenant after a Browns Chicken franchise transfer?

According to Browns Chicken's 2025 Franchise Disclosure Document, both the selling franchisee and its owners may be subject to a non-competition covenant after a franchise transfer. Specifically, the selling franchisee and its owners will remain liable for the performance by the transferee of its obligations under the Franchise Agreement. This liability extends for a duration determined by Browns Chicken, but it cannot exceed the remaining term of the transferor's Franchise Agreement.

This means that even after selling the franchise, the original franchisee and their owners could be held responsible if the new franchisee fails to meet the obligations outlined in the Franchise Agreement. Browns Chicken may require the selling franchisee and its owners to execute a guaranty to ensure the transferee's performance. This guaranty provides Browns Chicken with an additional layer of security and recourse in case of the new franchisee's non-compliance.

For a prospective Browns Chicken franchisee, this condition highlights the importance of carefully selecting a suitable and capable buyer when considering a franchise transfer. The original franchisee's financial and legal exposure is not entirely eliminated upon the sale of the franchise, as they remain liable for the transferee's performance. This could potentially impact their future business ventures and financial stability if the new franchisee encounters difficulties or fails to uphold the franchise agreement.

It is important for prospective franchisees to seek legal counsel to fully understand the implications of this clause and to negotiate the terms of the transfer agreement to minimize their potential liability. Additionally, franchisees should conduct thorough due diligence on potential buyers to assess their financial stability, business experience, and commitment to adhering to the Browns Chicken franchise agreement.