Is there an exception to the Browns Chicken exclusive relationship regarding ownership of publicly traded securities?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
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 the 2025 Browns Chicken Franchise Disclosure Document, Browns Chicken franchisees are generally required to deal exclusively with Browns Chicken regarding the operation of a retail food service business that offers cooked chicken, pasta, or sandwiches. This means that during the term of the Franchise Agreement, franchisees, their shareholders or partners, and their immediate families cannot have a direct or indirect interest in any other retail food service business offering similar products, nor can they perform services for such businesses.
However, there is a specific exception to this exclusive relationship. Franchisees and related parties are permitted to own shares of a class of securities listed on a stock exchange or traded on the over-the-counter market, provided that such ownership represents one percent (1%) or less of the total outstanding shares of that class of securities.
This exception allows Browns Chicken franchisees to make minor investments in publicly traded companies that may be considered competitive without violating the terms of their Franchise Agreement. This provides some flexibility for franchisees to diversify their investments while still maintaining their primary commitment to the Browns Chicken franchise.