Under what conditions will Browns Chicken consider the franchise agreement to be continued on a month-to-month basis after the expiration of the original term?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event Franchisee does not execute the Renewal Franchise Agreement after the expiration of the term of the Franchise, and continues to accept any of the benefits of this Agreement after the expiration of the term of the Franchise, then at Brown's option, this Agreement may be treated either as: (i) expired as of the date of the expiration with
Franchisee then operating without a franchise to do so and in violation of Brown's right; or (ii) continued on a month-to-month basis (the "Interim Term") until either party provides the other party with written notice of such party's intention to terminate the Interim Term. In the latter case, all of Franchisee's obligations shall remain in full force and effect during the Interim Term as if this Agreement had not expired, and all obligations and restrictions imposed on Franchisee upon expiration of this Agreement shall be deemed to take effect upon termination of the Interim Term. In the event of either (i) or (ii) of this Paragraph, Franchisee shall be obligated to pay a weekly royalty fee in the amount of seven percent (7%) of the Gross Sales of the Store (as defined in Paragraph 19.B. hereof).
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, if a franchisee does not execute a Renewal Franchise Agreement after the expiration of the original franchise term, but continues to accept the benefits of the original agreement, Browns Chicken has the option to treat the agreement in one of two ways. Browns Chicken can consider the franchise expired, with the franchisee operating without a franchise in violation of Browns Chicken's rights. Alternatively, Browns Chicken can consider the agreement continued on a month-to-month basis, referred to as the "Interim Term."
During this Interim Term, all of the franchisee's obligations remain in full force and effect, as if the original agreement had not expired. All obligations and restrictions imposed on the franchisee upon expiration of the agreement will take effect upon the termination of the Interim Term. This means the franchisee must continue to adhere to the standards and requirements of the franchise system.
In either scenario—whether the agreement is considered expired or continued on a month-to-month basis—the franchisee is obligated to pay a weekly royalty fee. This royalty fee is set at seven percent (7%) of the Gross Sales of the Store. The Interim Term continues until either Browns Chicken or the franchisee provides written notice to the other party, indicating their intention to terminate the Interim Term. This arrangement provides Browns Chicken with flexibility while ensuring continued revenue and adherence to standards during the transition period after the initial term expires.