Can Chesters compete with its own franchisees through other distribution channels?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
TERRITORY
You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. You also do not have any type of non-exclusive territory. We and our affiliates have the right at all times during the franchise term to engage in any and all activities we deem appropriate, at any time or place and through any distribution channels we choose (such as the Internet, catalog sales, telemarketing, or other direct marketing sales). We need not pay you any compensation if we solicit or accept orders from any customers, regardless of their location.
If you operate a Restaurant-in-Store franchise, you will operate your Restaurant within your existing business premises. If you will operate a food court/strip mall franchise or other non-traditional franchise (such as at a sports arena or stadium), you will operate your Restaurant from a site you lease in a food court, strip mall, sports arena, or stadium. We have the right to terminate the Agreement if you fail to open the Restaurant within 180 days after the Agreement's effective date. You have the right to operate only from the accepted location and have no right to relocate within your existing business premises or elsewhere without our prior written permission. Whether we will permit relocation depends on the specific circumstances and what we consider to be in your Restaurant's and our system's best interests. We do not expect relocation to occur often because the Restaurant typically is located in your existing business premises. You are not
restricted from advertising away from your location if all sales are made at the location. You have the right, with our prior written approval, to solicit sales and orders from your franchised location for delivery to a remote location (including catering). You have no right to use other channels of distribution to make sales away from your location (such as the Internet, catalog sales, telemarketing, or other direct marketing sales) or in any territory.
Except as described below, neither we nor any affiliate has established, or presently intends to establish, other franchised or company-operated restaurants or another distribution channel (such as the Internet, catalog sales, telemarketing, or other direct marketing sales) selling or leasing similar products or services under a different trade name or trademark (although we have the right to do so, as noted above).
As described in Item 1 above, the First Chester's and Giles licensed retail operators operate restaurants or sell chicken products under the CHESTER FRIED Total Program. We are now the licensor of those Chester Fried Licensed Restaurants.
Source: Item 12 — TERRITORY (FDD pages 29–31)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, Chesters franchisees may face competition from other distribution channels that Chesters controls. Specifically, Chesters retains the right to engage in activities it deems appropriate through any distribution channels it chooses, such as the Internet, catalog sales, telemarketing, or other direct marketing sales. Chesters does not need to compensate franchisees if it solicits or accepts orders from any customers, regardless of their location.
This means that Chesters has the freedom to sell its products or services through various channels that could directly compete with a franchisee's business. A franchisee is also restricted from using other channels of distribution to make sales away from their location, such as the Internet, catalog sales, telemarketing, or other direct marketing sales, or in any territory. However, with Chesters's prior written approval, a franchisee has the right to solicit sales and orders from their franchised location for delivery to a remote location, including catering.
Chesters also sells equipment to franchisees and has begun selling clothing and merchandise on the Internet. BirdShack, an affiliate of Chesters, sells consumable products like breading to food or equipment distributors or directly to restaurant operators that compete with Chesters franchisees. These other operators will not use trademarks owned by Chesters or its affiliates, except for BirdShack. This introduces another layer of potential competition, as these operators can sell similar products, albeit under different branding, potentially drawing customers away from Chesters franchises.
Prospective franchisees should carefully consider the implications of these competitive channels. While Chesters states it will use reasonable efforts to resolve conflicts, the FDD clearly states that Chesters has the right to engage in any activities it deems appropriate, which could include direct competition with its own franchisees. This lack of territorial exclusivity and the presence of alternative distribution channels represent a significant risk for franchisees, as their revenue could be impacted by Chesters's actions and other competitive brands that Chesters controls.