Does Chesters require franchisees to purchase or lease real estate from them or their affiliates?

According to Chesters's 2025 Franchise Disclosure Document, franchisees are not required to purchase or lease real estate from Chesters or its affiliates. However, franchisees must develop the restaurant in compliance with Chesters's system standards, ensuring that all plans and specifications adhere to Chesters's requirements, applicable laws, and lease terms. Chesters will provide the necessary specifications and layouts for the restaurant, and franchisees must submit all plans and specifications for review and approval before construction begins. This ensures that the restaurant's design and construction align with Chesters's brand standards and operational requirements.

While Chesters does not mandate real estate transactions with the company, franchisees are obligated to purchase various items from approved suppliers. These include food items, ingredients, equipment, furnishings, supplies, and materials. For trade-secret or proprietary food products and other branded items, Chesters reserves the right to limit suppliers to itself, its affiliates, or other specified exclusive sources. This restriction ensures quality control, protects trade secrets, and maintains a reliable supply chain. Franchisees must adhere to these designated sources for specific items, potentially impacting their operational costs and supplier choices.

Chesters also benefits financially from these supplier relationships. During 2024, Chesters received $37,118,501 from direct franchisee purchases of certain equipment and proprietary food products and from purchases by unaffiliated suppliers and grocery wholesalers to whom Chesters sold certain equipment and proprietary food products for resale to its franchisees. This revenue represented 91.97% of Chesters's total revenue of $40,358,110. The estimated cost of purchases from designated or approved suppliers is significant, ranging from approximately 70% to 95% of the total cost to establish the restaurant and approximately 20% to 40% of the total annual cost to operate it.

Although franchisees are not obligated to buy or lease real estate from Chesters, they must comply with Chesters's standards for restaurant build-out and purchase supplies from approved sources. Chesters encourages franchisees to purchase new equipment and fixtures and is a designated supplier for certain core equipment, signage, fixtures, and supplies. If franchisees obtain financing for these items through Ascentium, the purchase price will include an additional 5% to 10% of the purchase price, which is roughly equivalent to the amount that Ascentium will deduct from their payment to Chesters. This arrangement is designed to reduce the interest rate for the financing obtained through Ascentium.