During the term of the Chesters agreement, can the franchisee or their owners have an interest in a Competitive Business at the Location?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
0%) of its revenue from selling chicken, or (c) business granting franchises or licenses to others to operate the types of businesses described in clauses (a) or (b), other than a CHESTER'S Restaurant operated under an agreement with us. During this Agreement's term, you agree that neither you nor your owners will have any direct or indirect, controlling or non-controlling interest as an owner in, or perform services as a director, officer, manager, employee, consultant, representative, or agent for, a Competitive Business at the Location or within a five (5)-mile radius from the Location.
For each violation of this restriction on the operation of a Competitive Business, you acknowledge that we will suffer substantial Brand Damages. "Brand Damages" means, among other things, lost market penetration and goodwill, loss of CHESTER'S Restaurant representation in the Location's market area, customer confusion, lost opportunity costs, and expenses that we will incur in developing or finding another operator to develop another CHESTER'S Restaurant in the Location's market area. We and you acknowledge that Brand Damages are difficult to estimate accurately, and proof of Brand Damages would be burdensome and costly, although such damages are real and meaningful to us. Therefore, for each violation of the restriction on the operation of a Competitive Business, you must pay us in a lump sum, on or before the date we specify, liquidated damages equal to Ten-Thousand Dollars ($10,000). Payment is due by credit card or ACH transfer. You agree that these liquidated damages represent the best estimate of our Brand Damages arising from each violation of the restriction on the operation of a Competitive Business. Your payment of the liquidated damages to us will not be considered a penalty but, rather, a reasonable estimate of fair compensation to us for the Brand Damages we will incur. You acknowledge that your payment of liquidate
Source: Item 23 — **RECEIPTS (FDD pages 48–197)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, franchisees and their owners are restricted from having any ownership interest in or performing services for a Competitive Business during the term of the agreement. This restriction applies to any Competitive Business located at the Chesters franchise location or within a five-mile radius of it.
The FDD defines a "Competitive Business" as any business that prepares and sells breaded chicken products or similar side items that Chesters requires its restaurants to sell. This includes businesses like Charley Biggs, Champs Chicken, Krispy Krunchy Chicken, Cooper's Express, Broaster Chicken, and Chicken King. It also includes any business that operates a "Restaurant-in-Store" unit where more than 20% of its revenue comes from chicken sales, or any business that franchises or licenses others to operate similar businesses.
Chesters specifies that violating this restriction will result in substantial Brand Damages, including lost market penetration and goodwill, customer confusion, and lost opportunity costs. Due to the difficulty in accurately estimating these damages, Chesters requires the franchisee to pay liquidated damages of $10,000 for each violation. This payment is considered a reasonable estimate of the Brand Damages incurred and is in addition to any other amounts owed under the agreement.