What constitutes an 'Event of Default' that would allow Chick Fil A to terminate the lease?
Chick_Fil_A Franchise · 2025 FDDAnswer from 2025 FDD Document
The following events (referred to as "Events of Default") will each be an event of default by the Operator under this Agreement: (i) the Operator defaults in the payment of any installment of the Use/Occupancy Charge, the Equipment Fee or any other sum due under this Agreement; (ii) the Operator (or, as applicable, the Operator-Owner) defaults in any of the covenants, agreements, conditions or undertakings to be performed, observed or complied with by the Operator (or, as applicable, the Operator-Owner) under this Agreement other than the payment of the Use/Occupancy Charge, the Equipment Fee or any other sum due under this Agreement, and other than any other Event of Default listed in this Subsection 4(e), and such default continues for ten (10) days after notice in writing to the Operator; (iii) the Operator (or, as applicable, the Operator-Owner) attempts or otherwise purports to assign, transfer or encumber this Agreement (or the Operator's interest in this Agreement or in the Site) to or to sublet or allow occupancy of the Site by a third party without the express written consent and approval
of Chick-fil-A, and Licensor, contrary to Section 9 below; (iv) the Operator (or, as applicable, the Operator-Owner) violates, breaches or otherwise defaults in any of the terms of the Franchise Agreement, the DK Lease or the Additional Business Amendment, or the Franchise Agreement, the DK Lease or the Additional Business Amendment terminates or expires by lapse of time or otherwise; (v) the Operator or any of its officers, directors, members, employees, agents or contractors (including, without limitation, as applicable, the Operator-Owner) performs any act, neglects to perform any duty or fails to comply with any standard of conduct that would constitute a violation or default (or threatens to violate or default) under the DK Lease, any prime lease, ground lease or other title documents (or any document related to any of the above); (vi) the Operator vacates or abandons the Site.
Source: Item 23 — Receipts (FDD pages 103–600)
What This Means (2025 FDD)
According to Chick Fil A's 2025 Franchise Disclosure Document, several events can trigger a default, allowing Chick Fil A to terminate the lease agreement. These 'Events of Default' include failing to pay any installment of the Use/Occupancy Charge, Equipment Fee/Rental, or any other sum due under the agreement. Additionally, defaulting on any other covenants, agreements, conditions, or undertakings outlined in the agreement, and failing to correct the default within ten days after receiving written notice, also constitutes an event of default.
Further, if the Operator attempts to assign, transfer, or encumber the agreement, or sublet the site to a third party without Chick Fil A's express written consent, it will be considered an event of default. Violating or breaching any terms of the Franchise Agreement, the DK Lease/Concession Agreement, or the Additional Business Amendment, or if these agreements terminate or expire, also constitutes default. Moreover, any action or failure to act by the Operator, its officers, directors, members, employees, agents, or contractors that violates or threatens to violate the DK Lease/Concession Agreement, any prime lease, ground lease, or other title documents can trigger a default. Finally, vacating or abandoning the site is also considered an event of default.
These stipulations are typical in franchise agreements to protect the franchisor's interests and brand standards. For a prospective Chick Fil A franchisee, understanding these default conditions is crucial, as any of these events could lead to the termination of the lease and franchise agreement. It is important to maintain diligent financial records, adhere to all operational requirements, and seek approval from Chick Fil A before making any changes to the business structure or physical location.