What is the effect of a default under the Food Truck Lease on the Chick Fil A agreement?
Chick_Fil_A Franchise · 2025 FDDAnswer from 2025 FDD Document
- b.
This Agreement and the rights granted hereunder may be terminated for a default under this Agreement, including a default under the sublease granted in Section 4 of this Agreement by reason of a default of the Food Truck Lease, without also terminating the Franchise Agreement, provided that Chick-fil-A, in the exercise of its sole and exclusive business judgment, shall have the right at its election to also terminate the Franchise Agreement as to the Business and one or more or all of any other of the Businesses operated under the Franchise Agreement by providing written notice to the Operator pursuant to the terms of the Franchise Agreement.
Subject to Section 15, this Agreement and the rights granted under this Agreement, including the sublease granted in Section 4 of this Agreement (but not the obligations the Operator has undertaken thereunder, which will survive until the Operator has fully performed the same), will expire automatically upon Chick-fil-A retaking possession of the Food Truck following the expiration or termination of this Agreement and the Operator's fulfillment of the Operator's obligations under this Agreement, including under the sublease granted in Section 4 of this Agreement.
Notwithstanding anything to the contrary in this Agreement, the Operator further acknowledges and agrees that Chick-fil-A has the right, in Chick-fil-A's sole and exclusive business judgment, to terminate this Agreement, including the sublease granted in Section 4, and/or the Food Truck Program at any time for any reason or for no reason.
- c.
The Operator will bear any and all risk arising from or related to termination of this Agreement.
Upon termination of this Agreement, the Operator will remain liable for the then current outstanding balance of the Food Truck Usage Fee, the Food Truck Insurance Fee and any other payments due Chick-fil-A or BALC as provided in the Food Truck Lease and/or in this Agreement.
The Operator agrees that upon default BALC may demand, receive and collect any monies due or falling due after the default without in any manner affecting the status of the default or any notice of suit, action, order or judgment related to the default.
Source: Item 23 — Receipts (FDD pages 103–600)
What This Means (2025 FDD)
According to Chick Fil A's 2025 Franchise Disclosure Document, a default under the Food Truck Lease can have significant repercussions for the franchisee's agreement with Chick Fil A. The rights granted to the operator are contingent upon the Food Truck Lease being in full force and effect. If the Food Truck Lease is terminated or expires before the agreement's term ends, the agreement will automatically terminate at the same time.
Furthermore, Chick Fil A has the right to terminate the agreement if the operator defaults on the Food Truck Lease. However, Chick Fil A can choose to terminate the Food Truck agreement without terminating the Franchise Agreement. Conversely, Chick Fil A can also elect to terminate the Franchise Agreement for the business, or even all other businesses operated by the franchisee under the Franchise Agreement. Upon termination of the agreement, the operator remains liable for any outstanding balances, including the Food Truck Usage Fee and the Food Truck Insurance Fee.
Moreover, any violation of the Food Truck Lease also constitutes a violation of the Franchise Agreement. This cross-default provision means that a problem with the Food Truck Lease can trigger broader consequences for the franchisee's relationship with Chick Fil A. The franchisee bears all risks associated with the termination of the agreement. BALC (presumably a leasing company) can collect any monies due after a default without affecting the default's status.
Chick Fil A retains the right to terminate the Food Truck Program at any time, for any reason, highlighting the potential instability of this aspect of the franchise. The obligations of the operator under the Food Truck Lease will survive until the operator has fully performed them, even after termination of the agreement. This includes the sublease granted in Section 4 of the agreement. Any payments made by the operator after termination will not reinstate the agreement or waive Chick Fil A's right to repossess the Food Truck.