What is the effect of a default under the sublease granted in Section 4 on the Chick Fil A agreement?
Chick_Fil_A Franchise · 2025 FDDAnswer from 2025 FDD Document
rm of this Agreement, the Franchise Agreement is terminated or expires with respect to the Business or the Food Truck Lease is terminated or expires, this Agreement, including the sublease granted in Section 4 of this Agreement, will automatically terminate or expire at the same time. If the Franchise Agreement is in default at the effective date of this Agreement or at any time during the term of this Agreement (and has not been terminated), such default will also constitute a default by the Operator under this Agreement, and Chick-fil-A may terminate the Operator's rights under
- this Agreement, including the sublease granted in Section 4 of this Agreement, or suspend such rights until the default is cured.
- 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.
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 sublease granted in Section 4 of the agreement can have significant consequences for the operator. Specifically, the document states that the agreement and the rights granted within it can be terminated due to a default under the sublease, which arises from a default of the Food Truck Lease. However, Chick Fil A has the discretion to terminate the agreement without terminating the Franchise Agreement itself.
Chick Fil A retains the right, based on its business judgment, to also terminate the Franchise Agreement, potentially impacting all businesses operated by the franchisee under that agreement. This decision would be communicated through written notice to the operator, as per the terms of the Franchise Agreement. The agreement, including the sublease, will automatically expire when Chick Fil A retakes possession of the Food Truck after the agreement's expiration or termination, provided the operator has fulfilled all obligations, including those under the sublease.
Furthermore, Chick Fil A reserves the right to terminate the agreement, including the sublease, and/or the Food Truck Program at any time, for any reason or without any specific reason. The operator bears all risks associated with the termination of the agreement and remains liable for outstanding balances, such as the Food Truck Usage Fee and the Food Truck Insurance Fee, owed to Chick Fil A or BALC, as stipulated in the Food Truck Lease and the agreement. BALC also has the right to demand and collect any monies due after a default without affecting the default status or any related legal actions.
In summary, a default under the sublease can lead to termination of the agreement and potentially the Franchise Agreement, at Chick Fil A's discretion. The operator is responsible for all risks and financial obligations resulting from termination. This highlights the importance of adhering to the terms of the sublease and the Food Truck Lease to maintain the franchise agreement and operational rights.