What rights does Chick Fil A have if the Franchise Agreement is in default during the term of the agreement?
Chick_Fil_A Franchise · 2025 FDDAnswer from 2025 FDD Document
of any person or entity, any personal injury or death, any claim, demand or penalty, and any suit or other judicial or administrative proceeding arising out of or relating to or in connection with the Sales Locations, the Food Truck or this Agreement, as applicable, all of which will be the sole and exclusive responsibility of the Operator. This section is not intended to and does not convey any benefits to any third party and does not prevent the Operator or Chick-fil-A from seeking indemnification from another third party whose actions, or the actions of such third party's employee, were the source of any injury, damage or loss. This section is in addition to any obligations of the Operator to Food Truck Lessor and others that may be named in the Food Truck Lease.
14. Default; Termination.
- a. The rights granted under this Agreement are contingent upon the Franchise Agreement, this Agreement, and the Food Truck Lease, being in full force and effect and the Operator otherwise being in good standing at the effective date of this Agreement and at all times during the term of this Agreement. If prior to the expiration of the term 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 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 Chickfil-A may terminate the Operator's rights under this Agreement or suspend such rights until the default is cured.
- b. This Agreement and the rights granted hereunder may be terminated by Chick-fil-A for a default by the Operator under this Agreement or 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, will terminate automatically upon the Food Truck Lessor or Chick-fil-A taking possession of the Food Truck following the expiration or termination of this Agreement or the Food Truck Lease. The Operator's obligations under this Agreement and the Food Truck Lease will survive until the Operator
has fully performed the same.
Source: Item 23 — Receipts (FDD pages 103–600)
What This Means (2025 FDD)
According to Chick Fil A's 2025 Franchise Disclosure Document, if the Franchise Agreement is in default at any time during the term of the agreement, Chick-fil-A has specific rights. Chick-fil-A may terminate the Operator's rights under the agreement or suspend such rights until the default is cured. This means that if a franchisee fails to meet the obligations outlined in the Franchise Agreement, Chick-fil-A can take action to end the agreement or temporarily halt the franchisee's operations until the issues are resolved.
Chick-fil-A also retains the right to terminate the agreement for a default by the Operator or a default of the Food Truck Lease, without terminating the Franchise Agreement. Chick-fil-A can 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. This allows Chick-fil-A flexibility in addressing defaults, potentially targeting specific areas of concern without necessarily terminating the entire franchise relationship, although they can choose to do so.
Furthermore, Chick-fil-A has the right, in its sole and exclusive business judgment, to terminate the Agreement and/or the Food Truck Program at any time for any reason or for no reason. This clause provides Chick-fil-A with broad discretionary power to end the agreement, which is a significant consideration for potential franchisees. Upon termination of the 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 will also bear any and all risk arising from or related to termination of this Agreement.
These terms are important for prospective franchisees to understand, as they highlight the potential consequences of defaulting on the Franchise Agreement and the extent of Chick-fil-A's control over the franchise operation. It is fairly typical in franchising for the franchisor to retain rights to protect their brand and system, but the breadth of discretion granted to Chick-fil-A, including termination for any reason, is something a franchisee should carefully consider.