Under what conditions does Chick-fil-A consent to the assignment of a franchise?
Chick_Fil_A Franchise · 2025 FDDAnswer from 2025 FDD Document
epresent and warrant that they shall not make nor permit, directly or indirectly, voluntarily or involuntarily, including by will, trust or other instrument, or by operation of law, the issuance, pledge or sale of stock in Assignee or any other legal, beneficial or equity interests in Assignee to be issued, pledged or sold to a person or entity other than Assignor nor make nor permit any stock in Assignee or any other legal, beneficial or equity interest in Assignee, in whole or in part, subsequently to be pledged, sold, assigned, encumbered, given, transferred or otherwise hypothecated, directly or indirectly, voluntarily or involuntarily, including by will, trust or other instrument, or by operation of law. As used in this
Agreement, the term "equity interest(s)" shall include direct or indirect interest in the equity of Assignee or the business risk of the Business including, but not limited to, interests allegedly denominated as debt but which in substance encompass the type of risk-taking interest described herein.
SECTION 5 – INDUCEMENTS AND CONDITIONS TO CONSENT
- 5.1 Chick-fil-A hereby consents to the assignment of the Franchise upon the following conditions only:
- (a) Chick-fil-A has relied upon, and agreed to execute the Assignment based upon, the agreements, representations, warranties and guaranty executed and undertaken by Assignor and Assignee.
- (b) The granting of this consent is in no way an approval by Chick-fil-A of the legal sufficiency of the formation and organizational documents or any other documents pertaining to Assignee, and insofar as the terms of same may conflict with or contradict the terms of the Assignment, said terms are expressly disclaimed.
- (c) Assignor shall maintain stoptransfer instructions against the transfer on its records of any equity securities; Assignor shall include the following provision in the by-laws pertaining to Assignee:
- (1) Neither the stock in the Corporation nor any other legal, beneficial or equity interest in the Corporation shall be issued, pledged or sold to a person or entity other than the initial sole stockholder, nor shall any stock in the Corporation nor any other legal, beneficial or equity interest in the Corporation, in whole or in part, be pledged, sold, assigned, encumbered, given, transferred or otherwise hypothecated, directly or indirectly, voluntarily or involuntarily, including by will, trust or other instrument, or by operation of law. Any and all stock issuances and transfers are also subject to the terms of the Franchise and any attached Lease(s), any attached Concession Sublicense Agreement(s) for any Captive Venue Unit(s), Assignment and Consent to Assignment Agreement relating to the Franchise Agreement and other applicable agreements, for each franchised Chick-fil-A restaurant business operated by the Corporation. As used herein, the term "legal, beneficial or equity interest(s)" shall include direct or indirect interest(s) in the equity of the Corporation or the business risk of the franchised Chick-fil-A restaurant business(es) operated by the Corporation, including, but not limited to, interests allegedly denominated as debt, but which in substance
encompass the type of risk-taking interest described herein.
(2) All certificates representing stock in the Corporation during the term of the Franchise shall have affixed to them a legend substantially in the following form:
"Neither this stock nor any legal or beneficial interest thereof shall be pledged, sold, assigned, encumbered, given, transferred or hypothecated, directly or indirectly, in whole or in part, voluntarily or involuntarily, including by will, trust or other instrument, or by operation of law.
Source: Item 23 — Receipts (FDD pages 103–600)
What This Means (2025 FDD)
According to Chick-fil-A's 2025 Franchise Disclosure Document, Chick-fil-A consents to the assignment of a franchise under specific conditions. Chick-fil-A must rely on the agreements, representations, warranties, and guarantees made by both the assignor (current franchisee) and the assignee (new franchisee). This indicates that Chick-fil-A carefully evaluates the qualifications and commitments of both parties involved in the transfer.
Chick-fil-A's consent to the assignment does not imply approval of the legal sufficiency of the assignee's formation or organizational documents. If any terms in those documents conflict with the assignment terms, the assignment terms will prevail. This protects Chick-fil-A's interests and ensures that the franchise agreement remains consistent and enforceable. The assignor must also maintain stop-transfer instructions against the transfer of equity securities and include specific provisions in the assignee's by-laws or operating agreement that restrict the transfer of equity interests to anyone other than the initial sole member or stockholder. These provisions ensure that control of the franchise remains with the approved operator and prevent unauthorized transfers of ownership.
Furthermore, Chick-fil-A's consent to the assignment does not extend to any future transfers of interest in the assignee to beneficiaries based on age or other conditions. Granting consent to the assignment does not automatically approve any member, stockholder, or officer of the assignee as an approved Operator, unless that individual was a previous signatory to the Franchise Agreement in their individual capacity as the approved Operator. This highlights Chick-fil-A's strict requirements for operator approval and ensures that only qualified individuals manage the franchise.
Chick-fil-A also requires that the assignor and assignee promptly provide copies of the assignee's organizational documents, such as articles of organization, operating agreements, certificates of incorporation, and by-laws, upon written request. Chick-fil-A retains the right to examine, review, and copy any records, books, financial documents, tax returns, or other documents related to the assignee to ensure compliance with the franchise agreement and the assignment. This allows Chick-fil-A to monitor the assignee's operations and financial health to protect its brand and interests. A breach of any of these conditions, representations, agreements, or warranties by either the assignor or assignee will subject them to all remedies available to Chick-fil-A, including termination of the franchise and the assignment.