What activities are prohibited by the non-competition covenant after termination or expiration of a Chicken Guy Development Agreement?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
ou should read these provisions in the agreements attached to this disclosure document.**
DEVELOPMENT AGREEMENT
| PROVISION | SECTION IN DEVELOPMENT AGREEMENT | SUMMARY |
|---|---|---|
| a. Length of the development term | Section 1.A. | The term is from the date of execution of the Development Agreement to the date that you sign a lease or purchase the site for the last Franchised Restaurant that you are required to develop under the Development Schedule. |
| PROVISION | SECTION IN DEVELOPMENT AGREEMENT | SUMMARY |
| r. Non-competition covenants after the franchise is terminated or expires | Section 12.C. | No activity as described in q. above for one year within your Development Territory, within two miles of its border and within two miles of any then- existing Chicken Guy! Restaurant. If you violate the post-termination non-competition provisions, you must pay liquidated damages equal to our then- current Initial Franchise Fee and 8% of the Gross Sales of the competing business until the expiration of the non-competition period (subject to state law). |
| s. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 40–46)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, after the termination or expiration of a Development Agreement, the franchisee is restricted from engaging in activities described in section q of the franchise agreement. This restriction lasts for one year within the franchisee's Development Territory and within two miles of the Development Territory's border, as well as within two miles of any then-existing Chicken Guy restaurant.
Section q of the franchise agreement prohibits the diversion of any business or customer to any competitor. It also prohibits having an interest in any restaurant business that features chicken as a primary menu item, defined as chicken menu items comprising at least 20% of sales. The non-competition covenant also applies to any restaurant whose method of operation or trade dress is similar to that used in the Chicken Guy system.
If a franchisee violates these post-termination non-competition provisions, they must pay liquidated damages. These damages are equal to Chicken Guy's then-current Initial Franchise Fee and 8% of the Gross Sales of the competing business. This payment continues until the expiration of the one-year non-competition period, and is subject to state law.