What activities are prohibited by the non-competition covenant after termination or expiration of a Chicken Guy franchise?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN FRANCHISE AGREEMENT | SUMMARY |
|---|---|---|
| q. Non-competition covenants during the term of the franchise | Section 21.C. | No diversion of any business or customer to any competitor; no interest in any restaurant business that that features chicken as a primary menu item (i.e., sales of chicken menu items comprise at least 20% of sales) or whose method of operation or trade dress is similar to that used in the System (subject to state law). |
| r. Non-competition covenants after the franchise is terminated or expires | Section 21.C. | No activity as described in q. above for one year within the Protected Area 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). |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 40–46)
What This Means (2025 FDD)
According to the 2025 Chicken Guy Franchise Disclosure Document, after the termination or expiration of a franchise, a franchisee is restricted from engaging in activities described in section q of the franchise agreement for one year. This restriction applies within the franchisee's Protected Area and within two miles of any existing Chicken Guy restaurant.
Section q of the Chicken Guy franchise agreement prohibits franchisees from diverting business or customers to any competitor. It also restricts franchisees from 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, or any restaurant whose method of operation or trade dress is similar to 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 until the non-competition period expires. It is important to note that these non-competition provisions are subject to state law, which may affect their enforceability and specific terms.