For an Affiliated Entity to operate a Chicken Guy franchise, what business activities are they permitted to conduct?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
At Developer's request, Chicken Guy will permit the Franchise Agreement for any Franchised Restaurant in the Development Territory to be executed by a corporation, a limited liability company or general or limited partnership formed by Developer to develop and operate the Franchised Restaurant ("Affiliated Entity"), provided all of the following conditions are met: (1) Developer, the Development Principal (defined in Section 8.G.) or Developer's Continuity Group (defined in Section 8.E.) owns at least 51% of the voting securities of a corporate Affiliated Entity, at least 51% of the membership interests in a limited liability company Affiliated Entity or all of the general partnership interests of a partnership Affiliated Entity; (2) the Affiliated Entity conducts no business other than the operation of the Franchised Restaurant; (3) Developer, the Development Principal, the members of Developer's Continuity Group and all holders of a legal or beneficial interest in Developer of 10% or more ("10% Owner(s)") agree to assume full and unconditional liability for, and agree to perform all obligations, covenants and agreements contained in the Franchise Agreement; and (4) all owners of voting securities of a corporate Affiliated Entity, membership interests of a limited liability company Affiliated Entity or partnership interests of a partnership Affiliated Entity possess a good moral character, as determined by Chicken Guy in its sole discretion, and Developer provides Chicken Guy all reasonably requested information to permit Chicken Guy to make such a determination.
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, an Affiliated Entity formed by a developer to operate a franchised restaurant is restricted to conducting only the business of operating the Chicken Guy franchise. This means the Affiliated Entity cannot engage in any other business activities besides running the Chicken Guy restaurant.
This restriction is in place to ensure that the Affiliated Entity's focus remains solely on the Chicken Guy franchise, maintaining the brand's standards and operational consistency. The developer, or a related party, must maintain at least 51% ownership in the Affiliated Entity. Additionally, the developer and other stakeholders must agree to be fully liable for all obligations under the Franchise Agreement.
This requirement helps Chicken Guy maintain control over its brand and ensures that franchisees are dedicated to the success of their Chicken Guy restaurants. It also protects Chicken Guy by ensuring that the individuals ultimately responsible for the franchise's performance are fully accountable for its obligations. This arrangement is fairly common in franchising, as franchisors typically want to ensure that franchisees are focused on their brand and that the financial responsibility remains with the original franchisee, even if an entity is created to operate the restaurant.