What constitutes 'good cause' for Chicken Guy to repurchase a franchisee's business?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor.
This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchisee on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchisee for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
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, 'good cause' for the franchisor to repurchase a franchisee's business includes situations where the franchisee fails to pay sums owed to Chicken Guy or fails to correct any existing default in the franchise agreement at the time of a proposed transfer. This condition is outlined within the context of transfer restrictions and the franchisor's rights regarding the assets of the franchise.
This provision ensures that Chicken Guy can recover outstanding debts or enforce compliance with the franchise agreement if a franchisee attempts to transfer the business while in default. It protects Chicken Guy's financial interests and maintains the integrity of the franchise system by preventing transfers to new owners who might inherit unresolved issues.
Additionally, the FDD states that Chicken Guy has the right to acquire the assets of a franchisee for their market or appraised value if the franchisee has breached the lawful provisions of the franchise agreement and failed to cure the breach as specified in the agreement. This clause allows Chicken Guy to take control of a non-compliant franchise, ensuring that brand standards and operational procedures are maintained even if a franchisee is unable or unwilling to meet their obligations.
It is important for prospective franchisees to understand these conditions, as they define the circumstances under which Chicken Guy can intervene and potentially repurchase the business. Franchisees should carefully review the franchise agreement to fully understand their obligations and the potential consequences of failing to meet them.