What constitutes a violation of the non-compete agreement that would trigger the additional remedies for breach for a Chicken Guy franchisee?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition to any other remedies or damages permitted under this Agreement, if Franchisee breaches Sections 21.C.(2)(c), 21.C.(3) or 21.C.(5) ("Covenants Against Competition") during the 1-year period following the expiration or earlier termination of this Agreement, for each restaurant business that violates those Sections, Franchisee shall pay to Chicken Guy: (1) a fee equal to Chicken Guy's then-current Initial Franchise Fee for franchised Chicken Guy!
Restaurants; and (2) 8% of the gross sales of that restaurant business until the expiration of the 1-year period following the expiration or earlier termination of this Agreement.
Franchisee acknowledges that a precise
calculation of the full extent of Chicken Guy's damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section 21.D. is reasonable. Franchisee's payment to Chicken Guy under this Section shall be in addition to any attorney's fees and other costs and expenses to which Chicken Guy is entitled pursuant to Sections 7.I. or 31.E. Franchisee acknowledges that breach of the Covenants Against Competition by Franchisee shall cause irreparable harm to Chicken Guy in addition to monetary damages and nothing in this Section 21.D. shall preclude Chicken Guy from obtaining appropriate injunctive relief to enforce the Covenants Against Competition and specific performance to enforce this Section 21.D.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to the 2025 Chicken Guy Franchise Disclosure Document, a Chicken Guy franchisee will face additional remedies for breach if they violate the Covenants Against Competition outlined in Sections 21.C.(2)(c), 21.C.(3), or 21.C.(5) of the franchise agreement during the 1-year period following the expiration or earlier termination of the agreement. These additional remedies apply for each restaurant business that violates these sections.
Specifically, for each violating restaurant business, the franchisee must pay Chicken Guy a fee equal to the then-current Initial Franchise Fee for franchised Chicken Guy restaurants. Additionally, the franchisee must pay Chicken Guy 8% of the gross sales of the violating restaurant business until the end of the 1-year post-termination period.
The FDD states that calculating the full extent of Chicken Guy's damages in such a scenario is difficult to determine precisely, and the method of calculation outlined in Section 21.D is considered reasonable. These payments are in addition to any attorney's fees and other costs Chicken Guy is entitled to under Sections 7.I. or 31.E. The document also clarifies that a breach of the Covenants Against Competition will cause irreparable harm to Chicken Guy, allowing them to seek injunctive relief to enforce the covenants and specific performance of Section 21.D, in addition to monetary damages.