What is the definition of 'Affiliated Entity' in the Chicken Guy Development Agreement?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
Execution of Franchise Agreements by Affiliated Entities.** 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 the 2025 Chicken Guy Franchise Disclosure Document, an 'Affiliated Entity' refers to a corporation, limited liability company, or general or limited partnership formed by the Developer to develop and operate a franchised Chicken Guy restaurant.
However, for Chicken Guy to permit a Franchise Agreement to be executed by an Affiliated Entity, certain conditions must be met. First, the Developer, the Development Principal, or the Developer's Continuity Group must own 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. Second, the Affiliated Entity can conduct no business other than the operation of the Franchised Restaurant. Third, the 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 must agree to assume full and unconditional liability for, and agree to perform all obligations, covenants and agreements contained in the Franchise Agreement. Finally, 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 must possess a good moral character, as determined by Chicken Guy in its sole discretion, and the Developer must provide Chicken Guy all reasonably requested information to permit Chicken Guy to make such a determination.
This definition is important for prospective Chicken Guy developers because it outlines the specific requirements and conditions under which they can form a separate legal entity to operate a franchise. It ensures that the Developer maintains significant ownership and control over the Affiliated Entity and that all parties involved are held accountable for the Franchise Agreement's obligations. This structure is common in franchising, as it allows for flexibility in business operations while protecting the franchisor's interests and brand standards.