What discretion does Chicken Guy have in approving or disapproving a proposed Transfer?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
iness skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly controls Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any interest in Franchisee, this Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to Franchisee's operations under this Agreement (collectively "Transfer") without the prior written consent of Chicken Guy, which consent shall not be unreasonably withheld.
(2) Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of Chicken Guy shall be null and void and shall constitute a material breach of this Agreement, for which Chicken Guy may terminate this Agreement without providing Franchisee an opportunity to cure the breach.
B. Transfer Considerations. Franchisee shall advise Chicken Guy in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, and submit a copy of all contracts and all other agreements or proposals, and all other information requested by Chicken Guy, relating to the proposed Transfer. If Chicken Guy does not exercise its right of first refusal, the decision as to whether or not to approve a proposed Transfer shall be made by Chicken Guy in its reasonable business discretion and shall include numerous factors deemed relevant by Chicken Guy. These factors may include, but will not be limited to, the following:
(1) The proposed transferee (and if the proposed transferee is other than an individual, such owners of an interest in the transferee as Chicken Guy may request) must demonstrate that it has extensive experience in high quality restaurant operations of a character and complexity similar to the restaurants franchised by Chicken Guy or its affiliates; meets the managerial, operational, experience, quality, character and business standards for a franchisee promulgated by Chicken Guy from time to time; possesses a good character, business reputation and credit rating; has an organization whose management culture is compatible with Chicken Guy's management culture; and has adequate financial resources and working capital to meet Franchisee's obligations under this Agreement.
(2) The sales price shall not be so high, in Chicken Guy's reasonable judgment, as to jeopardize the ability of the transferee to develop, maintain, operate and promote the Franchised Restaurant and meet financial obligations to Chicken Guy, third party suppliers and creditors. Chicken Guy's decision with respect to a proposed Transfer shall not create any liability on the part of Chicken Guy: (a) to the transferee, if Chicken Guy approves the Transfer and the transferee experiences financial difficulties; or (b) to Franchisee or the proposed transferee, if Chicken Guy disapproves the Transfer pursuant to this Section 19 or for other legitimate business purposes. Chicken Guy, without any liability to Franchisee or the proposed transferee, has the right, in its reasonable business discretion, to communicate and counsel with Franchisee and the proposed transferee regarding any aspect of the proposed Transfer.
(3) All of Franchisee's accrued monetary obligations to Chicken Guy and its affiliates (whether arising under this Agreement or otherwise) and all other outstanding obligations related to the Franchised Restaurant (including, but not limited to, bills from suppliers, taxes, judgments and any required governmental reports, returns, affidavits or bonds) have been satisfied or, in the reasonable judgment of Chicken Guy, adequately provided for. Chicken Guy reserves the right to require that a reasonable sum of money be placed in escrow to ensure that all of these obligations are satisfied.
(4) Franchisee is not then in material default of any provision of this Agreement or any other agreement between Franchisee and Chicken Guy or its affiliates, is not in default beyond the applicable cure period under any real estate lease, equipment lease or financing instrument relating to the Franchised Restaurant and is not in default beyond the applicable cure period with any vendor or supplier to the Franchised Restaurant.
(5) Franchisee, all individuals who executed this Agreement and all guarantors of Franchisee's obligations must execute a general release and a covenant not to sue, in a form satisfactory to Chicken Guy, of any and all claims against Chicken Guy and its affiliates and their respective past and present officers, directors, shareholders, agents and employees, in their corporate and individual capacities, including, without limitation, claims arising under federal, state and local laws, rules and ordinances, and claims arising out of, or relating to, this Agreement, any other agreements between Franchisee and Chicken Guy or its affiliates and Franchisee's operation of the Franchised Restaurant and all other restaurants operated by Franchisee that are franchised by Chicken Guy or its affiliates.
(6) Unless waived by Chicken Guy in its reasonable business discretion, the transferee and those employees of the transferee designated by Chicken Guy shall complete the training provided in Sections 12.A.-B.
**C.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the decision to approve or disapprove a proposed transfer of a franchise is made by Chicken Guy in its reasonable business discretion, considering numerous factors deemed relevant by Chicken Guy. These factors include, but are not limited to, whether the proposed transferee has extensive experience in high quality restaurant operations similar to those franchised by Chicken Guy, meets Chicken Guy's standards for a franchisee, possesses a good character, business reputation, and credit rating, has a compatible management culture, and has adequate financial resources.
Chicken Guy also considers whether the sales price jeopardizes the transferee's ability to operate the restaurant and meet financial obligations. Additionally, all of the franchisee's accrued monetary obligations to Chicken Guy and its affiliates must be satisfied or adequately provided for. The franchisee must not be in material default of any agreement with Chicken Guy or in default beyond the cure period under any lease or financing instrument related to the restaurant. Furthermore, the franchisee, all individuals who executed the agreement, and all guarantors must execute a general release and a covenant not to sue Chicken Guy. Unless waived by Chicken Guy, the transferee and designated employees must complete the required training.
Chicken Guy's decision regarding a proposed transfer does not create any liability on the part of Chicken Guy to the transferee if the transfer is approved and the transferee experiences financial difficulties, or to the franchisee or proposed transferee if the transfer is disapproved for legitimate business purposes. Chicken Guy has the right to communicate and counsel with the franchisee and the proposed transferee regarding any aspect of the proposed transfer, without any liability to either party. Before a transfer can be effective, the transferor must pay Chicken Guy a nonrefundable transfer fee of $10,000. Franchisee must also provide Chicken Guy written notice of its intent to undertake the Transfer at least 30 days prior to the effective date of the Transfer, together with documents demonstrating that the Transfer meets the requirements of this Section. At the time of Franchisee's notice to Chicken Guy, Franchisee shall not be in default of this Agreement or any other agreements between Franchisee and Chicken Guy or its affiliates.
This level of discretion and the numerous conditions Chicken Guy imposes for transfer approval highlight the importance of carefully vetting potential buyers and ensuring full compliance with all contractual obligations before attempting to transfer a franchise. The $10,000 transfer fee is a notable cost that the seller must pay regardless of the outcome of the transfer application. The extensive list of requirements aims to protect the Chicken Guy brand and ensure that any new franchisee meets their standards.