What is the duration of the post-termination non-competition covenant for a Chicken Guy franchise?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN FRANCHISE AGREEMENT | SUMMARY |
|---|---|---|
| r. Non-competition covenants after the franchise is terminated or expires | Section 21.C. | No activity as described in q. above for one year within the Protected Area and within two miles of any then-existing Chicken Guy! Restaurant. If you violate the post-termination non-competition provisions, you must pay liquidated damages equal to our then-current Initial Franchise Fee and 8% of the Gross Sales of the competing business until the expiration of the non- competition period (subject to state law). |
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, if the franchise is terminated or expires, the franchisee is subject to a non-competition covenant. This covenant restricts the franchisee from engaging in activities similar to those of Chicken Guy for one year.
This restriction applies within the franchisee's Protected Area and within two miles of any then-existing Chicken Guy restaurant. Should a franchisee violate these post-termination non-competition terms, they are liable for liquidated damages. These damages are equivalent to Chicken Guy's current Initial Franchise Fee plus 8% of the gross sales of the competing business. This financial penalty remains in effect until the non-competition period concludes, although state laws may affect the enforceability of these provisions.
It is important to note that the FDD also includes additional disclosures for franchisees in certain states like California and Minnesota, which may impact the enforceability of non-competition agreements and other clauses. For example, California law may deem certain non-compete provisions unenforceable. Similarly, Minnesota law includes specific regulations regarding termination notices and franchisee rights, potentially affecting the application of the non-competition covenant in those states.