What are the financial consequences of violating the post-termination non-competition provisions 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 a franchisee violates the post-termination non-competition provisions, they must pay liquidated damages. These damages are equal to Chicken Guy's then-current Initial Franchise Fee, plus 8% of the Gross Sales of the competing business. This payment obligation continues until the expiration of the non-competition period, and is subject to state law.
The non-competition covenant restricts the franchisee from engaging in activities similar to those prohibited during the franchise term. Specifically, it prevents involvement in any business that diverts customers from Chicken Guy, or any restaurant business where chicken is a primary menu item (at least 20% of sales) or that has a similar method of operation or trade dress to the Chicken Guy system.
The restriction applies for one year after termination or expiration of the franchise. The geographic scope includes the franchisee's Protected Area and within two miles of any then-existing Chicken Guy restaurant. Prospective franchisees should carefully consider these restrictions and potential financial consequences, as they could significantly impact their ability to pursue other business ventures after leaving the Chicken Guy system.