Following termination or expiration of the Chicken Guy franchise agreement, for how long is the franchisee restricted from selling or leasing the Franchised Location to someone intending to operate a competing restaurant?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (5) Franchisee further covenants and agrees that, for a period of 1 year following the expiration or earlier termination of this Agreement, Franchisee will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, firm, partnership, corporation, or other entity, sell, assign, lease or transfer the Franchised Location to any person, firm, partnership, corporation, or other entity which Franchisee knows, or has reason to know, intends to operate a restaurant business at the Franchised Location that would violate Sections 21.C.(2)(c) or 21.C.(3).
Franchisee, by the terms of any conveyance selling, assigning, leasing or transferring its interest in the Franchised Location, shall include these restrictive covenants as are necessary to ensure that a restaurant business that would violate Sections 21.C.(2)(c) or 21.C.(3) is not operated at the Franchised Location for this 1 year period, and Franchisee shall take all steps necessary to ensure that these restrictive covenants become a matter of public record.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to the 2025 Chicken Guy Franchise Disclosure Document, a franchisee is restricted from selling, assigning, leasing, or transferring the franchised location to any entity that the franchisee knows intends to operate a competing restaurant business for a period of one year following the expiration or earlier termination of the franchise agreement.
To ensure compliance, the franchisee must include restrictive covenants in any conveyance documents when selling, assigning, leasing, or transferring their interest in the franchised location. These covenants are designed to prevent a competing restaurant business from operating at the location during that one-year period. The franchisee is also required to take necessary steps to ensure these restrictive covenants become a matter of public record.
This restriction is in place to protect Chicken Guy's market position and brand integrity by preventing a competitor from immediately taking over a former franchise location. This ensures that the goodwill and customer base developed by Chicken Guy are not directly transferred to a competing business. Franchisees should be aware of this obligation as they plan for the eventual sale or transfer of their business, as failing to comply could result in legal repercussions.