For a Chicken Guy franchise, what minimum equity ownership interest must the Operating Principal maintain in the Franchisee?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) If Franchisee is owned by more than one individual, Franchisee shall designate and retain an individual to serve as the Operating Principal. The Operating Principal as of the date of this Agreement is identified in the attached Data Sheet. Unless waived in writing by Chicken Guy, the Operating Principal shall meet all of the following qualifications:
- (a) The Operating Principal, at all times, shall have at least a 10% equity ownership interest in Franchisee. This Section 17.G.(1)(a) shall not apply if Franchisee was a publiclyheld entity or a wholly-owned subsidiary of a publicly-held entity as of the date of the first franchise-related agreement between Franchisee and Chicken Guy.
- (b) The Operating Principal, at all times, shall be a member of the Continuity Group and, at a minimum, have full control over the day-to-day activities, including operations, of the Franchised Restaurant and those other restaurants (that are franchised by Chicken Guy or its affiliates) operated by Franchisee in the same geographic area as the Franchised Restaurant, including control over the standards of operation and financial performance.
- (c) The Operating Principal shall devote substantial time and adequate efforts to supervising the operation of the Franchised Restaurant and those other restaurants (that are franchised by Chicken Guy or its affiliates) operated by Franchisee in the same geographic area as the Franchised Restaurant and shall not engage in any other business or activity, directly or indirectly, that requires substantial management responsibility.
- (d) The Operating Principal shall successfully complete the initial manager training program (either the full initial manager training program or a modified version of the initial manager training program to meet the specific needs of the candidate, as deemed appropriate by Chicken Guy in its sole discretion) and any additional training required by Chicken Guy.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, if the franchisee is owned by more than one individual, they must designate an Operating Principal. This Operating Principal is required to maintain at least a 10% equity ownership interest in the Chicken Guy franchise.
This requirement ensures that the Operating Principal has a vested interest in the success of the franchise and is motivated to manage it effectively. The Operating Principal is responsible for the day-to-day activities, operations, and financial performance of the franchised restaurant. They must also devote substantial time and effort to supervising the restaurant's operation and cannot engage in other business activities that would interfere with their management responsibilities.
However, the 10% equity ownership requirement is waived if the franchisee was a publicly-held entity or a wholly-owned subsidiary of a publicly-held entity at the time of the initial franchise agreement with Chicken Guy. This exception recognizes that publicly-held entities have different ownership structures and governance requirements than privately-held businesses. The Operating Principal must also complete the initial manager training program and any additional training required by Chicken Guy to ensure they have the necessary skills and knowledge to operate the franchise successfully.