What does the franchisee covenant regarding suing Chicken Guy for advertising fund liabilities?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (2) Franchisee understands and acknowledges that each fund is intended to enhance recognition of the Proprietary Marks and patronage of Chicken Guy! Restaurants. Chicken Guy will endeavor to utilize each fund to develop advertising and marketing materials and programs and to place advertising that will benefit the System and all Chicken Guy! Restaurants contributing to the fund. Franchisee agrees, however, that Chicken Guy is not liable to Franchisee, and Franchisee forever covenants not to sue and holds Chicken Guy harmless of any liability or obligation to ensure that expenditures by each fund in or affecting any geographic area (including the Franchised Location) are proportionate or equivalent to the contributions to the fund by Chicken Guy! Restaurants operating in that geographic area, or that any Chicken Guy! Restaurant will benefit directly or in proportion to its contribution to each fund from the development of advertising and marketing materials or the placement of advertising. Except as expressly provided in this Section 9, neither Chicken Guy nor its designee assumes any direct or indirect liability to Franchisee with respect to the maintenance, direction or administration of each fund.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, franchisees acknowledge that the advertising funds are intended to enhance the recognition of Chicken Guy restaurants. While Chicken Guy aims to use these funds to develop advertising and marketing programs that benefit the entire system, the franchisee agrees that Chicken Guy is not liable to the franchisee for how the advertising funds are spent.
Specifically, the franchisee covenants not to sue Chicken Guy and agrees to hold Chicken Guy harmless from any liability or obligation. This includes ensuring that expenditures by each fund in any geographic area, including the franchised location, are proportionate or equivalent to the contributions made by Chicken Guy restaurants operating in that area. It also covers ensuring that any Chicken Guy restaurant benefits directly or in proportion to its contribution to each fund from the advertising and marketing materials developed or the placement of advertising.
This means that as a Chicken Guy franchisee, you cannot take legal action against Chicken Guy if you believe your restaurant is not receiving a fair share of advertising benefits relative to your contributions to the advertising fund. This is a significant point for prospective franchisees to consider, as it limits their recourse if they feel the advertising funds are not being used effectively in their specific market.
This type of clause is relatively common in franchise agreements, as franchisors often want to maintain control over advertising and marketing strategies without the risk of legal challenges from individual franchisees who may have differing opinions on how the funds should be allocated. However, franchisees should carefully evaluate the potential implications of this covenant and consider whether they are comfortable relinquishing their right to sue over advertising fund matters.