Can a Chicken Guy franchisee pledge their franchise without Chicken Guy's consent?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Chicken Guy has entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly controls Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any interest in Franchisee, this Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to Franchisee's operations under this Agreement (collectively "Transfer") without the prior written consent of Chicken Guy, which consent shall not be unreasonably withheld.
- (2) Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of Chicken Guy shall be null and void and shall constitute a material breach of this Agreement, for which Chicken Guy may terminate this Agreement without providing Franchisee an opportunity to cure the breach.
- B. Transfer Considerations. Franchisee shall advise Chicken Guy in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, and submit a copy of all contracts and all other agreements or proposals, and all other information requested by Chicken Guy, relating to the proposed Transfer. If Chicken Guy does not exercise its right of first refusal, the decision as to whether or not to approve a proposed Transfer shall be made by Chicken Guy in its reasonable business discretion and shall include numerous factors deemed relevant by Chicken Guy. These factors may include, but will not be limited to, the following:
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, franchisees are restricted from pledging their franchise without prior written consent from Chicken Guy. Chicken Guy emphasizes that the rights and duties outlined in the franchise agreement are personal to the franchisee, and the company has entered into the agreement based on the franchisee's skills, financial capacity, character, experience, and ability to operate a high-quality foodservice operation.
This means that a franchisee cannot sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any interest in the franchise agreement, the franchise, the franchised restaurant, its assets, the franchised location, or any other assets related to the franchisee's operations without obtaining Chicken Guy's prior written consent. This requirement extends not only to the franchisee but also to any successors or entities that control the franchisee.
Any transfer that occurs without Chicken Guy's prior written consent is considered null and void and constitutes a material breach of the agreement. This breach can lead to the termination of the franchise agreement without an opportunity for the franchisee to rectify the situation. This provision allows Chicken Guy to maintain control over who operates a Chicken Guy franchise and ensures that all franchisees meet their standards.
Before any proposed transfer, the franchisee must inform Chicken Guy in writing and provide a franchise application for the proposed transferee, copies of all related contracts, agreements, proposals, and any other information requested by Chicken Guy. Chicken Guy has the right of first refusal, and if they choose not to exercise it, they will still evaluate the proposed transfer based on various factors relevant to their business discretion. These factors may include considerations such as the transferee's qualifications and experience.