To whom is the Chicken Guy franchisee prohibited from selling, assigning, leasing, or transferring the Franchised Location after the Franchise Agreement expires or terminates?
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 Chicken Guy's 2025 Franchise Disclosure Document, for a period of one year following the expiration or earlier termination of the Franchise Agreement, a franchisee is restricted from selling, assigning, leasing, or transferring the franchised location. This restriction applies to any person, firm, partnership, corporation, or other entity that the 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) of the agreement.
This means that if a franchisee wants to sell or transfer their location after the franchise agreement ends, they must ensure that the new operator will not run a business that competes with Chicken Guy in a way that violates the terms outlined in the specified sections of the agreement. The franchisee is responsible for including restrictive covenants in any conveyance documents to ensure compliance and must take steps to make these covenants a matter of public record.
This provision protects Chicken Guy from direct competition arising from its former franchisees. It ensures that franchisees cannot simply transfer their location to a competitor immediately after their agreement ends, potentially undermining Chicken Guy's market position. This type of restriction is common in franchising to protect the brand and its network of franchisees from unfair competition.
It is important for prospective Chicken Guy franchisees to understand these post-termination obligations, as they can impact the franchisee's ability to sell or transfer the location after the agreement expires or is terminated. Franchisees should seek legal counsel to fully understand the implications of these restrictions and ensure they comply with all requirements.