Does the Chicken Guy franchisor specify any restrictions on how the initial franchise fee is used?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
up>nd day of March, 2021.
Notary Public
ADDITIONAL DISCLOSURE DOCUMENT DISCLOSURES REQUIRED BY THE STATE OF MARYLAND
1. Item 5: Initial Fees. The following is added at the end of Item 5 of the Disclosure Document:
Based upon our financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until we complete our pre-opening obligations under the Franchise Agreement. In addition, all development fees and initial payments owed by developers shall be deferred until the first Chicken Guy! Restaurant under the Development Agreement opens.
2. Item 17, Additional Disclosures. The following statements are added to Item 17:
The franchise agreements provide for termination upon bankruptcy. These provisions may not be enforceable under federal bankruptcy law.
Any provisions requiring you to sign a general release of claims against Chicken Guy, including upon execution of the franchise agreements, renewal or transfer, does not release any claim you may have under the Maryland Franchise Registration and Disclosure Law.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 40–46)
What This Means (2025 FDD)
According to the 2025 Chicken Guy FDD, there are specific conditions under which the initial franchise fee is restricted. For franchisees in Maryland, the Maryland Securities Commissioner has mandated a financial assurance due to Chicken Guy's financial condition. As a result, all initial fees and payments owed by franchisees in Maryland are deferred until Chicken Guy completes its pre-opening obligations as outlined in the Franchise Agreement. This means that franchisees in Maryland will not have to pay the initial franchise fee until Chicken Guy has fulfilled its responsibilities in preparing the restaurant for opening. A similar condition applies to developers in Maryland, where development fees and initial payments are deferred until the first Chicken Guy restaurant under the Development Agreement opens.
Similarly, in Washington, the issuance of Chicken Guy's permit is contingent upon maintaining a surety bond of $100,000. This bond must be maintained until all Washington franchisees have received their initial training and are open for business, or until the Administrator provides written authorization to the contrary. This condition ensures that Chicken Guy has a financial safeguard in place to protect the interests of its franchisees in Washington, guaranteeing that franchisees receive the training and support they are entitled to before fully committing their initial fees.
These restrictions on the use of initial fees are designed to protect franchisees by ensuring that Chicken Guy meets its obligations before receiving full payment. Prospective franchisees should be aware of these state-specific requirements, as they can significantly impact the timing of their initial investment and the security of their funds. It is important for potential franchisees to fully understand these conditions and how they apply to their specific situation, especially if they are planning to open a Chicken Guy franchise in Maryland or Washington.