What are the geographic limitations of the post-termination non-competition covenant for a Chicken Guy franchise?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN FRANCHISE AGREEMENT | SUMMARY |
|---|---|---|
| r. Non-competition covenants after the franchise is terminated or expires | Section 21.C. | No activity as described in q. above for one year within the Protected Area and within two miles of any then-existing Chicken Guy! Restaurant. If you violate the post-termination non-competition provisions, you must pay liquidated damages equal to our then-current Initial Franchise Fee and 8% of the Gross Sales of the competing business until the expiration of the non- competition period (subject to state 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 Franchise Disclosure Document, if the franchise is terminated or expires, the franchisee is restricted from engaging in activities similar to those during the franchise term for one year. This restriction applies within the franchisee's Protected Area and within two miles of any existing Chicken Guy restaurant. This post-termination covenant is subject to state law.
Specifically, the non-competition covenant restricts a franchisee from diverting business or customers to a competitor or having an interest in a restaurant business that features chicken as a primary menu item (at least 20% of sales) or has a similar method of operation or trade dress to the Chicken Guy system.
If a franchisee violates the post-termination non-competition provisions, they must pay liquidated damages. These damages are equal to Chicken Guy's then-current Initial Franchise Fee and 8% of the Gross Sales of the competing business until the non-competition period expires. Again, these stipulations are subject to state law, meaning the enforceability and specific terms may vary depending on the franchisee's location.