What happens if the Developer is in material default of any agreement with Chicken Guy?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
urrence of any of the following events:
(1) Developer fails to obtain Chicken Guy's written approval of a site by the applicable site approval date listed in the attached Data Sheet.
(2) At any time during the Development Term, Developer fails to have open and operating the number of Franchised Restaurants required by the Development Schedule.
(3) Developer begins construction of a Franchised Restaurant before Developer has received a fully-executed Franchise Agreement for that location.
(4) Developer is insolvent or is unable to pay its creditors (including Chicken Guy); files a petition in bankruptcy, an arrangement for the benefit of creditors or a petition for reorganization; there is filed against Developer a petition in bankruptcy, an arrangement for the benefit of creditors or petition for reorganization, which is not dismissed within 60 days of the filing; Developer makes an assignment for the benefit of creditors; or a receiver or trustee is appointed for Developer and not dismissed within 60 days of the appointment.
(5) Execution is levied against Developer's business or property; suit to foreclose any lien or mortgage against the premises or equipment of any Franchised Restaurant developed hereunder is instituted against Developer and is not dismissed within 60 days; or the real or personal property of any Franchised Restaurant developed hereunder shall be sold after levy thereupon by any sheriff, marshal or constable.
- (6) There is a material breach by Developer of any obligation under Section 12.
(7) Any Transfer that requires Chicken Guy's prior written approval occurs without Developer having obtained that prior written approval.
(8) Chicken Guy discovers that Developer made a material misrepresentation or omitted a material fact in the information that was furnished to Chicken Guy in connection with its decision to enter into this Agreement.
(9) Developer knowingly falsifies any report required to be furnished Chicken Guy or makes any material misrepresentation in its dealings with Chicken Guy or fails to disclose any material facts to Chicken Guy.
(10) Developer, the Development Principal, any stockholder, member, partner, director or officer of Developer, any member of the Continuity Group or any 10% Owner is convicted of, or pleads no contest to, a felony charge, a crime involving moral turpitude or any other crime or offense that is reasonably likely, in the sole opinion of Chicken Guy, to adversely affect Chicken Guy, its affiliates or the System.
(11) Developer, the Development Principal, any member of the Continuity Group or any 10% Owner remains in default beyond the applicable cure period: (a) under any other agreement with Chicken Guy or its affiliates; (b) under any real estate lease, equipment lease, or financing instrument relating to a Franchised Restaurant; or (c) with any vendor or supplier to a Franchised Restaurant; provided that if the default is not by Developer, Developer is given written notice of the default and 30 days to cure said default.
(12) There is a material breach by Developer of any representation or warranty set forth in Section 24.G.-H.
(13) Developer fails or refuses to comply with any other provision of this Agreement or any requirement of the System and does not correct the failure or refusal within 30 days (10 days for monetary defaults) after receiving written notice of default.
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, several consequences can arise if a Developer materially defaults on any agreement with Chicken Guy. Chicken Guy may terminate the agreement if the Developer, Development Principal, any member of the Continuity Group or any 10% Owner remains in default beyond the applicable cure period under any other agreement with Chicken Guy or its affiliates.
Additionally, if the Developer fails or refuses to comply with any other provision of the agreement or any requirement of the Chicken Guy system and does not correct the failure or refusal within 30 days (10 days for monetary defaults) after receiving written notice of default, it constitutes a default. However, for non-monetary defaults, if correction cannot be completed within 30 days, the Developer has additional time, not exceeding 90 days, provided they begin corrective actions during the initial 30-day period and diligently pursue them. If a Developer has received two or more default notices within a 12-month period, Chicken Guy can issue a termination notice without an opportunity to remedy the default upon the next default within that same 12-month period.
Upon termination or expiration of the agreement, the Developer loses the right to develop or open further franchised restaurants in the Development Territory, although they can complete and open a restaurant for which a Franchise Agreement has been fully executed. The exclusive rights in the Development Territory terminate, allowing Chicken Guy to operate or license others to operate restaurants there. The Developer must also return the Manual and all other materials furnished by Chicken Guy, continue to abide by covenants, and immediately pay all sums due to Chicken Guy. Chicken Guy retains the Development Fee.
These terms highlight the importance of adhering to all agreements and standards set by Chicken Guy. A prospective franchisee should carefully review all agreements and ensure they can meet the obligations to avoid potential termination and loss of development rights. It is also important to note the conditions for curing defaults and the implications of multiple default notices within a short period.