What happens if a Chicken Guy franchisee is not current on all obligations due to Chicken Guy and its affiliates?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
restaurants are not licensed to use the Proprietary Marks in connection with their retail sales.
Except as described in the preceding paragraph, we will not, during the term of the Development Agreement (which expires on the date that you sign the lease for the last Franchised Restaurant that you are required to develop under the Development Schedule) operate, or license others to operate, restaurants identified in whole or in part by the name and mark "Chicken Guy!" in the Development Territory, provided you are in compliance with the terms of the Development Agreement and other agreements with us or our affiliates and you are current on all obligations due to us and our affiliates. This does not prohibit us or our affiliates from: (1) operating, and licensing others to operate, during the term of the Development Agreement, restaurants identified in whole or in part by the name and mark "Chicken Guy!" at any location outside of the Development Territory; (2) operating, and licensing others to operate, after the Development Agreement terminates or expires, restaurants identified in whole or in part by the name and mark "Chicken Guy!" at any location; and (3) operating, and licensing others to operate, at any location, during or after the
Development Term, any type of restaurant other than a restaurant identified in whole or in part by the name and mark "Chicken Guy!." The restrictions above apply only to Chicken Guy and do not apply to restaurants identified in whole or in part by the name and mark "Chicken Guy!" under construction or in operation in the Development Territory as of the date of the Development Agreement. We are not required to compensate you for exercising any rights reserved to us in the Development Territory.
Source: Item 12 — TERRITORY (FDD pages 34–36)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, a franchisee's failure to remain current on all obligations to Chicken Guy and its affiliates can have significant repercussions, particularly concerning territorial rights. For franchisees with a Development Agreement, Chicken Guy will not operate or license others to operate Chicken Guy restaurants in the Development Territory as long as the franchisee is in compliance with the Development Agreement and other agreements and is current on all obligations. However, if the franchisee defaults on the Development Agreement, including failing to meet the Development Schedule, Chicken Guy may terminate the Development Agreement and the franchisee's territorial rights. This means the franchisee could lose the exclusive right to develop Chicken Guy restaurants in the agreed-upon territory.
For franchisees who sign a Franchise Agreement without a Development Agreement, maintaining compliance and staying current on all obligations to Chicken Guy and its affiliates is crucial for preserving the Protected Area around their Franchised Location. Chicken Guy and its affiliates will not operate or license others to operate Chicken Guy restaurants in the Protected Area as long as the franchisee is compliant and current on their obligations. This Protected Area offers a degree of exclusivity, but it is contingent on the franchisee meeting all financial and operational requirements.
It is important to note that even with a Development Agreement or a Protected Area under a Franchise Agreement, Chicken Guy retains several rights that could impact a franchisee's business. Chicken Guy can operate or license others to operate Chicken Guy restaurants in Nontraditional Locations within the Development Territory or Protected Area. They can also award national or regional licenses to third parties to sell Chicken Guy products in foodservice facilities identified by the third party's trademark. Additionally, Chicken Guy can develop and operate restaurants other than Chicken Guy restaurants within the territory, merchandise products using the Proprietary Marks through other channels, and sell products to other restaurants that are not licensed to use the Proprietary Marks. These retained rights mean that even if a franchisee is in good standing, Chicken Guy can still introduce competition through alternative channels or locations.
Overall, the Chicken Guy FDD emphasizes the importance of staying current on all financial and operational obligations. Failure to do so can result in the loss of territorial rights and increased competition, highlighting the need for franchisees to carefully manage their finances and adhere to the terms of their agreements with Chicken Guy.