If a Chicken Guy franchisee holds an interest in other Chicken Guy franchised restaurants, is a cross-guarantee required?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (3) If Franchisee, any guarantor or any parent, subsidiary or affiliate of Franchisee holds any interest in other restaurants that are franchised by Chicken Guy or its affiliates, the party who owns that interest shall execute, concurrently with this Agreement, a form of cross-guarantee to Chicken Guy and its affiliates for the payment of all obligations for such restaurants, unless waived in writing by Chicken Guy in its sole discretion. For purposes of this Agreement, an affiliate of Franchisee is any company controlled, directly or indirectly, by Franchisee or Franchisee's parent or subsidiary.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, if a franchisee or any affiliate holds an interest in other Chicken Guy restaurants, a cross-guarantee is generally required. Specifically, the party who owns the interest must execute a cross-guarantee to Chicken Guy and its affiliates, ensuring the payment of all obligations for all such restaurants.
This cross-guarantee provision means that the financial health of one Chicken Guy franchise location can impact the others. If one location experiences financial difficulties, the cross-guarantee could allow Chicken Guy to seek payment from the other restaurants owned by the same franchisee or affiliate. This is a significant risk for franchisees who plan to operate multiple locations, as the performance of one restaurant can affect the financial stability of the others.
However, Chicken Guy does retain the discretion to waive this requirement in writing. A prospective franchisee should discuss this provision with Chicken Guy to understand the circumstances under which a waiver might be granted. It is important to note that the cross-guarantee applies to affiliates of the franchisee as well, meaning any company controlled by the franchisee could also be subject to this requirement.