If the Chicken Guy franchisee is a partnership, what must the written partnership agreement provide regarding ownership interests?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is a partnership, its written partnership agreement shall provide that ownership of an interest in the partnership is held subject to, and that further assignment or transfer is subject to, all restrictions imposed on assignment by this Agreement.
- **E.
Continuity Group.** If Franchisee is a corporation, a limited liability company or a partnership, the attached Data Sheet lists those persons whom Chicken Guy and Franchisee have designated as Franchisee's "Continuity Group." In the event of any change in the Continuity Group or in the ownership interests of any member of the Continuity Group, Franchisee shall execute addenda to the attached Data Sheet to reflect the change.
If Franchisee is a corporation, the Continuity Group shall at all times own at least 51% of the voting securities of Franchisee; if Franchisee is a limited liability company, the Continuity Group shall at all times own at least 51% of the membership interests in Franchisee; and if Franchisee is a partnership, the Continuity Group shall at all times have at least a 51% interest in the operating profits and losses and at least a 51% ownership interest in Franchisee.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, if the franchisee is a partnership, the written partnership agreement must state that ownership of an interest in the partnership is held subject to all restrictions imposed on assignment by the Franchise Agreement. This means that any transfer or assignment of partnership interests is subject to Chicken Guy's approval and the conditions outlined in the agreement.
This requirement ensures that Chicken Guy maintains control over who becomes a partner in a franchise location and that all partners are aware of and bound by the terms of the Franchise Agreement. It also helps Chicken Guy protect its brand and maintain consistency across all franchise locations.
Furthermore, if the franchisee partnership has a designated "Continuity Group," the agreement must ensure that this group maintains at least a 51% interest in the operating profits and losses, as well as at least a 51% ownership interest in the franchise. This ensures stability and continuity in the franchise's management and operations. Prospective franchisees should carefully review the ownership transfer restrictions and Continuity Group requirements with Chicken Guy before entering into a franchise agreement.