If a proposed transfer of a Chicken Guy franchise involves non-cash consideration, what option does Chicken Guy have?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
If the proposed Transfer provides for payment of consideration other than cash or it involves intangible benefits, Chicken Guy or its designee may elect to purchase the interest proposed to be sold for the reasonable equivalent in cash.
If the parties are unable to agree within 30 days on the reasonable equivalent in cash of the non-cash part of the offer received by Franchisee or the cash value of that portion of the offer received by Franchisee relating to this Agreement, the Franchised Location, the Franchised Restaurant and those other restaurants, the amount shall be determined by two professionally certified appraisers, Franchisee selecting one and Chicken Guy or its designee selecting one.
If the amounts set by the two appraisers differ by more than 10%, the two appraisers shall select a third professionally certified appraiser who also shall determine the amount.
The average value set by the appraisers (whether two or three appraisers as the case may be) shall be conclusive and Chicken Guy or its designee may exercise its right of first refusal within 30 days after being advised in writing of the decision of the appraisers.
The cost of the appraisers shall be shared equally by the parties.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, if a proposed transfer involves consideration other than cash or intangible benefits, Chicken Guy has the option to purchase the interest proposed to be sold for a reasonable cash equivalent.
If Chicken Guy and the franchisee cannot agree on a reasonable cash equivalent for the non-cash consideration within 30 days, the determination will be made by two professionally certified appraisers, one selected by the franchisee and one by Chicken Guy. If the appraisers' valuations differ by more than 10%, a third appraiser will be selected by the first two, and the average value set by the appraisers will be conclusive. Chicken Guy can then exercise its right of first refusal within 30 days of being advised of the appraisers' decision. The cost of the appraisers will be shared equally between Chicken Guy and the franchisee.
This process ensures that Chicken Guy has the ability to maintain control over franchise transfers, even when the consideration is not straightforward. It also protects the franchisee by ensuring a fair valuation process involving independent appraisers. Prospective franchisees should be aware of these conditions and understand the potential costs associated with appraisals if a disagreement arises over the value of non-cash considerations.