Is Chicken Guy liable to franchisees if advertising expenditures are not proportionate to contributions from Chicken Guy restaurants in a specific geographic area?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (2) Franchisee understands and acknowledges that each fund is intended to enhance recognition of the Proprietary Marks and patronage of Chicken Guy! Restaurants. Chicken Guy will endeavor to utilize each fund to develop advertising and marketing materials and programs and to place advertising that will benefit the System and all Chicken Guy! Restaurants contributing to the fund. Franchisee agrees, however, that Chicken Guy is not liable to Franchisee, and Franchisee forever covenants not to sue and holds Chicken Guy harmless of any liability or obligation to ensure that expenditures by each fund in or affecting any geographic area (including the Franchised Location) are proportionate or equivalent to the contributions to the fund by Chicken Guy! Restaurants operating in that geographic area, or that any Chicken Guy! Restaurant will benefit directly or in proportion to its contribution to each fund from the development of advertising and marketing materials or the placement of advertising. Except as expressly provided in this Section 9, neither Chicken Guy nor its designee assumes any direct or indirect liability to Franchisee with respect to the maintenance, direction or administration of each fund.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, Chicken Guy is not liable to franchisees regarding the proportionality of advertising expenditures. The franchise agreement stipulates that Chicken Guy will endeavor to use advertising funds to benefit all Chicken Guy restaurants. However, franchisees explicitly agree that Chicken Guy has no liability to ensure advertising expenditures in any geographic area are proportionate to the contributions from Chicken Guy restaurants operating in that area.
This means a Chicken Guy franchisee cannot sue Chicken Guy or hold them responsible if the advertising and marketing efforts in their specific location do not directly correlate with or match the amount of money that their restaurant contributes to the advertising fund. The franchisee also acknowledges that there is no guarantee that their restaurant will directly benefit from the advertising in proportion to their contribution.
This clause protects Chicken Guy from potential legal action by franchisees who might feel shortchanged by the allocation of advertising funds. It also gives Chicken Guy the flexibility to direct advertising resources where they believe it will have the greatest impact on the brand as a whole, even if that means some locations benefit more than others. Prospective franchisees should consider this carefully, as they will have limited control over how advertising funds are spent and no recourse if they feel their area is not receiving its fair share.