What is the liquidated damages amount for violating the post-termination non-competition agreement for a Chicken Guy franchise?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN FRANCHISE AGREEMENT | SUMMARY |
|---|---|---|
| r. Non-competition covenants after the franchise is terminated or expires | Section 21.C. | No activity as described in q. above for one year within the Protected Area and within two miles of any then-existing Chicken Guy! Restaurant. If you violate the post-termination non-competition provisions, you must pay liquidated damages equal to our then-current Initial Franchise Fee and 8% of the Gross Sales of the competing business until the expiration of the non- competition period (subject to state law). |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 40–46)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, if a franchisee violates the post-termination non-competition provisions, they must pay liquidated damages. This amount is equal to Chicken Guy's then-current Initial Franchise Fee, plus 8% of the gross sales of the competing business. This payment continues until the expiration of the non-competition period, and is subject to state law.
This means that if a former Chicken Guy franchisee opens a competing business or becomes involved with a competitor within the restricted area and time frame (one year within the Protected Area and within two miles of any then-existing Chicken Guy! Restaurant), they will be obligated to pay this liquidated damages amount. The initial franchise fee can vary, so the exact amount will depend on what the fee is at the time of the violation. The 8% of gross sales adds an ongoing penalty based on the competing business's performance.
It is important to note the phrase "subject to state law" which appears multiple times in the quoted text. For example, the FDD includes an addendum for California franchisees noting that the non-compete and liquidated damages clauses may not be enforceable under California law. A prospective franchisee should consult with a legal professional to understand the specific implications and enforceability of these clauses in their state.