For how long after the Chicken Guy Franchise Agreement expires or terminates is the franchisee restricted from engaging in competitive businesses?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
(2) Accordingly, Franchisee covenants and agrees that during the term of this Agreement, and for a continuous period of 1 year following its expiration or earlier termination, Franchisee shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with, any person, firm, partnership, corporation, or other entity:
(a) Divert or attempt to divert any business or customer, or potential business or customer, of any restaurant franchised or operated by Chicken Guy or its affiliates to any competitor, by direct or indirect inducement or otherwise.
(b) Own, maintain, operate, engage in, advise, help, make loans to, or have any interest in, either directly or indirectly, any restaurant business: (i) that features chicken as a primary menu item (i.e., sales of chicken menu items comprise at least 20% of sales); or (ii) whose method of operation or trade dress is similar to that employed in the System.
**D.
Additional Remedies for Breach.** In addition to any other remedies or damages permitted under this Agreement, if Franchisee breaches Sections 21.C.(2)(c), 21.C.(3) or 21.C.(5) ("Covenants Against Competition") during the 1-year period following the expiration or earlier termination of this Agreement, for each restaurant business that violates those Sections, Franchisee shall pay to Chicken Guy: (1) a fee equal to Chicken Guy's then-current Initial Franchise Fee for franchised Chicken Guy!
Restaurants; and (2) 8% of the gross sales of that restaurant business until the expiration of the 1-year period following the expiration or earlier termination of this Agreement.
Franchisee acknowledges that a precise
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, franchisees face certain restrictions both during the term of the Franchise Agreement and for a period after it expires or terminates. Specifically, for one year following the expiration or termination of the agreement, franchisees are restricted from engaging in competitive business activities.
This post-term restriction prevents a former Chicken Guy franchisee from directly or indirectly owning, operating, or having any interest in a restaurant business that features chicken as a primary menu item (at least 20% of sales) or whose operation or trade dress is similar to the Chicken Guy system. The restriction applies to prevent franchisees from diverting business or customers from Chicken Guy to a competitor. The non-compete extends to preventing the franchisee from selling or transferring the franchised location to someone who would operate a competing restaurant business at that location.
If a franchisee violates these non-compete clauses, Chicken Guy can impose significant financial penalties. For each competing restaurant, the franchisee must pay Chicken Guy the then-current initial franchise fee and 8% of the restaurant's gross sales until the end of the one-year restriction period. These payments are in addition to any legal fees Chicken Guy incurs to enforce the agreement. Chicken Guy can also seek injunctive relief to stop the franchisee from violating the non-compete agreement.
These restrictions are designed to protect Chicken Guy's trade secrets, confidential information, and the integrity of its system. Prospective franchisees should carefully consider these limitations and how they might affect their future business opportunities after leaving the Chicken Guy system.