Is the minimum equity ownership requirement for the Operating Principal waived for a Chicken Guy franchisee that was a publicly-held entity on the date of the first franchise-related agreement?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) If Franchisee is owned by more than one individual, Franchisee shall designate and retain an individual to serve as the Operating Principal. The Operating Principal as of the date of this Agreement is identified in the attached Data Sheet. Unless waived in writing by Chicken Guy, the Operating Principal shall meet all of the following qualifications:
- (a) The Operating Principal, at all times, shall have at least a 10% equity ownership interest in Franchisee. This Section 17.G.(1)(a) shall not apply if Franchisee was a publiclyheld entity or a wholly-owned subsidiary of a publicly-held entity as of the date of the first franchise-related agreement between Franchisee and Chicken Guy.
- (b) The Operating Principal, at all times, shall be a member of the Continuity Group and, at a minimum, have full control over the day-to-day activities, including operations, of the Franchised Restaurant and those other restaurants (that are franchised by Chicken Guy or its affiliates) operated by Franchisee in the same geographic area as the Franchised Restaurant, including control over the standards of operation and financial performance.
- (c) The Operating Principal shall devote substantial time and adequate efforts to supervising the operation of the Franchised Restaurant and those other restaurants (that are franchised by Chicken Guy or its affiliates) operated by Franchisee in the same geographic area as the Franchised Restaurant and shall not engage in any other business or activity, directly or indirectly, that requires substantial management responsibility.
- (d) The Operating Principal shall successfully complete the initial manager training program (either the full initial manager training program or a modified version of the initial manager training program to meet the specific needs of the candidate, as deemed appropriate by Chicken Guy in its sole discretion) and any additional training required by Chicken Guy.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the requirement for the Operating Principal to have at least a 10% equity ownership interest in the franchisee is waived if the franchisee was a publicly-held entity or a wholly-owned subsidiary of a publicly-held entity on the date of the first franchise-related agreement between the franchisee and Chicken Guy.
This waiver provides significant flexibility for publicly-held entities or their subsidiaries becoming Chicken Guy franchisees. It removes the need for a specific individual acting as the Operating Principal to hold a minimum equity stake, which might otherwise conflict with the ownership structure and regulatory requirements of publicly-held companies.
However, even with the equity ownership waiver, the Operating Principal must still meet other qualifications. They must be part of the Continuity Group, have full control over the day-to-day operations of the franchised restaurant, devote substantial time and effort to supervising the restaurant's operations, and successfully complete the required training programs. This ensures that even without a minimum equity stake, the Operating Principal is fully engaged and qualified to manage the Chicken Guy franchise effectively.