How is noncompliance with the competitive restrictions treated regarding the 1-year obligation after the Chicken Guy Franchise Agreement expires or terminates?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
If, at any time during the 1-year period following expiration or earlier termination of this Agreement, Franchisee fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Franchisee's satisfaction of the 1-year obligation.
- **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
calculation of the full extent of Chicken Guy's damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section 21.D. is reasonable. Franchisee's payment to Chicken Guy under this Section shall be in addition to any attorney's fees and other costs and expenses to which Chicken Guy is entitled pursuant to Sections 7.I. or 31.E. Franchisee acknowledges that breach of the Covenants Against Competition by Franchisee shall cause irreparable harm to Chicken Guy in addition to monetary damages and nothing in this Section 21.D. shall preclude Chicken Guy from obtaining appropriate injunctive relief to enforce the Covenants Against Competition and specific performance to enforce this Section 21.D.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to the 2025 Chicken Guy Franchise Disclosure Document, if a franchisee fails to comply with the competitive restrictions during the 1-year period following the expiration or termination of the Franchise Agreement, the period of noncompliance will not be credited toward fulfilling the 1-year obligation. This means the franchisee must remain in compliance for a full year, excluding any time spent in violation of the restrictions.
In addition to the time extension for non-compliance, Chicken Guy outlines further remedies for breaches of the Covenants Against Competition (Sections 21.C.(2)(c), 21.C.(3) or 21.C.(5)). For each restaurant business that violates these sections, the franchisee must pay Chicken Guy a fee equal to the then-current Initial Franchise Fee for franchised Chicken Guy Restaurants, and 8% of the gross sales of that restaurant business until the expiration of the 1-year period following the expiration or earlier termination of the Agreement.
These payments are in addition to any attorney's fees and other costs Chicken Guy is entitled to. The FDD states that a breach of these covenants will cause irreparable harm to Chicken Guy, entitling them to seek injunctive relief and specific performance to enforce these covenants. This could involve court orders to stop the franchisee's competitive activities.
This clause is designed to protect Chicken Guy's business interests and prevent former franchisees from unfairly competing using knowledge gained during their franchise term. Prospective franchisees should carefully consider these post-termination restrictions and the potential financial and legal consequences of non-compliance.