What is Chicken Guy's right regarding a proposed transfer before making a decision?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
al may be conditioned, on the written agreement by the secured party that, in the event of a default by Franchisee under any agreement related to the security interest, Chicken Guy shall have the right and option (but not the obligation) to purchase the rights of the secured party upon payment of all sums then due to the secured party.
- I. Offerings by Franchisee. Securities or partnership interests in Franchisee may be sold, by private or public offering, only with Chicken Guy's prior written consent (whether or not Chicken Guy's consent is required under any other provision of this Section), which consent shall not be unreasonably withheld. In addition to the requirements of Section 19.B., prior to the time that any public offering or private placement of securities or partnership interests in Franchisee is made available to potential investors, Franchisee, at its expense, shall deliver to Chicken Guy a copy of the offering documents. Franchisee, at its expense, also shall deliver to Chicken Guy an opinion of Franchisee's legal counsel and an opinion of one other legal counsel selected by Chicken Guy (both of which shall be addressed to Chicken Guy and in a form acceptable to Chicken Guy) that the offering documents properly use the Proprietary Marks and accurately describe Franchisee's relationship with Chicken Guy and/or its affiliates. The indemnification provisions of Section 26 shall also include any losses or expenses incurred by Chicken Guy and/or its affiliates in connection with any statements made by or on behalf of Franchisee in any public offering or private placement of Franchisee's securities.
J. Chicken Guy's Right of First Refusal.
(1) If any party holding any interest in Franchisee or in this Agreement receives a bona fide offer (as determined by Chicken Guy in its reasonable discretion) from a third party or otherwise desires to undertake any Transfer that would require Chicken Guy's approval (other than a Transfer for convenience of ownership pursuant to Section 19.D. or a sale of ownership interests in Franchisee to a spouse, parent, adult child or adult sibling), it shall notify Chicken Guy in writing of the terms of the proposed Transfer, and shall provide such information and documentation relating to the proposed Transfer as Chicken Guy may reasonably require. Chicken Guy or its designee may elect to purchase the interest that the seller proposes to Transfer any time within 30 days after receipt of written notification, and all documents and other information required by Section 19.B., by sending written notice to the seller that Chicken Guy or its designee intends to purchase the seller's interest on the same financial terms and conditions offered by the third party (except that Chicken Guy or its designee shall not be obligated to pay
any finder's or broker's fees). In purchasing the interest, Chicken Guy or its designee shall be entitled to set off any monies owed to Chicken Guy or its affiliates by Franchisee and Chicken Guy or its designee shall be entitled to all customary representations and warranties that the assets are free and clear (or, if not, accurate and complete disclosure) as to: (a) ownership, condition and title; (b) liens and encumbrances; (c) environmental and hazardous substances; and (d) validity of contracts inuring to the purchaser or affecting the assets, whether contingent or otherwise.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, Chicken Guy has the right of first refusal if a franchisee receives a legitimate offer from a third party to transfer their interest in the franchise. Chicken Guy can elect to purchase the interest within 30 days of receiving written notification of the proposed transfer's terms. To make an informed decision, Chicken Guy requires the franchisee to provide all information and documentation related to the proposed transfer.
Chicken Guy can also evaluate various factors to approve or disapprove a proposed transfer in its reasonable business discretion if it does not exercise its right of first refusal. These factors include the proposed transferee's experience in high-quality restaurant operations, managerial and operational standards, character, business reputation, credit rating, compatibility with Chicken Guy's management culture, and adequate financial resources. Chicken Guy also assesses whether the sales price jeopardizes the transferee's ability to operate the franchise successfully and meet financial obligations.
If Chicken Guy chooses to exercise its right of first refusal, the terms must be the same as those offered by the third party, although Chicken Guy is not obligated to pay any finder's or broker's fees included in the third-party offer. Chicken Guy can also offset any monies owed to it by the franchisee. If the offer involves non-cash consideration, Chicken Guy can elect to pay the reasonable cash equivalent. If the parties disagree on the cash equivalent, it will be determined by professional appraisers, with Chicken Guy having 30 days to exercise its right of first refusal after the appraisers' decision. Chicken Guy also has the right to communicate and counsel with the franchisee and the proposed transferee regarding any aspect of the proposed transfer without incurring any liability.