What section of the Chicken Guy Franchise Agreement contains covenants not to compete?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN FRANCHISE AGREEMENT | SUMMARY |
|---|---|---|
| q. Non-competition covenants during the term of the franchise | Section 21.C. | No diversion of any business or customer to any competitor; no interest in any restaurant business that that features chicken as a primary menu item (i.e., sales of chicken menu items comprise at least 20% of sales) or whose method of operation or trade dress is similar to that used in the System (subject to state law). |
| 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 the 2025 Chicken Guy Franchise Disclosure Document, Item 17 outlines details regarding non-competition covenants within both the Development Agreement and the Franchise Agreement. Specifically, Section 21.C. of the Franchise Agreement addresses non-competition covenants both during the term of the franchise and after the franchise is terminated or expires.
During the franchise term, franchisees are prohibited from diverting business to competitors or having an interest in any restaurant business that features chicken as a primary menu item (at least 20% of sales) or has a similar method of operation or trade dress to the Chicken Guy system. After the franchise term, franchisees are restricted from engaging in the same activities for one year within the Protected Area and within two miles of any existing Chicken Guy! Restaurant.
If a franchisee violates these post-termination non-competition provisions, they must pay liquidated damages. These damages are equal to Chicken Guy's then-current Initial Franchise Fee and 8% of the Gross Sales of the competing business until the non-competition period expires. It is important to note that these non-competition provisions are subject to state law, meaning their enforceability can vary depending on the franchisee's location.